Family and Corporate Trusts are being reviewed … what you need to know …

The Law Commission has recently released a series of proposals as part of its review of Trust Law.

The Commission has recommended the following changes …

Trustee obligations

Trustees will no longer be able to contract out of:

• The obligation to act honestly and in good faith for the benefit of the trustees;
• The duty to adhere to and understand the terms of the trust;
• The duty to account to the beneficiaries for trust property, and;
• The duty to exercise their trustee powers for their proper purposes.

That Trustees should be obligated to retain

• Copies of the trust deed;
• Any variations to the trust deed;
• Documentation of any trust property and;
• Records of trustee decisions, any written contracts entered into, and any accounting records and financial statements.

Access to justice and minimising litigation costs

• The District Court be given jurisdiction to determine claims up to $500,000 (present jurisdiction is for claims up to $200,000), this means cheaper court costs.
• The Courts have the power to remove trustees convicted of a dishonesty offence.
• Trustees can use dispute resolution measures even when the trust deed does not specifically make mention of this.

Transparency

• The Companies Act should require a company, when acting as a trustee of a trust, to describe its status clearly. For example:  “ABC Ltd acting as Trustee for XYZ Trust”
• An appropriate mechanism be put in place to appoint a liquidator or receiver for the trust should it become necessary.

Rights of beneficiaries

• If a trustee has acted unlawfully whilst making a decision in their capacity as trustee that beneficiaries can apply to the court to have a trustee decision reviewed.

The Commission invites submissions on the proposals.  These are due Friday 22 February 2013.

If you are a trustee and want further information about the proposals or if you would like assistance in preparing a submission please contact us on (04) 4736850.