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New Trusts Act Update

27 August 2020

On 30 January 2021, the new Trusts Act 2019 will come into effect. The 2019 Act modernises existing trust law, provides better guidance for Trustees and Beneficiaries and makes it easier to resolve disputes.

While most of the Act updates or restates existing statute or case law, there are changes that anyone who is a Trustee of a Trust or has a Trust should be aware of.

A couple of the key issues that are being addressed by the new law is Trust administration and the lack of transparency for Beneficiaries.  Many Trustees have been found to be lacking in these areas when matters have ended up in court.  These new rules will impose mandatory obligations that have to be followed.  This may cause concern for some Trustees.

Some of the issues we are seeing and that we anticipate will become more problematic under the 2019 Act if action isn’t taken, include:

  • Lack of records of trust decisions and the settlor’s intentions for the Trust;

  • Lack of separation of trust financial records from trustees’ personal records;

  • Trust deeds with a long list of beneficiaries that are wider than was really intended, meaning that there are a wide group of people who will need to have information disclosed to them when the Act comes in to force;

  • Insufficient clauses in Trust Deeds to contract out of the default duties under the new Act.

To ensure that you are up to date and ready for the changes, we recommend that you
undertake a review of your Trust and associated documents and transactions to ensure there won’t be any issues when the new law comes in effect. We can assist you with the review of your Trust. 

As part of the review you will be provided with a tailored service that would include (if needed):

  • Completing / updating any missing or incomplete documentation;

  • Updating the Trust to ensure the beneficiaries who need to receive disclosure of Trust information are narrowed to those people you want to provide information to;

  • Updating the Trust to ensure the default duties under the new Act are appropriately contracted out of;

  • Potentially winding up the Trust and distributing assets if it is deemed the Trust is no longer of any benefit to you.

While undertaking the review, we will be encouraging you to consider:

  • Does the Trust continue to meet your objectives?

  • Are you willing and able to undertake the increased obligations?

  • Are you comfortable with managing the Trust properly going forward?

  • Are you aware of the information that needs to be provided to all the beneficiaries?

  • Will the Trust be cost-effective with the extra Trust law compliance requirements?

 

Changes to the Trusts Act can be difficult to understand. Talk to an expert.

If you would like us to clarify and assist you in getting your Trust in order before the deadline, please phone or email your Harris Tate solicitor to arrange a review. If you have not previously engaged Harris Tate for any matters please call us on 07 578 0059 or email admin@harristate.co.nz