Introduction

Trusts are a common way of holding and managing property in New Zealand. A trust is a legal relationship where one or more people (the trustees) hold and deal with property for the benefit of others (the beneficiaries). The Trusts Act 2019, which came into force on 30 January 2021, sets out the core principles and obligations of trustees in New Zealand. This article briefly overviews some of the key aspects of the Trusts Act 2019 and what they mean for trustees.

Mandatory and Default Duties

The Trusts Act 2019 distinguishes between mandatory and default duties of trustees. Mandatory duties cannot be modified or excluded by the terms of the trust. These include the duty to:

  • Know the terms of the trust

  • Act in accordance with the terms of the trust

  • Act honestly and in good faith

  • Act for the benefit of the beneficiaries or to further the permitted purpose of the trust

  • Exercise the trustee's powers for a proper purpose

Default duties apply unless they are modified or excluded by the terms of the trust. They include the duty to:

  • Exercise reasonable care and skill

  • Invest prudently

  • Avoid conflicts of interest

  • Act impartially

  • Not profit from the trust

  • Not delegate the trustee's powers

  • Consider the exercise of the trustee's powers

  • Keep and provide information

Trustees should be aware of the mandatory and default duties that apply to them to ensure that they can comply.

Disclosure of Information

One of the most significant changes introduced by the Trusts Act 2019 is the requirement for trustees to disclose certain information to beneficiaries. This requirement ensures that beneficiaries have sufficient information to enforce the terms of the trust and hold the trustees accountable.

The Trusts Act 2019 requires trustees to notify every beneficiary of the following information:

  • The fact that they are a beneficiary of the trust

  • The name and contact details of the trustees

  • The details of any changes to the trustees

  • The right of the beneficiary to request a copy of the terms of the trust or trust information

Trust information is any information regarding the administration or management of the trust, the trust property, or the exercise of the trustee's powers. Trustees must, within a reasonable period of time, provide trust information to a beneficiary who requests it, unless there is a good reason not to do so. The Trusts Act 2019 sets out several factors that trustees must consider when deciding whether to disclose trust information, such as the nature and interests of the beneficiary, the nature and interests of other beneficiaries, the nature and purpose of the trust, the expectations and intentions of the settlor, and the likely impact of the disclosure.

Conclusion

The Trusts Act 2019 is a significant reform of the law of trusts in New Zealand. It aims to provide greater clarity, transparency, and accountability for trustees and beneficiaries. Trustees should familiarise themselves with the provisions of the Trusts Act 2019 and ensure that they fulfil their obligations.

If you have any questions or need any assistance with your trust matters, please contact our experienced trust lawyers.