What are the new obligations for Trustees in the new Act

What are Trustees expected to do?

Trustees are expected to know the terms of the Trust and act accordingly, act in good faith and for the benefit of the beneficiaries and exercise their powers for a proper purpose.  Unless specified in the Trust Deed, the Act sets out other duties Trustees should comply with.  These include investing prudently, exercising reasonable care and skill and not acting in a way that benefits the Trustee personally.  This can be an issue where the Trustee is also a beneficiary and care should be taken to ensure that this is allowed for in the Trust Deed.

Trustees are also expected to retain copies of core Trust records.  These can be paper or electronic copies and include the following:

  • The Trust Deed and any other documents which contain the terms of the Trust
  • Amendments and variations to the Trust Deed or Trust
  • Documents for the appointment, removal and discharge of Trustees
  • Records of the Trust property which identify the Trust assets, liabilities, income, and expenses which are appropriate to the value and complexity of the trust property
  • Record of Trustee decisions
  • Any written contracts entered into by the Trust
  • Accounting records and financial statements memorandum of wishes from the settlor
  • Any other documents necessary for the administration of the Trust
  • Documents referred to above that were kept by a previous Trustee and passed onto the current Trustee

Each Trustee must keep copies of the trust Deed and variations and have access to the other Trust records which may be held by one Trustee.

The default duties that must be performed by Trustees unless they are modified or excluded in the trust deed (or by way of a subsequent variation of the Trust Deed):

  • Investing prudently
  • Not exercising their power for their own benefit
  • Acting impartially between beneficiaries
  • Not to profit from the Trusteeship of the Trust
  • Act unanimously with the other Trustees
  • Regularly and actively consider the exercise of Trustee powers
  • Not binding or committing Trustees to the future exercise or non-exercise of discretion
  • Avoid conflicts of interest between beneficiaries and trustees
  • Not to take reward for being a Trustee

Trustees are expected to give basic trust information about the Trust to ALL beneficiaries (or their representative).  This information includes:

  • The existence of the Trust and that they are a beneficiary
  • The names and details of the Trustees, and any changes to the Trustees when these occur
  • The beneficiaries right to request a copy of the Trust Deed and Trust information

The beneficiaries have the right to request further information from the Trustees which can include details of assets, distributions and loans that the trust has made and to whom.  This could be of some concern to settlors where this information has not previously been made available to beneficiaries.  There are a number of instances where the Trustees can decline the request or limit the information provided – as a Trustee you need to consider what the requirements will be for your trust and take advice accordingly.

Should you review your trust?

Put simply, yes. Trusts should be reviewed now and again as a matter of course, so if you haven’t reviewed a trust in some time, now is a perfect opportunity, given the major change in trust law and reporting requirements.

Benefits of a Trust Review

  • Independent assessment of your Trust setup, including recommendations as to whether it’s still needed
  • Increased understanding of your Trust
  • Peace of mind that your Trust is compliant with the Trusts Act 2019 and will deliver your desired outcomes
  • Clarity as to whether you should accelerate your gifting programme
  • Keeps the structure of your Trust as simple as possible
  • Identifies any tax saving opportunities and reduces any potential exposure to Capital Gains Tax
  • Gives certainty that all assets are protected in accordance with statutory requirements
  • Highlights any potential areas of risk or concern
  • Addresses any financial implications of your arrangements
  • Ensures your Trust meets your succession planning and asset protection objectives
  • Ensures optimal tax structuring and asset protection from the outset if your Trust enters into a major transaction
  • Avoids the Trust being deemed a sham
  • We will work with you and your lawyer to update your Trust if required

 

Need more help?

The better you understand your Trust and how the changes impact you, the easier your trust can be administered and the more peace of mind you will have.   We have developed comprehensive resources to enable trustees to fully understand and exercise their responsibilities.  Need more help?  Contact us for a call, zoom or meet on 06 871 0793.