On 30 January 2021, major changes to New Zealand’s Trust Law regime come into effect. If you are the trustee of a New Zealand trust, or you intend to establish a trust in the near future, you need to be aware of these changes: They will effect you.
The Trusts Act 2019 introduces significantly increased obligations for trustees, and new rights for beneficiaries.1 The main purpose of these changes is make trust law more accessible to the public to strengthen the ability of beneficiaries to hold trustees to account.
New Obligations for Trustees
The new Act now includes mandatory duties for trustees. Trustees cannot avoid these obligations, and any purported exclusion of a mandatory duty via the Trust Deed or otherwise will have no effect. Any purported exclusion of a mandatory duty will have no effect.
The mandatory duties are:
- A duty to know the terms of the trust;
- A duty to act in accordance with the terms of trust;
- A duty to act honestly and in good faith;
- A duty to act for the benefit of the beneficiaries, or to further the permitted purpose of the trust in accordance with the terms of the trust; and
- A duty to exercise trustee powers for a proper purpose.
The new Act also specifies a number of “default duties” for trustees that, unlike mandatory duties, can be excluded via the Trust Deed or otherwise. These default duties include:
- A general duty of care;
- A duty to invest prudently;
- A duty not to exercise a trustee power for self benefit;
- A duty of impartiality.
New Rights for Beneficiaries
The new Act also gives increased rights to beneficiaries ‘against’ trustees and the trust.
Specifically, under the new regime, a trustee must make ‘basic trust information’ available to beneficiaries, and more robust trust information available to beneficiaries on request. There are exceptions that allow trustees to withhold information in some circumstances.
‘Basic trust information’ that needs to be provided to beneficiaries includes letting them know they are beneficiaries, trustee contact information, and letting them know they can request a copy of the Trust Deed and other relevant documentation.
The purpose of allowing beneficiaries to request this information is to allow beneficiaries to ensure Trustees comply with their obligations under the trust.