On 30 January 2021, the Trust landscape in New Zealand will experience significant change. That’s because the Trusts Act 2019 (Act) will become operational, replacing the Trustee Act 1956 and the Perpetuities Act 1954. It’s the first time in 50 or so years a complete rethink of trust law has occurred. Many advisors are citing the Act as a ‘game changer’ because it affects trustees and beneficiaries, applying retrospectively and prospectively to existing written and future created family trusts, trading trusts, testamentary trusts and potentially even statutory, constructive and equitable trusts should the Courts deem appropriate.
The new legislation goes further than merely updating, restating and codifying current law – it institutes a number of substantial changes to trustees’ obligations and beneficiaries’ rights, which anyone involved in a trust should be aware of. Ultimately, the Act will have a considerable effect on many trustees who will be forced to change their current practices and on beneficiaries who will benefit from their rights being strengthened.
Irrespective of the purpose of the trust or the assets it held, a commonality dominated many people who were beneficiaries of a trust were never told of its existence. Trustees have always been legally accountable to beneficiaries in discharging their duties (particularly, to keep trust assets safe and to invest in accordance with the terms of the trust) but in reality, often their behaviour went unchecked because a person never knew they were a beneficiary.
Under the new Act, individuals will have a right to be informed of the fact they are beneficiaries of a trust and trustees will have a positive duty placed on them to make this disclosure. Undoubtedly, one of the effects of this will be to strengthen the ability a beneficiary has to hold a trustee to account with respect to how they have carried out their trusteeship, particularly in the administration and investment arena.
It should be clear from reading so far, trustees have a far greater compliance regime to satisfy than ever before. This will mandate the need for many trustees to bring their knowledge and their management practices up to date to ensure compliance with the Act’s provisions. There is also going to be a greater scrutiny of trustee’s actions with respect to administration and investment activities of the trust under their control. To make the task of compliance somewhat easier, the Act clearly states compulsory trustee duties.
Some trustees will be acquainted with the requirements of the Act and be well down the track to attending to matters. Others however will only just be starting to apply their grey cells to the new statutory regime. Regardless of your position, if you’re wanting assistance or would like to discuss any aspect of your trust or affairs, please contact your Greenlion advisor, and for more information on business consulting firms, Xero bookkeeping and chartered accountants Auckland please go to https://www.greenlion.co.nz .
