The Trustee Act in New Zealand was enacted in 1956 and trust law since that date has evolved considerably as a consequence of numerous decisions by the Courts. There is now a Bill before Parliament that, subject to the Governments schedule, may well be passed into law later this year. There are many changes proposed of which some are quite significant from a practical perspective (quite apart from the legal perspective). The key changes that will affect many of Ecovis clients are summarised below.
- Duration of trust – most trust deeds provide for the trust to be wound up and distributed no later than 80 years after settlement. This was in order not to offend the Rule Against Perpetuities introduced in the Perpetuities Act 1964. The Trust Bill proposes that this period be extended to 125 years. This change does not apply retrospectively and may well necessitate resettlements i.e. transfer onto a new trust, if the 80 year maximum period is getting close and trustees do not want to be compelled to wind up at the 80 years point.
- Positive duty on trustees – there is now a provision that requires trustees to make available to a sufficient number of beneficiaries sufficient trust information to enable the terms of the trust to be enforced against the trustees.
- Disclosure of information – this positive duty obligation is reflected in the disclosure of information provisions. These provisions require that information regarding the terms of the trust, the administration of the trust and details of trust property, including financial statements be made available to qualifying beneficiaries. A qualifying beneficiary is defined as a person who has a reasonable likelihood of receiving trust property on a distribution.
The trustees may withhold information if they consider that the provision of such information should not be made to every qualifying beneficiary. The trustees may withhold from one or more beneficiaries but NOT all qualifying beneficiaries.
The grounds for refusing to supply the requested information include such factors as the age and circumstances of the beneficiary, the effect of family relationships and relationships between trustees and beneficiaries to the detriment of beneficiaries as a whole.
- Audit – a beneficiary can apply to the Public Trust for an audit and the Public Trust will appoint a suitably qualified lawyer or accountant to conduct the audit at the cost of the trust.
- Winding up – if all beneficiaries vote in favour of a winding up, by written notice to the trustees, the trust can be terminated, resettled or varied.
The above is a very brief outline of the proposed changes that will inevitably have a significant impact on the administration of the many thousands of family trusts. Some of the proposed changes will likely create difficulties in many family situations and in turn add to administrative complexity. It is almost certain that given the more onerous obligations imposed on trustees that many existing trustees will seek to resign. Additionally there are many trusts settled in New Zealand with just a single asset such as the family home and consideration needs to be given to whether such trusts are worthwhile continuing with. Ecovis KGA does offer a professional trustee service so contact any of the directors if you wish to discuss any aspects of your trust with us.