The utilisation of trusts for asset protection, estate planning and tax planning purposes has exploded over the last 20 years. I suspect many readers are currently trustees of trusts. I equally suspect that very few readers have read the Trustee Act 1956, which was essentially the legislative rule book for trustee obligations.
If you have had the misfortune to read this 60-year-old piece of legislation you would realise that it is nearly impenetrable in its complexity and likely left you none the wiser as to what your trustee obligations are.
On 30 July 2019, Parliament's solution to this lack of a coherent, readable rulebook for trusts received royal assent in the form of the Trusts Act 2019. This is designed to be a one-stop shop for trustees and beneficiaries in terms of their obligations and entitlements. While in large part this new legislation merely repackages existing statute and common law principles that are fairly well known, there are some changes that those of you who are trustees of existing trusts, or those of you who may become trustees of trusts in the future, should be aware of.
In particular, the following points are worthy of note:
•While the Act passed on 30 July 2019, it does not become effective law until 30 January 2021. This provides an 18-month transition period for trustees of existing trusts to ensure that their house is in order.
•The maximum life of a trust is to be extended to 125 years. At present it is 80 years.
•Trustees will be obligated to provide more information to beneficiaries – starting with notification that they are beneficiaries of the trust. In addition, beneficiaries should be advised of who the trustees are, when trustee changes occur, and the fact that they have a right to request information regarding the trust.
•Trustees must provide “trust information” on request, which is “any information regarding the terms of the trust, the administration of the trust, or the trust property, that is reasonably necessary for the beneficiary to have to enable the trust to be enforced, but does not include reasons for trustees' decisions”. This is fairly broad and would likely extend to financial statements, details of assets held, trustee resolutions and amendment documents.
•Having said that, there are exceptions to these obligations, including consideration of the potential impact that disclosure of information may have on the trustees and the beneficiaries, the age and circumstances of the beneficiary and a myriad of other factors.
•There is a lengthy list of documents that trustees must maintain, noting that if there is more than one trustee it is possible for one trustee to hold the documents on behalf of the other trustees provided that copies can be made available.
•There is a prohibition on trustees contracting out of liability or receiving an indemnity from the trust for breaches of trust due to dishonesty, wilful misconduct or gross negligence.
•There are obligations on advisers to draw the existence of indemnity clauses to the attention of settlors when providing advice in relation to trusts or setting them up.
In summary, for the most part it is business as usual, as the new Act largely codifies what was common practice already. However, there is no doubt that the obligations of trustees are ramped up under this Act, particularly with regard to disclosing information to beneficiaries. As a result of this, some trustees may reconsider whether they want to remain trustees of trusts and furthermore, it is an opportune time right now to review trust deeds. We recommend you engage with your trust professional or contact the trustee team at GRA for advice: 09 522 7955, [email protected] or via our website.
Did you like this article? Subscribe to our newsletter to receive tips, updates and useful information to help you protect your assets and grow your net worth. We're expert accountants providing expert advice to clients in NZ and around the world.
Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
Comments
Testimonials
Hey Salesh, great webinar last night, inspired me to get off my arse and get back into investing in property.
. . tips, updates and useful information to help
protect your assets and grow your net worth?
Subscribe to GRA Newsletter
Gilligan Rowe and Associates is a chartered accounting firm specialising in property, asset planning, legal structures, taxation and compliance.
We help new, small and medium property investors become long-term successful investors through our education programmes and property portfolio planning advice. With our deep knowledge and experience, we have assisted hundreds of clients build wealth through property investment.
This cashbook is for non GST registered entities with no specific bank account for income/expenses. Use this spreadsheet to collect and maintain accounting information for submission to your accountants at year end, summarising all receipts and payments for your rental/business activities.
This cashbook is for non GST registered entities using one bank account for income/expenses. Use this spreadsheet to collect and maintain accounting information for submission to your accountants at year end, summarising all receipts and payments for your rental/business activities.
This cashbook is for GST registered entities with no specific bank account for income/expenses. Use this spreadsheet to collect and maintain accounting information for submission to your accountants at year end, summarising all receipts and payments for your rental/business activities.
This cashbook is for GST registered entities using use one bank account for income/expenses. Use this spreadsheet to collect and maintain accounting information for submission to your accountants at year end, summarising all receipts and payments for your rental/business activities.
This cashbook is for non GST registered entities with no specific bank account for income/expenses. Use this spreadsheet to collect and maintain accounting information for submission to your accountants at year end, summarising all receipts and payments for your rental/business activities.
This cashbook is for non GST registered entities using one bank account for income/expenses. Use this spreadsheet to collect and maintain accounting information for submission to your accountants at year end, summarising all receipts and payments for your rental/business activities.
This cashbook is for GST registered entities with no specific bank account for income/expenses. Use this spreadsheet to collect and maintain accounting information for submission to your accountants at year end, summarising all receipts and payments for your rental/business activities.
This cashbook is for GST registered entities using use one bank account for income/expenses. Use this spreadsheet to collect and maintain accounting information for submission to your accountants at year end, summarising all receipts and payments for your rental/business activities.
Arrange to meet in-person or online to discuss your affairs
Disclaimer
With respect to the various resources available from our website, neither Gilligan Rowe & Associates LP (“GRA”), nor its owners nor any of its employees, make any warranty, express or implied, including warranties of merchantability and fitness for a particular purpose, or assume any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, product, or process. GRA will not be liable for any problems or damages of any kind experienced by users of GRA’s online materials, resources or tools. The information and resources from or through this site are provided “as is,” “as available,” and all warranties express or implied, are disclaimed. The information or tools may contain errors, problems or other limitations. Our sole and entire maximum liability for inaccurate information, for any reason, and the user's sole and exclusive remedy shall be limited to the amount paid for the information, tool or other resource (if any). GRA are not liable for any indirect, special, incidental or consequential damages whatsoever.