A modernisation of trust law – the Trusts Act 2019
Upon receiving royal asset on 30 July 2019, the Trusts Bill has now become the Trusts Act 2019 (Act). The Act, which comes into force on 30 January 2021, will reshape and modernise the landscape of trust law in New Zealand.
Most trusts affected
The Act applies to most existing and new trusts. Existing trusts have an 18 month transitional period to conform to the Act. Likewise, new trusts should be drafted in accordance with the Act.
Settlor and trustee considerations
As the Act introduces various changes to trust law, settlors and trustees should be aware of their changing rights and obligations. The most notable being.
- Mandatory duties: The Act imposes mandatory duties on trustees. To avoid contravening the Act, trustees should be aware of and comply with, these duties.
- Default duties: The Act imposes default duties on trustees. Settlors and trustees should consider whether any of these duties should be modified or excluded by the terms of the trust.
- Record retention requirements: The Act prescribes what information trustees should keep and for how long. To avoid breaching the Act, trustees should be familiar with, and comply with these requirements.
- Obligation to give certain information to beneficiaries: The Act outlines what information trustees should generally give to beneficiaries. This obligation should be front of mind for settlors when determining who should be a beneficiary of a trust.
- Restrictions around the use of trustee exemption and indemnity clauses: The Act restricts the use of trustee exemption and indemnity clauses. Trustees should be aware of these restrictions when acting.
- Ability to delegate powers: The Act outlines what powers trustees can and cannot generally delegate, and the circumstances in which trustees can delegate all of their powers. Before delegating any powers under a trust, trustees should familiarise themselves with the requirements of the Act.
Trusts and managing your assets
Trusts are an important aspect of managing your assets. It is vital that you understand your changing rights and obligations, and action these where needed.
Please contact one of our experts if you have any questions or would like more information on the impact that the changes may have on your affairs.