Many will be aware that the landscape for the management and administration of trusts has been changing in New Zealand.
In November last year, an exposure draft of a new Trusts Bill was released. It is expected this bill will be enacted later this year and become effective in 2018.
There has never been a better time to re-evaluate your trust arrangements and if you are acting as a trustee, to consider whether to continue in that role. While the new Trusts Act is not intended to be revolutionary for the law relating to trusts in New Zealand, there will be more rigour around the standards expected from trustees and there are some real issues for trustees to consider.
Examples include:
* If you are acting as a trustee, it will be mandatory for you to have a broad understanding of the terms of the trust.
* There will be a prescribed list of trustee duties in the new Act, including a duty to actively and regularly consider whether trustee powers should be exercised.
* There will be a statutory list of all documents and records that must be maintained by trustees in relation to a trust.
* It will no longer be possible to exclude trustee liability for any losses arising due to the gross negligence of a trustee.
* There will be an obligation for trustees to proactively ensure that at least one beneficiary of a trust has sufficient "trust information" to enable the terms of the trust to be enforced against the trustees.
In recent times, the courts have made it obvious that trustees can no longer be "passive" and this will be reinforced by the new Trusts Act. If you are a trustee, you must act proactively with other trustees and the settler to ensure the terms of the trust are being met. The days of "setting and forgetting" are long gone.
As a result, individuals - particularly friends of the family - are becoming increasingly apprehensive and circumspect about accepting trustee appointments. Even many professional firms are choosing to no longer act in a trustee capacity for clients. Where firms do act as a trustee, most are using a separate trustee company for each client's trust, a reflection of the challenging times.
For further information, please contact the team at Crowe Horwath on 06 858 5540.
This information is general in nature and readers should seek specialist advice before making financial decisions.