Trusts are an important part of New Zealand society and the economy. It is estimated there are between 300,000 to 500,000 trusts in New Zealand. The Government is moving to update and improve the general law governing trusts for the first time in 60 years.
Generally, the proposed reforms seek to clarify core trust concepts such as what constitutes a trust and what duties a trustee has. The proposed changes are about making trust legislation more useful, fixing practical problems and reducing costs. The reform also aims to modernise outdated language and concepts. However, there is no requirement for existing trust deeds to be changed, as the draft legislation is all about restating existing law. Some of the proposed changes include:
Trustees will be required to perform mandatory duties and these cannot be modified or excluded by the terms of the trust deed. However, while the terms of the trust can’t exclude a mandatory duty, the trust deed can influence how the duty to hold or deal with the trust property, for the benefit of the beneficiaries or permitted purpose, is applied. There will also be default trustee duties, which are the common law trustee duties, which can be modified or excluded expressly or implicitly by the terms of a trust.
Trustees will need to exercise such care and skill as is ‘reasonable in the circumstances’, taking account of any special knowledge or experience that the trustee has.
Trustees will need to keep specified documents.
There will be greater clarity around the provisions for the appointment and removal of trustees and the transfer of trust property to new trustees.
We will keep you informed as the bill passes through parliament and becomes law.