The new law will apply to existing trusts as well as new ones.
The new law aims to do the following:
The perpetuity period, which is the maximum lifespan of trusts, will increase from 80 to 125 years.
In some circumstances, it will not be possible to contract out of the mandatory trustee duties, and there will be restrictions on the nature of trustee indemnities. Currently, trustees are entitled to be indemnified for their actions out of the trust assets if acting prudently and reasonably. The exact nature of this indemnity will be spelt out in the legislation and will be clear. There will also be stronger obligations on retaining trust records and documents, and strengthened creditor protection provisions.
One of the controversial aspects of the new law is beneficiary disclosure obligations.
This process will require trustees to notify all people if they are qualifying beneficiaries, which is defined to be a person who the settlor intends to have a realistic possibility of receiving trust property. Trustees can only withhold information in certain circumstances.
While trustees will have some flexibility with disclosure, the law, as drafted, favours keeping beneficiaries informed. This will undoubtedly result in more trust disputes.
There is a school of thought that people can manage their own trusts, and that it is not necessary to engage a lawyer to do this. My view on that is this: do you do your own car repairs, or do you do your own GST and income tax returns, if in business? The answers are probably no. If it is, then why would you expect to be able to be competent in an ever-complicated
The legal world is becoming increasingly complicated, with stringent new tax and money laundering obligations on property transactions and trusts, and these are areas that even experienced lawyers are struggling to understand. But we have to understand it, and shouldn’t expect lay people to have this knowledge, nor take on the responsibility.
Trusts are still a very important aspect of managing assets. It is going to be very important that the evolving and changing rights and obligations of trustees and beneficiaries are understood and, where necessary, actioned. That is the very nature of the legal world. It is always challenged, and it is always evolving.
If you have any queries, or would like more information on the impact the expected changes to this area of law may have on your affairs, please contact one of our three trust practitioners (Nick Kearney, Leonie Reid and Chris Hallowes).
Schnauer & Co, 222 Kitchener Road, Milford
09 486 0177 www.schnauer.com