Introducing - the Trusts Act 2019
replacing the Trustees Act 1956 on 30 Jan, 2021 		 
       
 
 
  Introduction        
  Changes to Trust legislation have been made, with the provisions of the new Trusts Act 2019 coming into effect on 30 January 2021. 

The Trusts Act 2019 is the first major rewrite of trustee legislation since the Trustee Act 1956. The new Act is intended to update existing Trust law, making it more accessible for all New Zealanders and ensuring that beneficiaries have enough information so that the terms of the Trust are being carried out properly. 		 
  Trusts Law Changes        
  The Trusts Act 2019 is the first major re-write of New Zealand Trustee legislation since the Trustee Act 1956. Society has changed enormously since the late 50s: the nuclear family is increasingly the exception, not the norm, and trusteeship is now intended to protect many more complex and diverse situations than orphanhood.

Many Trustees may feel vulnerable to Beneficiaries as a result of the Trusts Act 2019. However, the fundamental principle of Trust law has always been that a Trustee is looking after assets for the benefit of others and not for themselves. This can be an extremely difficult task when a Trustee is also a Beneficiary, but it can still be difficult for an independent/professional Trustee to adequately discharge all of their obligations and duties when carrying out the act of balancing all Beneficiaries’ interests.

It is fair enough that Beneficiaries should be able to obtain or be provided with sufficient information to ensure their interests are being looked after. Put yourself in those shoes by asking yourself: if I were a Beneficiary of a Trust would I feel entitled to information to ensure it is being run correctly and that my best interests are being cared for adequately? The only rational answer is YES.

Alongside the many amendments to the legislation between 1956 and the present day, Trust law has also been evolving through the courts – and while the evolution of law through common law is both a good and very necessary thing, that form of change can make the law difficult to follow and also difficult to access and understand.

One of the main aims of the Act is to fix that opacity, and although all Trust law can never be recorded in one location, it is indisputably a good outcome to have some clear expectations and obligations recorded in one place that is accessible to the public, while still allowing for the evolution of Trust law through the courts.

What does the new Act mean for Trustees? It means that Trustees must be at the steering wheel at all times. Trusts must be proactively managed; Trustees cannot sit back and merely respond to incoming requests or leap into action only for a one-off or periodic sale or acquisition of a property. There is continuous work associated with the role of Trusteeship. If a Trust is being administered correctly by a professional Trustee there will be costs attached to that, and Trustees will need to ask whether the Trust provides a sufficient benefit to warrant the cost of having it in the first place. This is an essential question – it goes to the heart of new Trust law, and Trustees should be asking it and examining their position and responsibilities well in advance of 30 January 2021. Trustees need to be ready to consider the options should the answer be NO.
  
  Obligation nothing new        
  The obligation to actively manage a Trust is nothing new; it has always existed. What has changed with the Trusts Act 2019 is that the obligation is now there for the world to see. It is so clear that the difference between how a professional Trustee and a layperson as Trustee are going to be treated is likely to diminish. If you are going to act as a Trustee you must know your obligations, you must know the terms of the Trust, and you must discharge your duties and obligations without the need of the Beneficiaries forcing you to do so. Remember: Trusteeship cannot be a part-time activity, it is a job. That is an issue for both layperson trustees and professionals.

For Beneficiaries, the message is clear: you can expect more information than you may have received under old Trust law. Some beneficiaries will learn for the first time that a Trust (or Trusts) exist of which they are a Beneficiary. They will be told who the Trustees are and how to contact them. They will also be told that they have a right to request more information. Where Beneficiaries are finding out about a Trust they did not know existed, chances are that a request for further information will be made, because the basic Trust information does not give a Beneficiary even the slightest idea of what the trust holds and whether or not it is being run correctly. This means most Trustees should reasonably expect requests for further information following their provision of basic Trust information. Whether Trustees decide to pre-empt that by supplying more information upfront than just the basic Trust information will be their own decision. However, doing so could well set the stage for a more efficient and open long-term process, providing a solid foundation for a very good working relationship between Trustees and Beneficiaries.

