What Should Trustees be Doing?
What trustees should NOT be doing:
While it's not always useful to consider the negative first, but in this instance, considering what trustees should not be doing is quite insightful. If you are a trustee of a trust, regardless of whether it has run well for many years or is relatively new, you should not:
- be ignoring the changes the Trusts Act 2019 (the Act) has brought into effect since 2021; and
- if you don’t know about the Act, you should not remain ignorant.
What Trustees SHOULD be doing:
Now that that’s out of the way, on to the positives – what trustees should be doing. The answer is familiarising with, and then adapting to, the changes the Act has created in the landscape of trust management.
Typically, in New Zealand, trusts have for many years been managed passively and reactively. By this we mean trustees tend to not hold accurate trust records, to not gather regularly to consider their management of the trust fund or exercise of their powers, and many beneficiaries often have no idea they are a beneficiary of a trust.
A key objective of the Act was to change this status quo, by:
- codifying in modern language the explicit duties on trustees; and
- heightening accountability to beneficiaries of a trust, including giving beneficiaries the right to have certain information about the trust.
- As obvious as it sounds – reviewing exactly what the purpose of your trust is. Was it established many years ago to protect your assets from business risk? Or did you decide a trust was necessary for your estate planning, to ensure your children are provided for?
- Secondly, in light of the more onerous duties the Act imposes on trustees, the ongoing compliance obligations and bearing disclosure obligations to beneficiaries in mind, is it still worth having a trust?
In many cases, the answer will be yes it’s worth having a When managed well, trusts remain an excellent way to protect and manage wealth.
However, if your circumstances have changed since establishing a trust, for example – that business risk you once were protecting against has now changed due to a change in job or other reasons, then the administrative and disclosure obligations may outweigh the actual benefits of continuing to have a trust in place.
Furthermore, if you foresee any issues with disclosure to beneficiaries about a trust, then it is really important to consider if a trust is the best structure for you. We know sometimes families find the trust structure useful when trying to navigate difficult family relationships, but the new disclosure obligations to beneficiaries mean you have no choice but to share some information (in most scenarios).
We are here to help
MoranLaw has over 20 years of trustee and governance experience. We can offer proactive, professional and tailored advice that ensures your trust remains fit for purpose, compliant with legislation, and as robust as possible against potential attacks.
Our Elevated Trust Management service, can take care of your trust documents, annual meetings, and routine resolution We can also undertake the role of independent trustee if desired.
Please get in touch to discuss your trust and how we can help.
