Preparing for Changes to the Trusts Act

Many clients who have Trusts will be aware that this Act comes into force in January 2021. We are currently ensuring all the records are up to date for any Trust where Whakatane Trustee Services Ltd (which is Rural Accountant’s Trustee Company) is an independent trustee. 

To ensure that any clients who have a Trust are aware of their duties under the new Act we have detailed here a summary of the Duties of Trustees from a recent seminar we attended. 

Talking to many of our clients who have trusts, it has been interesting to note that many have decided that the need for their Trust no longer exists and they have decided to wind the Trust up. If you have a trust and would like to discuss this with us, give Christine a call or email christine(at)ruralaccountants.co.nz.

 

SUMMARY OF THE DUTIES OF TRUSTEES

Mandatory duties:

  • Know terms of the trust
  • Act in accordance with terms of trust
  • Act honestly and in good faith
  • Act for the benefit of the beneficiaries or to further the permitted purpose of the trust
  • Exercise powers for proper purpose

Default duties:

  • General default duties:
    • General duty of care
    • To invest prudently
  • Specific default duties:
    • Not to exercise power for own benefit
    • To consider exercise of power
    • Not to bind or commit trustees to future exercise of discretion
    • To avoid conflict of interest
    • Impartiality
    • Not to profit
    • To act for no reward
    • To act unanimously

Trustees must keep core documents, including:

  1. Trust deed/terms of trust
  2. Variations made to trust
  3. Records of trust property
  4. Records of trustee decisions
  5. Written contracts entered into by trustees
  6. Accounting records/financial statements
  7. Appointment, removal, discharge trustees
  8. Letter of memorandum of settlor wishes
  9. Other documents necessary for administration of the trust
  10. Documents from former trustees

Trustees must notify basic trust information, including:

  • Presumption that trustees must make available to every beneficiary or representative of a beneficiary the basic trust information:
    1. The person is a beneficiary
    2. Name and contact details of trustees
    3. Ongoing changes to trustees
    4. The right of the beneficiary to request a copy of the trust deed and trust information
  • Before giving information, trustees must consider the factors in Section 53 of the Act
Section 53 - Procedure for deciding if presumption applies
  1. Nature of beneficiary's interests and likelihood of receiving trust property
  2. Confidentiality of information
  3. Expectations and intentions of the settlor when the trust was created
  4. Age and circumstances of beneficiary
  5. Age and circumstances of the other beneficiaries
  6. Effect on the beneficiary of giving information
  7. Effect on the trustees, other beneficiaries and 3rd parties of giving the information
  8. For family trusts, the effect on relationships within family, between trustees and beneficiaries
  9. In trusts where large number of beneficiaries, practicality of giving information out to all
  10. Practicality of imposing restrictions or safeguards on the use of information e.g. undertakings
  11. Practicality of giving information in redacted form
  12. The nature and context of the beneficiary request
  13. Any other factor that the trustee reasonably considers is relevant to determining whether the presumption applies

Information Requested by Beneficiaries

This includes:

  • Presumption that trustees must, within a reasonable period of time, give a beneficiary or representative of a beneficiary the trust information that person has requested.
  • Before giving information, trustee must consider the factors in Section 53 of the Act

Other Points to Note

  • Term of a trust - extended to 125yrs
  • Age of majority - now 18yrs
  • Delegation - some trustee functions
  • Special Trust Advisors
  • Appointment and removal of trustees
  • Review of trustee decisions
  • Alternative Dispute Resolution

 

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