2021 Trust Act Changes - Your obligations as a trustee

Mandatory duties
Mandatory duties cannot be modified or excluded by the trust deed so all trustees will be required to abide by these duties. These duties are to:

  • Know the terms of the trust

  • Act in accordance with the terms of the trust

  • Act honestly and in good faith

  • Deal with the trust property and to act for the benefit of the beneficiaries in accordance with the terms of the trust deed, and

  • Exercise the trustees’ powers for a proper purpose.

Default duties
Default duties are obligations by which trustees must abide — unless the settlor decides otherwise when the trust is established, or the trust deed is amended. These default duties include:

  • A general duty of care, a requirement to invest prudently,

  • A prohibition on trustees acting in their own interests,

  • A duty to consider the exercise of trustees’ powers,

  • A duty not to fetter a trustee’s discretion,

  • A duty to act unanimously and;

  • Duties not to profit from the trusteeship or benefit from the exercise of trustee discretions.

Default duties can be modified or excluded if this is how the settlor wants to set up a trust. For example, a settlor might want the trustees to invest in a specific business that might not necessarily be a prudent investment.

Trust documentation
Each trustee will be required to keep copies of the trust deed and any variations. They will have to either keep their own copies of ‘core trust documents’ (which are defined in the Act) or to ensure that at least one of the other trustees holds all of the core trust documents. 

 

Beneficiary access to basic trust information
The Act also creates a presumption that ‘basic trust information’ must be made available to beneficiaries.

That includes:

  • Information that a person is a beneficiary of the trust,

  • The name and contact details of the trustees,

  • Details of trustee changes as they occur and;

  • The beneficiary’s right to request further trust information.

There is also a presumption that if a beneficiary requests further trust information, including a copy of the trust deed, the trustee must provide that information within a reasonable period of time. The trustee may ask the beneficiary to pay the reasonable costs of providing that information.

Trustees do have the ability to decide that either, or both presumptions, do not apply. A list of factors is set out in the legislation and the trustees must consider these factors when deciding whether these apply in the circumstances. Those factors include, amongst other things:

  • The nature and interests of the beneficiary (including whether the beneficiary is likely to receive trust property in the future)

  • The nature and interests of other beneficiaries

  • The intentions of the settlor when the trust was established

  • The age and circumstances of the beneficiary in question and the other beneficiaries of the trust

  • The effect of giving the beneficiary the information

  • The nature and context of any request for further information, and

  • Any other factor a trustee reasonably considers is relevant. Trustees will have to carefully consider any decision not to disclose information.

For any further information please contact us on 06 757 5477 or info@velocite.co.nz

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