It is often said that New Zealand has one of the highest rates of trusts per capita – the government estimates there are somewhere between 300,000 and 500,000 trusts operating in New Zealand.
2019 brings a long-anticipated change to the law of trusts in the form of the Trusts Act 2019. While much of the Act updates or restates the current law, there have been some significant changes.
Importantly, the days of establishing a trust and then forgetting about it are over. For example, the Act introduces a presumption that basic information about the trust is made available to beneficiaries periodically. It also creates new obligations regarding trust records. At present, it is common for trust documentation to be incomplete, with important documents being lost and trustees' decisions not being recorded – this creates issues when disputes arise. The Act compels a new level of rigor, including requiring each trustee to keep copies of the trust deed and any variations.
The Act also clarifies what it means to be a trustee. If you are a trustee, even of a simple family trust, these changes are relevant to you. The Act creates mandatory obligations that must be complied with, including that trustees know the terms of the trust deed and act in accordance with it. Time to dig out that trust deed and have a look!
The takeaway? The changes will increase the cost to establish and administer a trust. Rather than simply establishing a trust as a matter of course, you should carefully consider whether a trust structure will actually meet your needs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.