Trustees responsibilities, by Dale Adamson
The Trusts Act 2019, which came into force 31 January 2021, is the first major Trust law reform in New Zealand in 70 years and is applicable to all existing and future Trusts. The intention of the reform is to make Trust law simpler, more transparent, and more accessible to the general public. It extends the maximum life of trusts from 80 to 125 years.
If you have a connection to a Trust, as settlor, trustee or beneficiary, you need to be aware of your rights and obligations.
Compulsory duties for trustees cannot be changed in the Trust deed. They include knowing and acting in accordance with the terms of the Trust with honesty and in good faith. A Trustee must deal with the trust property for the benefit of the beneficiaries and for a proper purpose.
Trustees’ optional duties, which can be changed in the Trust deed, include (but are not restricted to) use of reasonable skill & care, requirement for unanimous trustee decisions, “prudent person” test when investing and restriction on self-benefit or conflict between the interests of the trustee and beneficiaries.
The trustees’ responsibilities also include the maintenance of trust records and disclosures to beneficiaries.
Trustees must keep all trust information and documents stored for the life of the trust. This responsibility can be delegated to one trustee. However, each trustee must have a copy of the trust deed and any subsequent variations as a bare minimum.
Under the new legislation, the trustees must make available to every beneficiary (or their representative) the basic information relating to the trust. This includes the fact that the person is a beneficiary, the name and contact details of all trustees (including notification of subsequent changes) and the right of the beneficiary to request a copy of the terms of the trust or trust information.
After considering the factors provided for in the legislation, the trustees may decide not to provide the information requested. However, as with all trustee decisions, the decision and the thought processes behind it, should be clearly documented. The beneficiary should be advised of the decision but not the reasons.
To assist trustees to understand the settlor’s intentions regarding the trust, it is recommended that the settlor prepares a letter of wishes. This should include any information regarding the beneficiaries which may affect trustee decisions. The trustees must act on behalf of the beneficiaries within the terms of the trust.
The Trusts Act 2019 sets out greater expectations for trustees beyond a name written on documentation and it will no longer be acceptable for trustees to take a passive role within the Trusts they serve.
Remember that one person can hold multiple roles in a trust – settlor, trustee and beneficiary. Each role wears a different hat and has different rights and obligations.
If you are not sure of your rights and obligations, don’t bury your head in the sand, contact your advisor.