Trust Act 2019 – How will this affect you?
On 30 January 2021 the Trust Act 2019 (the Act) will come into force. While the Act contains some new duties for trustees which are intended to provide beneficiaries greater access to information and enhance the transparency of trustee activities, it does not radically alter the law or core principles of trusts. For the most part the Act restates the current law and trustee duties in an easy to understand manner.
A key feature of the Act is that it sets out mandatory and default duties for trustees. The mandatory duties are the core duties of trustees and cannot be excluded or modified by the trust deed. These duties are to know the terms of the trust, to act in accordance with those terms, to act honestly and in good faith, to act for the benefit of the beneficiaries, and to exercise the trustee’s power for proper purposes. The default duties, which include a duty to invest prudently, not to exercise power for the benefit of the trustees, to avoid conflict of interest and to act unanimously, can be modified and excluded from a trust deed.
There are new provisions in the Act aimed at providing beneficiaries greater access to information about the Trust. These provisions require trustees to hold trust information, provide beneficiaries (both discretionary and final) with basic information about the trust, and provide detailed information if requested to by beneficiaries. Trustees may decline to provide basic information or detailed information in certain circumstances. The provisions relating to disclosure of information may particularly be a point of concern for many settlors and trustees. Many trust deeds allow for the removal of beneficiaries and settlors and trustees should consider whether some beneficiaries should be removed and consider what information should be disclosed to remaining beneficiaries.
Other matters of note in by the Act include:
- That an adult is a person aged 18 and over. A child is a person aged under 18;
- A clear process for removing trustees, particularly where a trustee has lost capacity;
- A restatement of the rule in Saunders v Vautier which allows all beneficiaries to unanimously decide to terminate or vary a trust
- Setting out a process to apply to the Court to review trustee’s decisions
- Powers for trustees to apply to the Court for directions regarding trust property and the exercise of their powers
- Increased jurisdiction of the Family Court to allow it to make orders to protect or preserve trust property, or to give proper effect to matter before it
- The ability to refer a matter to alternative dispute resolution processes even if there is no provision in the trust deed allowing this.
The Act will apply to all existing and future trusts in New Zealand. It will be important for trustees to review their trust deeds and to understand their duties under the Act. For some trustees this will prompt a discussion about whether the trust is still needed or meets the current aims of the settlor/trustees. Depending on yours and your trust’s circumstances this may mean varying the trust deed, winding up the trust, or creating a new one better suited to your needs. White Fox & Jones is ready to assist you in undertaking a review of your trust and discussing the best way forward for you.
You can read the Act here
If you would like us to undertake a review of your trust, or like to discuss the how the Act will impact your trust please do not hesitate to contact us.