There is a Trusts Act 2019 which comes into force on 30 January 2021 and will affect the administration of Trusts in New Zealand.

If you are a trustee, your duties to beneficiaries are changed by the new Act.  You need to be aware of these changes and act in accordance with your new obligations.  If Trusts are not administered in accordance with the new Act then this may affect the validity of the Trust and there could also be personal liability for the trustees.   

Key Changes

A trustee will have mandatory duties under the new Act to:

  • know the Trust’s terms;
    • act in accordance with those terms;
    • act honestly and in good faith;
    • act for the benefit of the beneficiaries or the stated purpose of the Trust;
    • exercise your powers for a proper purpose.

 In addition, a trustee will be required to ensure that:

  • at least one trustee holds a full set of the Trust’s documents, including all meeting Minutes and Resolutions.  All trustees need to have at least a copy of the Trust Deed and any variation to the Trust Deed;
    • financial statements for the Trust or records of the Trust property are prepared each year recording income, expenses, assets and liabilities.  This is true even for those Trusts which only own a family home;
    • the trustees meet annually to consider the position of the beneficiaries and the management of the Trust’s financial position, with this meeting being properly recorded and Minuted with required Resolutions passed;
    • at regular intervals, we suggest annually, the trustees consider providing beneficiaries with Trust information as required by the Act or they document the reasons why such information will not be given to beneficiaries.

There are also default trustee duties introduced, which can be changed by the terms of the Trust Deed.  An example being that the Act provides a trustee may not exercise a power for their own benefit – many Trust Deeds already allow for this to happen where a trustee is also a beneficiary.  However trustees should familiarise themselves with the default duties and consider which apply and whether it would be appropriate to seek a variation of the Trust Deed. 

The new Act introduces a presumption that trustees will provide basic trust information to beneficiaries.  The default requirement is for beneficiaries to be advised of the fact that they are a beneficiary, the name and contact details of the trustees, any change of trustees and their right as a beneficiary to request a copy of the Trust Deed or Trust information. Trust information may include the Trust’s financial statements.

It is possible for beneficiaries to seek additional information regarding the administration of the Trust, but trustees may also consider that there are circumstances which mean that it is not appropriate for a beneficiary to receive information ordinarily required to be provided – for example if the information is confidential or with regard to the beneficiary’s personal circumstances.

What to Do

From the coming into force of the Act next year, trustees need to ensure that they meet their obligations including possessing relevant Trust documents; considering provision of information to beneficiaries; and holding at least annual meetings which are properly documented and include consideration of financial information for the Trust.

This is a good opportunity to consider whether to continue to operate a Trust or otherwise review asset and estate planning arrangements.  It would be a good idea for trustees to arrange for a review of the Trust documents and be clear on their duties under the new Act and whether a change to the terms of the Trust Deed is required for the Trust to operate effectively.

Tom Mahony/Principal
P:  04 974 4703

Siri Nicholas/Associate
P:  04 974 4705