On 1 January 2019, The Trusts Act 2019 (Act) came into force. So what does it do? The Act is the first significant legislative change to trust law in New Zealand in over 60 years. It will make clarify and simplify core trust principles and essential obligations for trustees.
Prior to the creation of a trust, the adviser, must take reasonable steps to ensure that:
- the initial settlor is aware of the meaning and effect of the modification or exclusion of any default duties, and
- the settlor is aware of the meaning and effect of any liability exclusion or indemnity clauses in the terms of the trust.
What is the Trustee’s duty of disclosure to all beneficiaries?
The Trusts Act does not specifically state that basic trust information must be provided in writing, but to avoid misunderstandings, it is probably a good practice to provide this in writing. By doing this, you will have records of who you have written to and what you have covered.
If you decide not to disclose certain basic information to beneficiaries, this should bee recorded in writing along with the reasons.
What if you don’t want to disclose certain information?
You need to review the specific considerations set out in the Trusts Act and decide whether the presumption to disclose the trust information applies. The trustees will need to individually assess such requests for information.
If you decide not to disclose certain basic information to beneficiaries, this should bee recorded in writing along with the reasons.
Note that you are supposed to respond to such request within a reasonable period.
What are the ‘specific considerations’?
Section 53 of the Trusts Act outline the specific considerations which include but are not limited to:
With respect to each beneficiary, the Trustees must consider the beneficiary as to:-
- their age and circumstances
- their likelihood of receiving trust property in the future
- the impact that receiving the trust information might have on them;
- the impact that disclosing the trust information might have on the trustees and other beneficiaries
- whether the trust information is subject to personal or commercial confidentiality
If a beneficiary is a minor (under 18 years old), the trustee duty to make basic trust information and requested trust information available to the beneficiary still applies and it is expected that such request be addressed to the parent or guardian.
Breach of Duties?
From the date that the Trusts Act comes into effect, a trust deed is not able to limit a trustee’s liability or provide an indemnity, where their breach of trust arises from dishonesty, wilful misconduct or gross negligence. Any clause that attempts to limit a trustee’s liability for breach arising from this conduct, or indemnify the trustee for the same, will be deemed invalid. This restriction applies to both existing trusts and new trusts.
If a trust deed contains a limitation or indemnity clause that is too broad, it may be deemed invalid to the extent that it overreaches the restrictions imposed by the Trusts Act.
Can the Trust be wound up?
Due to the changes and additional responsibilities some Trustees may wish to wind up their trusts. We can assist you with determining if you can do so and suggest we work closely with your financial advisor to do this.
What if the trustees can’t agree on a course of action?
The Trusts Act requires trustees to act unanimously. This is a default duty and can be expressly modified by the terms of a trust deed.
You should seek legal advice if trustees cannot agree making it impossible to act and give effect to the terms of the trust.
