The Trusts Bill is now law – implications for you and your clients?
It is believed between 300,000 to 500,000 trusts operate in New Zealand, according to the Law Commission's Review of the Law of Trusts, Report 130 published August 2013. These trusts are used in a variety of ways to protect and manage assets. The Trust Act will drive significant change for those trusts and have an impact on many families.
What are the changes
The Act will replace the Trustee Act 1956 and the Perpetuities Act 1964 to make trust law more accessible, clarify and simplify core trust principles and essential obligations for trustees, and preserve the flexibility of the common law to allow trust law to continue to evolve through the courts.
Principal changes include:
- Clarification of key features of a trust and the duties of trustees. The Act provides for five mandatory trustee duties that cannot be excluded from a trust deed. These include the duty to act in accordance with the terms of the trust and to act in good faith.
- Clear rules about when trustees are required to provide information to beneficiaries so that beneficiaries can enforce their rights. The Act sets out the procedure for trustees when deciding to withhold information.
- Practical and flexible trustee powers that allow trustees to manage and invest trust property in the most appropriate way.
- Options for removing and appointing trustees without having to go to court in straightforward cases.
- Modern dispute resolution procedures.
- Permitting amendments to certain financial and commercial trusts to enable specified provisions of the Act to not apply to those trusts.
- Increasing the maximum duration of trusts to 125 years. This will not apply to trusts created before the Trusts Act comes into force unless the terms of such trusts contain a mechanism for amending the trust's duration.
Financial advisers should proactively engage with their trust clients and encourage them to seek professional help to review their existing trust arrangements. Advisers can drive awareness and understanding of these changes.
Review advice templates, brochures, websites and other places where information and advice relating to family trusts may be displayed. These tools may need to be updated to reflect the changes.