Estimates put the number of trusts operating in New Zealand between 300,000 and 500,000. Chances are you are personally involved in one (if not multiple) trusts or you at least know those who are.
The proper administration and operation of trusts is a complex area of law. It’s fair to say that many of those involved with trusts, in whatever capacity, have a limited understanding of their rights and obligations. It is hoped the Trusts Act will improve this to some extent. The Act’s three main objectives are to:
- Set out clear core trust principles
- Ensure more efficient trust administration
- Simplify and clarify the role of the courts in relation to trusts.
The Act updates and restates in modern language, existing Trust law. However, it also implements a number of important changes. If you are involved as a trustee or beneficiary the emphasis is on increased accountability and transparency.
If you are a trustee
- Trustee duties are now recorded in the Act. Mandatory duties, such as the duty to know the terms of the trust deed and exercise powers for a proper purpose, must be complied with. A failure to do so is a breach of trust.
- A number of default duties also apply to most Trusts unless specifically overridden or modified by the trust deed. By way of example, the duty to invest prudently, the duty to avoid conflicts of interest and the duty to act unanimously.
- In general, there are increased compliance requirements for trustees.
If you are a beneficiary
- There is now a presumption that “basic trust information” will be provided by the trustees to every beneficiary. Basic trust information includes the fact that a person is a beneficiary and details of the trustees.
Beneficiaries are entitled to request a copy of the trust deed and trust information and there is a presumption that trustees will provide this in a timely manner.
- Beneficiaries may apply to the High Court to review trustee decisions in certain circumstances.
Topics to be covered in the next edition:
- The provision of basic Trust information to beneficiaries.
- Trustee’s Mandatory Duties.
If you have any questions about the matters raised in these articles, please call to discuss further.
Also in this edition:
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