New Trust Law Proposed
There is a bill currently before Parliament which when enacted will be the first big change to New Zealand's trust law in more than 60 years. There is estimated to be more than 500,000 Trusts operating in New Zealand. Nobody knows for sure as there is no central trust register like the company's register.
The proposed changes include:
1) Extending the perpetuity laws
Now when you set up a family trust the Trust it can only exist for a maximum of 80 years then you must wind it up and distribute assets. The proposed legislation suggests extending it to 125 years. This is because people are living longer, and Trusts are often part of significant succession planning.
2) More information access for the beneficiaries
The Trust bill in draft form proposes giving most Trust beneficiaries the legal right to financial reports on the state of the family trust - meaning beneficiaries will be able to request more information including who is getting what. Whether beneficiaries have the right to request this information under our current law is a grey area. This will likely open a can of worms for the Trustees. Trusts are often been set up for the benefit of the primary beneficiaries usually mum and dad and the trust's principal purpose was to care for them first and then the children.
3) Trustees duties will be clearly defined
There are three groups of behaviours the Trusts Bill classifies:
The first are mandatory duties which a trustee must follow are set out in the act.
a) A trustee must know the terms of the trust.
b) A trustee must follow the terms of the trust.
c) A trustee must act honestly, and in good faith.
d) A trustee must act for the beneficiaries of the trust.
e) A trustee must exercise the powers they have for a proper purpose
The second group of behaviours are governed by the "default" duties for a trustee to act with reasonable care and skill, to invest prudently, not to do things for their own benefit, and to act impartially towards beneficiaries.
The third group of duties are about the information trustees must keep, and which of them must be made available to beneficiaries. These are to keep records (including of trust assets, trustee decisions, and changes to the trust), and to make them available to sane, adult beneficiaries.
The duty of trustee can be an onerous task and must be exercised diligently!
We have been asked to act as Trustee on a number of occasions. We have an understanding of business, finances and are already privy to your financial information as your trusted advisor. We have to wear two hats if asked to be a trustee. One as your accountant, the other as you co-trustee.
Our experience can help you discharge your trustee duties in the appropriate manner.
We are happy to discuss any concerns you may have.