The Trusts Act 2019, which came into force in 2021, brought some major changes to trust law in New Zealand.

It is important to be aware that the Trusts Act 2019 also applies to charitable trusts, in addition to the Charitable Trusts Act 1957.

The below is a reminder of some key provisions of the Trusts Act that will apply to trustees of charitable trusts:

Five Mandatory Trustee Duties

The new law requires trustees to:

• Know the terms of the trust;
• Act in accordance with the terms of the trust;
• Act honestly and in good faith;
• Act to further the permitted purpose of the trust; and
• Exercise their powers for a proper purpose.

Default Trustee Duties

Unless specifically excluded by the terms of a trust deed, the Trusts Act requires trustees to:

• Exercise care and skill that is reasonable in the circumstances, having regard to the special knowledge and experience the trustee has or holds out as having and if the person acts as trustee as part of their business or profession, to any special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession;
• Invest prudently having regard to the special knowledge and experience the trustee has or holds out as having and if the person acts as trustee as part of their business or profession, to any special knowledge or experience that it is reasonable to expect of a person acting in the course of that kind of business or profession (meaning some trustees will be held to a higher standard if they are professional trustees such as lawyers or accountants or have a background in investment, for example);
• Not exercise power for their own benefit;
• Consider exercise of power (ie when or whether to exercise power);
• Not bind or commit trustees to future exercise of discretion;
• Avoid conflicts of interest;
• Be impartial;
• Not to profit from trusteeship or receive a reward; and
• Act unanimously (ie all trustees agree on decisions).

It will be important to record in your trust deed if you are contracting out of any of these duties.

Many trustees of charitable trusts will choose to alter some of these powers to ensure that it accurately reflects the operation of the trust and in some cases to ensure all trustees are held to the same standard, rather than based on their existing skills or professions.

Keeping of documents

The Trusts Act specifies 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.

Each trustee is required to hold the trust deed and any variations and needs to be satisfied that at least one of the other trustees holds the other documents.

Trustees will need to hold onto these documents throughout their trusteeship (as far as is reasonable) and then ensure that at least one trustee has these documents when they retire or stand down.

Removing and appointing Trustees

The Trusts Act provides trustees with clear guidance on appointing and removing trustees (for situations where the trust deed does not provide for this):

• Generally if the trust deed does not specify otherwise, the person who can appoint or remove trustees will be the person named in the deed, or the remaining trustees, or a person holding an Enduring Power of Attorney for the person with the power of appointment. 
• Generally those who are excluded from being able to be a trustee are: a person under age 18, an undischarged bankrupt, a person without capacity and an insolvent company.
• Trustees generally are discharged by the person with the power to remove trustees unless the trust deed says otherwise.
• If a trustee dies, the surviving trustees exercise the functions of that trustee until a new trustee is appointed. If there is no such surviving trustee, then the personal representative of the last surviving trustee is to act.
• A right to compulsorily remove a trustee when a trustee loses the capacity to perform the functions of a trustee (that is, becomes subject to an order under the Protection of Personal and Property Rights Act 1988).
• An optional right of removal of a trustee when it is desirable for the proper execution of the trust and the trustee repeatedly fails to act as trustee, becomes bankrupt or insolvent, or is no longer suitable because of the trustee's conduct or circumstances (eg convicted of a dishonesty offence, the trustee cannot be located or is prohibited from being a director).

Note that a change of trustee still needs to be documented with Charities Services (if registered).

Making changes to your Trust Deed

Many charitable trusts are choosing to update their trust deeds to align with the Trusts Act where there is any inconsistency.  You need to make sure if you are doing so that you:

• Ensure that there is a variation clause in your trust deed and follow the terms of that clause; and
• Ensure you register the changes with the Registrar of Charitable Trusts (if registered as a Charitable Trust Board) as well as Charities Services (if registered as a Charity).

Summary

If you are a trustee of a charitable trust it is essential that you understand your obligations above.

If you are unsure about your obligations or about how to make changes to your trust deed, it pays to take legal advice from an experienced trust lawyer.