Trust Law has been under review for some time now. The Law Commission has spent the last four years reviewing the existing Trustee Act 1956, and an exposure draft Trust Bill incorporating much of their recommendations was released just prior to Christmas 2016.
The draft Trust Bill is not intended to create new law. Rather, it attempts to combine much of what are existing trust principles, established either in case law or in the 1956 Act, into one piece of legislation that is written in plain language and easily accessible. The changes come from a belief that within the wider NZ public there is a general lack of understanding and confusion about what a trust is, how it works and the rights and obligations of the parties involved. The proposed changes also reflect the need to ensure that some of the more routine trust administrative matters, such as the removal of an incapacitated Trustee from the land title, can be achieved more easily and cost effectively.
The more notable changes proposed by the draft Bill are the following:
- The creation of mandatory and default duties for Trustees. The mandatory duties must be performed by Trustees and cannot be modified or excluded by the Trust Deed. The default duties will apply unless they are modified or excluded by the Trust Deed. With the codification of trustee duties will come an expectation that trustees will be well appraised of their responsibilities;
- Requirements for Trustees to keep documentation. Each Trustee will be required to hold a copy of the Trust Deed and any variations made to it. At least one Trustee must hold a list of trust assets and liabilities, records of trustee decisions, written contracts entered into by the Trustees, accounting and financial statements for the Trust and documentation relating to changes of Trustees;
- Trustees obligations to give information to Beneficiaries. The Bill specifies basic trust information that trustees must be provided to beneficiaries. Trustees will not have the ability to withhold all trust information from all beneficiaries and can expect that beneficiaries are likely to be better informed of their entitlements in this regard.
Overall these changes signal a new era of active management and administration for Trusts. Trustees who fail to have regular meetings and who do not keep trust documentation or records of their minutes and resolutions are likely to find that they do not meet the standard expected of them. They will be held accountable by knowledgeable beneficiaries, other claimants such as creditors and ultimately by the Courts. If you are a Trustee, the draft Bill sends a clear message: get your house in order now or face the consequences in the future.
?Glenda Graham is a Partner in the Succession & Wealth Protection?team at Norris Ward McKinnon. You can contact her at [email protected]