To be clear, the provision of information to Beneficiaries should be seen as an opportunity to set the relationship between Trustees and Beneficiaries on the right foot. From a Beneficiary’s perspective, when Trustees provide more information than just the requisite basic information – without more needing to be requested – it communicates that Trustees have nothing to hide and want to be open with and helpful to Beneficiaries. In particular, people who are learning for the first time that they are beneficiaries may well appreciate the extra care and diligence taken by Trustees who want to give extra information and educate them as to their rights and the nature of the Trust.

Conversely, just because you may not take that step does not mean you have something to hide or do not want to have a good relationship with the Beneficiaries. Again, consider a question from a Beneficiary’s perspective: if you were a Beneficiary of a Trust, you requested information and that request was met with resistance, might you wonder what the Trustees don’t want you to know? Might you wonder whether something important is being withheld? This would be an understandable reaction.

The Trusts Act is a major opportunity for all in the Trustee arena. It is an opportunity to review how we are acting as Trustees, to examine how we build relationships with Beneficiaries, and to determine how we can best operate to ensure that top-level trusteeship is delivered to all New Zealanders. 		 
  Trustee Duties        
    Previously, to understand trustee duties we relied on lawyers, articles on trust law and case law, but now trustee duties are formalised in legislation. 

The requirements placed on trustees are higher than previously and there will be no excuse for not knowing what is required - it is set out in the Act. 

While the detailed workings of Maori land trusts are covered in Te Ture Whenua Maori Act 1993, trustee duties set out in this Act apply. (See the Links section and there is a link to an explanation.)

The new Act separates trustee duties into two areas as follows:

 		 
    Mandatory Trustee Duties      
      > Duty to know the terms of the Trust;
> Duty to act in accordance with the terms of the Trust;
> Duty to act honestly and in good faith;
> Duty to act for the benefit of Beneficiaries or to further the permitted purpose of the Trust;
> Duty to exercise powers for a proper purpose. 		 
    Default Trustee Duties      
      > General duty of care;
> Duty to invest prudently;
> Duty not to exercise power for own benefit;
> Duty to consider exercise of power;
> Duty not to bind or commit trustees to future exercise of discretion;
> Duty to avoid conflict of interest;
> Duty to act impartially;
> Duty not to profit;
> Duty to act for no reward;
> Duty to act unanimously. 		 
    Mandatory duties apply no matter what and cannot be excluded.  Default duties can be modified or excluded by the terms of the Trust.

The list of Trustee duties is not full and final.  However, it is intended to outline the basics so that both Beneficiaries and Trustees are aware of what is expected. 		 
  Beneficiaries’ rights to information:      
    As a minimum, Trustees are now required to provide Beneficiaries with basic Trust information, as early as possible, after the Trust has been set up (or for existing Trusts prior to 30 January 2021).  Basic Trust information should ideally be supplied to Beneficiaries without them asking for it.  
    Basic Trust information is:      
      > The fact that the person is a Beneficiary of the Trust;
> The name and contact details of the Trustees;
> The occurrence of, and details of, each appointment, removal, and retirement of a Trustee as it occurs; and
> The right of the Beneficiary to request a copy of the terms of the Trust and Trust information. 		 
    On an ongoing basis, Beneficiaries will need to be kept informed of the administration of the Trust.  
    Trust information is defined in the Act as meaning any information:  
    > regarding the terms of the Trust, the administration of the Trust, or the Trust property; and
  
    > that it is reasonably necessary for the Beneficiary to have to enable the Trust to be enforced; but
  
    > does not include reasons for Trustees’ decisions.  
  Other areas impacted by the Trusts Act 2019:    
    As the law currently sits, the age of majority is 20. This is the default age that a person can inherit if a specific age is not stated. Under the new Act, the age of majority will be changed to 18.

The new Act will also extend the maximum period of a Trust from 80 years to 125. This will be the default maximum lifetime of a Trust, unless a specific period is stated in the Trust deed. 		 
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