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NZ Trust Law Changes
The New Trusts Act
The new legislation has been in place for over a year now which has allowed some development of thinking around the practical implications for trustees.
These include;
- Mandatory trustee’s duties which require amongst other things the holding and understanding of all trust documentation, including any expressions of the settlors wishes, which are now given a real emphasis.
- Unless certain criteria are met a requirement to notify all beneficiaries (even if considered to be only “back-stops”) of the fact that they are beneficiaries under your trust.
- Certain default duties which unless excluded, will by law be deemed to apply. Examples of default duties causing trustees particular problems include;
- To invest prudently, which definition would usually exclude tying up most of the trusts wealth in the family home.
- Not to exercise trustees power for own benefit, which makes it difficult for a trustee who is also a beneficiary to allow him or her self rights of occupation of the family home now held in trust.
- To act impartially between all beneficiaries, no matter whether or not some were only included in the first place to give the trustees some flexibility and as a fall back position to operate only if everybody else originally intended to take was dead!
A failure to comply with the above puts a trustee at risk of being sued by a disgruntled beneficiary.
If you wish to discuss;
- If a settlor, recording your wishes as to priority of beneficiaries and who should and shouldn’t be told what.
- If a trustee, understanding your duties and/or excluding the default obligations.
- Or anything else
Contact us on 03 379 1740 and ask for David or email us on djh@wwl.co.nz
Trust Busting
In recent history there have been two significant court cases of note for those seeking to “ring fence” assets by putting them into trust. The first is Clayton and the second is Preston. In brief, these cases say if you put assets into trust and then get married (but it seems inevitable that this will extend to any form of personal relationship), if you do anything a Court can consider a “settlement” in favour of a “spouse” the Courts will consider that an invitation to treat your trusts assets as relationship property and to let the proverbial “bull loose in the China shop”.
“Settlements” can be doing as little as adding your spouse or step-child to your trust as an additional beneficiary, acquiring an asset and/or in some situations even just refinancing.
If wishing to “share” with your spouse going forward, make sure you do that personally and do not involve your trust.
The New Trust Act and Wills
The new Trusts Act applies to all trusts, whether created during a lifetime or after death under the terms of a will. This means the days of a trustee/executor under a will waiting to be told what to do, assuming somebody else has things under control and generally being “asleep at the wheel” are over.
There are mandatory duties, as well as default duties that if not excluded are also deemed to apply and if you are not aware of those and/or do not act in accordance therewith, then notwithstanding the fact you only agreed to become a trustee/executor as a favour to a friend, you could end up getting sued.
If you wish to discuss with our Christchurch family trust lawyers what you need to know about being a trustee and executor then please feel free to contact us on 03 379 1740 and ask for David or email us on djh@wwl.co.nz
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