Trusts have a valuable role to play for New Zealanders who want to protect their assets and provide for future generations of their family or Whanau. If you are a trustee or a beneficiary of a trust, you need to be aware that legislative changes are coming into effect in 2021 which may affect you.
Below we have answered some common queries concerning the new Trust Act:
What is the new Trust Act?
The Trust Act 2019 replaces the Trustee Act 1956. The new act will govern the administration and running of trusts in New Zealand.
When will the Trust Act 2019 come into effect?
The new Trust Act will come into effect on 30 January 2021.
Why is there a new Trusts Act?
The previous Trustee Act came into law over 60 years ago and is being updated to reflect the place of trusts in modern New Zealand. The new Act will also consolidate various pieces of legislation relating to trusts so that all aspects are clearly set out in one place.
The new Trusts Act will be a practical and usable statute. The aim is to aid the efficient operation of trusts and to facilitate the availability of straightforward information, particularly for those who are not professional trustees.
What changes are being introduced?
The new Trust Act details the duties of Trustees, rights of beneficiaries and administration requirements for Trusts. These changes include a series of positive obligations on Trustees, and changes may need to be made to the way Trusts are administered to meet these obligations. In particular:
- if a Trust is not run in compliance with the new laws, the validity of the Trust will be compromised and the very purpose of having the Trust may not be achieved.
- Trustees will be held accountable for any breaches of their duties.
The main points and changes of the Trust Act 2019 include (but are not limited to):
- explanations of mandatory and default trustee duties
- requirements for trustees relating to retaining and managing trust information and documentation
- trustee obligations for disclosing trust information to beneficiaries
- provisions to support the cost-effective establishment and ongoing administration of trust (such as clear rules on the variation of deeds and the closure of trusts)
- options for removing and appointing trustees without having to apply to the court to do so
What does the new Trust Act mean for my trust?
While Trusts will remain an important part of estate planning and asset protection for New Zealanders, it is expected that a large number of Trusts will require a variation to the terms of their Trust Deed to ensure compliance with the new Trust Act as well as to ensure the efficient administration of the Trust going forward. The new Act may pose some challenges to trustees, but this will need to be assessed on a case-by-case basis.
As a trustee, you may want to consider:
- if the increased administration and compliance duties are something that you can facilitate
- if the potential increased administration costs of having a professional trustee mean that the trust is still a cost-effective vehicle for you
- if the greater requirements for transparency from trustees to disclose information to beneficiaries will put things in the open that you may prefer to keep private
- if the reasons you originally established the trust are still relevant
We recommend your Trust be reviewed to determine the extent to which your Trust ought to be updated, and to identify any gaps in the Trust's records to be accounted for. In some cases, the purpose for setting up a Trust may no longer be relevant and you may wish to wind up your Trust to avoid the ongoing time and costs associated with the Trust administration.
If you are involved with a Trust, now is also a good time to review and update your enduring powers of attorney and your will. The directions you make in each of these documents should be considered with your Trust documents so that there is consistency and clarity as to your estate planning objectives.
If you are unsure of the implications of the new Trust Act and wish to discuss your situation with one of our trust experts, please call or email us and a Rice Craig representative will contact you to arrange a suitable time to discuss.
The full Trust Act 2019 can be located at www.legislation.govt.nz.