There are a number of advantages in forming a trust:

• Creditor protection; People involved in business or who are directors of companies often seek to obtain protection against possible claims from creditors arising from their activities. A usual situation in New Zealand is where people have liabilities related to their business interests and wish to protect their family home from such liabilities. In most circumstances a trust protects those assets from personal liabilities.
  
  Protection against creditor claims with children; Assets held in trust are usually protected from creditors of the beneficiaries. This can include claims from a child’s spouse or partner following a separation.
  
  Protection of capital for irresponsible children or grandchildren; You may be reluctant to simply give your assets to your children on death if you have concerns about their ability to manage their financial affairs. If your assets are held in a trust, then the trust can provide a vulnerable child with income and/or capital to meet their requirements as they arise. This can protect the long-term value of your family’s assets.
  
  Flexibility to cater for different beneficiaries needs at different times; Trusts provide a useful mechanism for effective estate planning, offering great flexibility to cater for different Beneficiaries’ needs and circumstances at different times.

If you are considering establishing a trust, we are happy to meet with you to discuss how a trust may work for you. We can create trust structures that will meet your personal and commercial circumstances.

Trust Act Changes in January 2021

For the first time in 60 years, the legislation around trusts has changed. This new landscape will focus on making trust law more accessible and understandable for trustees and beneficiaries. The Act introduced various changes to trust law which mean settlors and trustees should be aware of their changing rights and obligations. The changes are likely to make trusts more transparent, but also more intensive to administer for trustees.

Here are the principal changes to the Act:

• clarification of trustee’s duties (clearly articulated duties and default duties for trustees);

• clear rules about when trustees are required to provide information to beneficiaries so that beneficiaries can enforce their rights, including providing beneficiaries with information without needing to ask for it;

• practical and flexible trustee powers that allow trustees to manage and invest trust property in the most appropriate way;

• options for removing and appointing trustees without having to go to court in straightforward cases;

• requirements to hold and retain core records for the trust; and

• modern dispute resolution procedures.

One of the biggest new obligations for trustees is in relation to beneficiary disclosure; under the previous Trustee Act, trustees are not specifically required to tell people that they are beneficiaries of a trust, or even that a trust exists. Under the new Trusts Act, beneficiaries are more readily able to hold trustees accountable as generally disclosure will be required as right without a beneficiary even having to ask.

Trust Information will need to be disclosed to Beneficiaries

• Generally speaking, beneficiaries of a Trust need to know that they are a beneficiary of the trust, who the trustees are and that they are able to request information about the trust from the trustees, and this includes a request for financial information.

• On a continuing basis, trustees will need to consider disclosure of trust information to beneficiaries.
  

As a Trustee, what does the new Act require me to do?

The new Act requires you to do the following:• Review whether your trust is still necessary and why;• If it is necessary, determine whether your trust is fit for purpose, or what changes are needed to comply with the new Act; • Dissolve your trust if no longer needed.

I haven’t taken any steps to review or make changes to my trust. Will there be any ramifications?

If you choose to do nothing, there could be the following ramifications:

• Trust Deeds with terms that do not comply with the new Act;

• Default Trustee duties which may restrict the use of trust assets and who they can benefit (e.g. Trustees who are also beneficiaries of the same trust cannot benefit themselves as per the new Act, and 99% of Trusts we see have trustees who are also beneficiaries!);

• A Trust that is not administered properly may not provide protection in the event that a claim is made against the Trust.

• Trusts with a wide list of discretionary beneficiaries who will then need to be contacted to be made aware that they are a beneficiary and that they can request trust information.
  

If I need to keep an existing Trust or create a new Trust, what do I need to do to meet my obligations?

As a Trustee, you are now required to have an annual meeting of the trustees whereby the trustees review the use of the trust assets and review all of the following aspects (as applicable) of the Trust:

• The assets and liabilities of the trust

• The terms of the trust deed

• The objectives of the trust

• The circumstances of the beneficiaries

• Disclosure obligations to the beneficiaries

• The nature of the existing investments

• The insurance of the Trust assets

• The loans to the Trust

• The loans the Trust has

• The need for outside experts

The annual review with Trustees can usually be completed in around 20-30 minutes and all Trustees must attend. If you require a neutral space for all trustees to meet or would like assistance with your annual trust administration, we are happy to help you facilitate that at our law offices in either Papatoetoe or Beachlands, or remotely via video conferencing.

Our team can assist should you require advice or legal counsel about how to effectively administer your Trust. We can assist with documentation preparation including preparation of trustee meeting minutes and trustee resolutions. We can also hold your trust documentation on file so as to ensure that all core records are held and in keeping with the new Trusts Act.

over on the blog

Read our Changes to the Trusts Act article.