Changes to Trust Law NZ

Trustee's Duties

There are mandatory and default duties that trustees are required to comply with. 

Mandatory duties

The mandatory duties are primarily that a trustee acts honestly and in good faith; acts for the benefit of the beneficiaries and/or to further the purpose of the trust and exercises their powers for proper purpose.

None of these duties are new and all are well established under common law, but the duties are now codified in the Act. All trustees need to be aware of these mandatory duties, as they cannot be excluded or modified. Any purported exclusion of a mandatory duty will have no effect. It is even arguable, that if there is an attempt to exclude a mandatory duty that there was no intention to create a trust in the first place! It is important as such that no such provisions are left in your trust deed.

Default duties:

In addition to the mandatory duties, there is a list of default duties (ss 29-38) that trustees (unless specifically excluded) have to abide by. These duties are;

1.   to exercise reasonable care and skill;

2.   invest prudently;

3.   not to directly or indirectly exercise their power for their own self-benefit/ profit;

4.   actively and regularly consider exercises of the trustee’s power;

5.   not fetter future trustee’s powers.

6.   avoid conflicts of interest;

7.   treat beneficiaries impartially;

8.   act for no reward (the reimbursement of legitimate expenses is allowed); and

9.   to act unanimously.

Default duties can be modified. Accordingly, it is good practice to get your trust deed reviewed to check whether the circumstances of your trust warrants amending the deed to exclude one or more of these default duties. 

Indemnity clauses are void

The new Act also places a restriction on indemnity clauses. Where a trustee is dishonest, demonstrates wilful misconduct or is grossly negligent, a trustee cannot rely on exclusion from liability under the indemnity clause.

Trustee retire

If a trustee wishes to retire they must seek a discharge in writing from the person able to authorise the discharge. The Act also simplifies the process for removing a trustee who becomes mentally incapable of performing their trustee duties. Note, a trustee retiring from their role is also not automatically discharged them from liability.

Trustee’s administration

Trustees are also meant to know the terms of the trust and to act in accordance with the terms there of. This means that ALL trustees are required to hold a copy of the trust documentation. It is not sufficient, by way of example, for just one copy to be held in our deed’s system. 

Better Transparency - Disclosure to Beneficiaries

Another core provision is that trustees ought to be accountable to beneficiaries. As such the new Trusts Act contains a PRESUMPTION that trustees will make available to every beneficiary basic trust information. Note the emphasis on the word “Presumption”.

Basic Trust Information means:

1.   The fact that a person is a beneficiary of the trust; and

2.   The name and contact details of each trustee; and

3.   The occurrence of, and details of, each appointment, removal, and retirement of a trustee as it occurs; and

4.   The right of the beneficiary to request a copy of the terms of the trust or trust information;

When deciding whether the above presumption to disclose basic trust information will apply or not, trustees must consider the following;

1.   The likelihood or otherwise of the beneficiary receiving trust property in the future, including the nature, degree and extent of the beneficiary’s interest in the trust;

2.   The expectation of the settlor at the time of the creation of the trust;

3.   The age and circumstances of every beneficiary;

4.   In the case of a family trust, the effect on relationships within the family, the trustees and the beneficiaries when information is disclosed.

5.   Whether the information is subject to personal or commercial confidentiality;

6.   In a trust that has a large number of beneficiaries or unascertainable beneficiaries, the practicality of giving information to all beneficiaries.

7.   The practicality of imposing restrictions and safeguards on the use of the information.

8.   If the beneficiary has requested further information. The trustee must consider the nature and context of the request; a reasonable fee can be charged to the Trustee for this request.

9.   Any other factor that the trustee reasonably considers is relevant to determining whether the presumption applies.

A scenario where this could apply is where for instance the trust has been allocating income to an adult child beneficiary over a period of time and not to other beneficiaries. If this is disclosed to all the beneficiaries, it might lead to significant disharmony which the trustees may feel (all things considered) outweighs their duty to disclose.

Trust Law Changes 2021  | Other things to note:

The age of majority has changed from 20 to 18 years of age.

The maximum trust term has increased from 80 to 125 years, however, this extension does not automatically apply to trusts created before 30 January 2021. Again you may wish to vary your trust to provide for this.

The Act provides a degree of protection for trustees who invest with a diverse investment strategy and the ability of trustees to authorise persons to act on their behalf.

The Act specifically stipulates a resolution procedure. However, the Act also authorises trustees to use alternative disputes resolutions, even if those procedures are not specifically authorised in the Act. 

I’m a Trustee – what should I do before the end of October?

We recommend that you book a consultation to discuss your Trust with one of our Family Trust Lawyers, please contact or fill in our online form below.