What the Trusts Bill could mean for you as a trustee?
Trusts are very popular in New Zealand and are used in a variety of ways to protect property, family members and manage assets. Between 300,000 to 500,000 trusts are operational in New Zealand, and the proposed changes will impact many New Zealanders.
Following a review of trust law in New Zealand by the Law Commission from 2009 to 2013, a revised Trusts Bill was introduced to Parliament on 1 August 2017. The Justice Select Committee has recently reviewed the Bill and recommended it should be passed with some minor amendments.
It is intended that the Bill will replace the Trustee Act 1956 and the Perpetuities Act 1964 which are considered by the Justice Select Committee to be 'outdated and overly complex'. The Bill is designed to bring together the core principles of trust law and put them into easily accessible legislation.
If the Bill is enacted, it will come into force 18 months after it receives Royal Assent.
What will the new legislation mean for a trustee?
Duties of trustees are set out in the Bill with the intention being to assist trustees to better understand their role and for beneficiaries to understand the scope and nature of trustee's obligations.
Length of Trust life to be extended
Currently trusts can exist for up to 80 years. The Bill proposes that the duration of a trust be up to a maximum of 125 years (or less if specified).
The Bill clarifies the documents which trustees are required to keep such as the trust deed, memorandum of guidance, any deeds of variation or change of trustee and documentation as to the assets and liabilities of the trust.
Beneficiaries rights to information clarified
Trustees will be required to notify the beneficiaries as to certain basic information regarding the trust including that they are a beneficiary, the names and contact details of the trustees and their right to request information such as a copy of the trust deed. This is designed to ensure that beneficiaries have adequate details to be able to hold trustees accountable as to their role. This is also a significant change. Previously, a beneficiary would not necessarily be aware that they were named as such under the Trust. This is likely to be a concern to many people.
Family Courts role widened
It is proposed that the powers of the Family Court to make directions and/or orders involving trusts are widened. The purpose being to promote efficiencies such as when trusts arise in the context of relationship property disputes rather than having to seek recourse from the High Court.
As innocuous as these changes may seem, we need to brace ourselves for the potential of an onslaught of trust litigation. The advent of codified duties, mandatory disclosure and wider powers being granted to the Family Courts combined with the overarching vibe of social justice that pervades society means it will be easier for aggressive and/or aggrieved beneficiaries to try their luck with the courts.