The Trusts Act 2019 will come into force from 30 January 2021 and is the most comprehensive revision and modernisation of New Zealand’s law relating to trusts and trust administration in over 60 years. If you have a family trust or are a trustee of a family trust, you should be knowledgeable of these fundamental changes to the law and seek legal advice where suitable.
There are some essential amendments that you should review this year before the new rules come into force.
Increased Obligations of Trustees
The Act will limit trustees from taking benefit of an indemnity clause under the trust deed in particular conditions. A trustee will not be defended from liability if they operate the trust in a manner that is extremely careless. The outcome of this change is that trustees will require to take more responsibility when administering trusts. They cannot rely on the indemnity in the trust deed to safe them against allegations made by beneficiaries.
Trustees are required to spend greater time and effort on trust administration. It is, therefore, a good time to seek guidance on whether your trust is being managed accurately.
Document Retaining Obligations
Under the Act, trustees are expected to keep core trust documents for the duration of the trustee’s trusteeship and must move the documents to replacement trustees to ensure trust documents and records are maintained for the lifetime of the trust.
The Act provides a specific list of documents that trustees must hold. It is advisable for trustees to evaluate their trust records carefully to ensure they are complete and accurate. Trustees should also get advice on the documents that they must retain to comply with the updated trust laws.
Beneficiaries will Seek Detailed Information
The new laws expand the likelihood that beneficiaries will inquire detailed information from trustees. It is essential that trustees seek guidance on how they will comply with the new disclosure of information requirements.The Act gives that generally a trustee will have a certain duty to write to beneficiaries to inform them they are beneficiaries of the trust and advise them that they are authorised to request further trust information and records.
The common law rule identified as the rule against perpetuities is terminated by the Act and the Perpetuities Act 1964 is revoked. Trusts currently can only stay for a maximum period of 80 years. Under the Act, the maximum time of trust will be increased to 125 years. The effect of this change is that family trusts will be able to last for more extended and used as a succession planning vehicle for more periods. If you need your trust to be able to take benefit of these new rules then you should seek further advice on these amendments.
As the Act will come into force on 30 January 2021, we suggest that clients use the next 18 months to evaluate their current trusts in light of these amendments and seek guidance on how to deal with these changes. We can support you to examine your family trust to ensure that it abides compliant and fit for aim under the new trust laws.