The Trusts Act 2019
The Trusts Act 2019 (“the Act”) became law on 30 July 2019 but most of the provisions will not apply until 31 January 2021. This will give trustees an opportunity to understand the Act and to consider what they may need to do to comply.
The Act will help to simplify much of the law relating to trusts by updating and replacing old laws and clarifying and modernising rules that have arisen from decisions by the Court over many years. The Act also aims to increase transparency surrounding trusts and ensure that trustees can be held accountable if they do not look after trust assets in accordance with their duties. To achieve this, the Act creates new requirements for retaining records and disclosing information to beneficiaries.
What does this mean for your trust?
The Act will apply to most existing trusts and will increase compliance obligations for most trustees.
The Act may vary terms of a trust, the duties and obligations of trustees, and the rights beneficiaries have to access information.
Mandatory and default duties
Whilst there are no significant changes to the duties a trustee must perform, the Act identifies mandatory duties for trustees (which apply to all trusts) and default duties for trustees (which apply unless the terms of a trust specify otherwise).
Restricted use of trustee exemption and indemnity clauses
A trustee can limit or exclude liability where they have acted reasonably on behalf of a trust.
The Act prevents a trustee from limiting their liability for “any breach of trust arising from the trustee’s dishonesty, willful misconduct, or gross negligence.”
The Act clarifies the circumstances in which trustees can delegate their duties and the ability of a trustee to rely on specialist advice. A trustee can only delegate their powers to a co-trustee if the co-trustee is a statutory trustee/trustee corporation (such as Trustees Executors).
Trustee to provide Trust information to beneficiaries
The Act provides that a trustee must make basic trust information available to every beneficiary (or representative of a beneficiary).
In practical terms, this means every beneficiary should be advised:
- that they are a beneficiary of the trust;
- of the name and contact details of the trustee(s);
- when trustees are appointed, removed, or retired (and be given updated details); and
- that they have the right to request a copy of the trust deed or trust information.
Trustees will also need to advise beneficiaries that they are entitled to request certain trust information including:
- any deed of trust;
- any other document setting out the terms of the trust;
- information regarding the administration of the trust;
- information regarding property held on trust; and
- information that may reasonably be required in order for a beneficiary to ensure that the terms of the trust are enforced.
Trustees do not need to disclose the reasons for any decisions that they have made.
It will be possible for trustees to withhold information in some circumstances (such as where information is personal in nature or is commercially sensitive). There are a number of factors that would need to be considered prior to withholding information.
If trustees are unsure of their obligation to disclose information, specialist advice should be obtained.
Requirements for retaining records
The Act provides what documents need to be kept by trustees (and passed on if a trustee ceases to be a trustee). If a professional trustee is assisting with the administration of a trust, then the professional trustee should have policies in place to ensure the appropriate records are kept.
Resolving trust disputes
The Act provides new mechanisms for resolving disputes about trusts. This will allow us to resolve some difficult situations through mediation or arbitration instead of seeking judgement from the High Court.
What do you need to think about?
If you are a trustee of a trust, it is important to familiarise yourself with the new legislation and consider any increased obligations and duties that you may have.
If Trustees Executors is a co-trustee, you may also want to make an appointment with one of our Trust Managers to discuss the terms of the trust and the duties and obligations which apply.
How Trustees Executors can help you
Where Trustees Executors is a trustee of a trust, we will actively review that trust to identify whether the trust complies with the Act. Where a trust does not comply with the Act, we will be working with our Legal Services team to identify the appropriate steps for that trust and we may contact settlors and co-trustees to discuss the options available.
Trustees Executors will also review its practices and we expect to make some changes to the way we operate to ensure compliance with the Act. In some instances, the costs of administering a trust may increase because the trustee or trustees will need to make additional disclosure to beneficiaries.
Talk to us
We are here to help. If you have any questions about your trust or the Act, please contact one of our Trust Managers on 0800 768 029 or via email email@example.com or keep an eye out on our website www.trustees.co.nz for more information.
This document is published for general information purposes only and the legal content in the article is of a general nature and should not be relied upon as legal advice.