New Zealand’s law surrounding trusts has now been updated, in the form of the Trusts Act 2019.  The legislation governing Trusts had previously remained unchanged for over 60 years and was significantly outdated.

The Act applies to all types of Trusts, including Charitable Trusts (although some provisions are limited in the case of Charitable Trusts) and will come into effect on 30 January 2021.

The main changes this new Act brings are:

  • Clarification of the role and duties of trustees, so those who are appointed as trustees know their obligations
  • Clear requirements about providing information to beneficiaries about the trust so that beneficiaries can enforce their rights.  This includes some basic information that all beneficiaries must be provided, with a right to request additional documentation about the trust
  • Practical and flexible trustee powers that allow trustees to manage and invest trust property
  • More streamlined and cost-effective mechanisms for removing and appointing trustees, especially where trustees have lost capacity
  • Updated dispute resolution procedures
  • Changing the maximum lifetime of a trust to 125 years

As agents, it is important to be aware of these changes, as trusts are commonly involved in sale and purchase transactions.  Many agents will also have trusts to protect their own assets as well.

Mandatory Trustee Duties and Disclosure of Information to Beneficiaries

One of the major changes is that Trustees will have mandatory duties that they need to carry out and it will not be possible to exclude or contract out of these in your Trust Deed.  The mandatory duties will be to:

  • Know the terms of the Trust;
  • Act in accordance with the terms of the Trust;
  • Act honestly and in good faith;
  • Act for the benefit of beneficiaries or to further the Trust’s purpose; and
  • Exercise their powers for a proper purpose.

There are also other default duties that need to be carried out unless they have been specifically modified or excluded in your Trust Deed.

Keeping of documents

The Act requires core documents that Trustees must keep, including the Trust Deed, variation documents, records of Trust property and Trustee decision making, accounting records and financial statements, and documents appointing, removing and discharging Trustees. 

Trustees will need to keep the Trust Deed and any variations throughout their Trusteeship, and then pass them onto a current or new Trustee when they retire or stand down.  Trustees need to ensure that at least 1 other trustee holds all of the other trust information referred to above.

Providing Information to Beneficiaries

A major change for Trustees is that they will be required to provide beneficiaries with basic information about the Trust (sufficient for the Trust to be enforced).  There is no such provision in the old legislation. 

Basic Trust information is defined as:

  • The fact that a person is a beneficiary of the Trust;
  • The name and contact details of the trustee/s;
  • The occurrence, and details of each appointment, removal and retirement of a trustee as it occurs; and
  • The right of the beneficiary to request a copy of the Trust Deed and trust information. 

The Act requires this information to be provided to beneficiaries at ‘reasonable intervals’.  We would expect this be at least every 12 months and would suggest that Trustees consider at their annual meeting whether they should be providing such information to beneficiaries.

Trustees will also have to give other trust information to beneficiaries on request to enable the beneficiary to be able to enforce the terms of the trust.  This is likely to be information such as financial statements, trust documents and gifting documents. 

The Act sets out a number of factors for Trustees need to consider when deciding whether or not to give some or all of the requested information, and it gives guidance about how to withhold information from beneficiaries.  This includes whether there is any personal or commercial confidentiality involved, the age and circumstances of the other beneficiaries, the age and circumstances of the beneficiary requesting the information, the effect on family relationships and relationships between other beneficiaries, the trustees and the beneficiaries and the practicalities of providing information where there is a wide class of beneficiaries.

The Act also allows the trustees to ask for payment from the requesting beneficiary to cover the reasonable costs of providing such information.

Trustees will be obliged to give basic trust information to all listed beneficiaries, noting that some Trusts will have very wide classes of beneficiaries (e.g. children, grandchildren, siblings) who the trustees may not want to disclose information to.  We would expect that many Trusts will look at narrowing their classes of beneficiaries for this reason.

If Trustees do decide not to provide any trust information to beneficiaries, we recommend a trustee resolution recording this (and your reasons for not doing so) so you have proper records if this is ever challenged by a beneficiary in Court.  If you are not providing any information at all to any beneficiaries, there is a requirement to apply to the Court for directions.

It pays to be aware of the changes, so you (or your vendors and purchasers) can make any required changes to your trust deeds now.

Laurie Pallett
Senior Registered Legal Executive