As you may already be aware, the Trusts Act 2019 is not far away now, coming into force from 31st January 2021. This replaces the Trustee Act 1956, making it the first major update to NZ Trust law in more than 60 years.
In summary the 2019 Act modernises existing trust law, provides better guidance for Trustees and Beneficiaries, and intends to make it easier to resolve disputes. While most of the Act updates or restates existing legislation or case law, there are changes that everyone who is a Trustee of a Trust or has a Trust should be aware of.
Many of you will already be familiar with some of the changes, having read our earlier newsletter articles, and/or started a Trust review process with us and/or your lawyer. Equally we may have had the opportunity to discuss elements of the changes in your Annual Accounts review.
With the new Trust Act coming into force soon, we strongly encourage a thorough review of the Trust Deed to ensure it remains appropriate. We have started on this review for those Trusts that we have been engaged to administer. It is also likely that we will recommend including your legal advisor in this process to ensure the Trust Deed remains appropriate and enforceable with the new legislation.
One of the key issues that is being addressed by the new law is the lack of transparency for Beneficiaries. The latter being the focus of the rest of this article, as it is the area in which Trustees arguably have the most pressing issues to address.
Under the new Act there is a presumption that Trustees will disclose Trust information to all the beneficiaries. The Act specifies some factors for Trustees to consider when deciding whether or not beneficiaries will be provided Trust information which can be found here.
In light of the requirement to disclose information to all beneficiaries we recommended that Trustees review in full their beneficiary lists, so that a plan can be made to either notify, apply a specific exclusion option, or in some cases seek legal advice around amending the Deed. From the reviews we have completed so far, it has become apparent that Trust Deeds often have a long list of beneficiaries or a beneficiary list that is wider than settlors perhaps now want.
For those Trusts that have already engaged us with the administration duties, we will be discussing your beneficiary lists with the Trustees at your AGM or if that has already happened we will be in touch in the near future directly to discuss your beneficiary lists.
As a minimum, Trustees are now required to provide Beneficiaries with basic Trust information, as early as possible. There is an expectation that the provision of this information is reviewed annually. Basic Trust information is to be supplied to Beneficiaries without them asking for it.
Basic Trust information is:
- The fact that the person is a Beneficiary of the Trust;
- The name and contact details of the Trustees;
- The occurrence of, and details of, each appointment, removal, and retirement of a Trustee as it occurs; and
- The right of the Beneficiary to request a copy of the terms of the Trust and Trust information (such as the Deed and any Deeds of Trustee appointments/removals, Trust’s Annual Accounts etc)
On an ongoing basis, Beneficiaries need to be kept informed of any changes to the basic Trust information. Trustees also need to be in a position to respond to any requests for Trust information which could include, but is not limited to:
- The Trust’s accounts
- Any documents relating to the appointment or removal of Trustees
- Details of all distributions of capital and income and who the distributions were made to (distribution is another term for payment)
- Resolutions of the Trust
The reason beneficiaries are entitled to receive information is to enable them to ensure that the Trustees are acting in accordance with the terms of the Trust Deed. However, these rights will always be subject to the discretion of the court that must balance the rights of a beneficiary seeking information against the interests of all the beneficiaries, and in some circumstances, the wider family. We will need to wait for some court cases to see how far the provision of information goes.
Beneficiaries are not generally entitled to see information relating to the trustee’s decision making processes as this information is the trustee’s information, not the trust’s information.
So if you are a Trustee of a Trust it is CRUCIAL that you are all up to date and ready for the changes.
If you have not yet considered the ongoing administration of your Trust and/or been in contact with us or your legal advisor, we recommend you do so as soon as possible to allow time for a review to be completed.