New landscape for trusts

Perpetual Guardian general counsel Henry Stokes says new laws will be game-changing for the management of trusts.

Saturday, February 8th 2020, 10:58AM

Henry Stokes

For the first time since the 1950s, New Zealand trust law is being overhauled – and one of the country’s leading legal specialists says it’s going in the right direction, but financial advisers and other professional services providers who work as trustees will need to step up and move quickly to help their clients.

The new Trusts Act 2019, which comes  into effect on January 30, 2021, replaces the Trustee Act 1956 and the Perpetuities Act 1964. The new Act aims to make trust law more accessible, to clarify and simplify core trust principles and essential obligations for trustees and preserve the flexibility of the common law to allow trust law to continue to evolve through the courts. It is important to note that the new Act provides more beneficiary rights than ever before.

Henry Stokes, general counsel for Perpetual Guardian, says the Trusts Act 2019 contains mandatory and default duties of trustees, a first for New Zealand. “The whole landscape of trust law has changed significantly in the last five to 10 years, with lots of changes in case law that have crystallised trustee duties and highlighted some large gaps and inconsistencies in trust law. Many trustees are laypeople, not trained professionals, and there was previously no single source to tell them what they needed to know about their responsibilities – in plain language.” 

Five key things for professional trustees to consider under the Trusts Act 2019:

Stokes says, all existing trusts in New Zealand – the number is estimated at up to 400,000 – have 18 months to become compliant with the new law. “This is a massive time of change and significant work is involved, so as an industry we need to be getting onto this now. 

“The new Trusts Act is definitely a good thing, but requires a significant shift in thinking and approach from the current way the industry deals with trusts to a new proactive, on the ball form of trusteeship.

“Many professional trustees are starting to talk to trust companies like ours about collaborating to preserve their status quo client relationship while mitigating all the risk that has arisen in the new legislative environment. 

“The only way to be ready is for the industry to cooperate and work together. Professionals have enough on their plate with their core work and maintaining a practice without the trustee responsibilities on top of it. That’s why over the years trusts haven’t had the level of attention that they’ve required, and many are not even compliant with existing law, let alone with what is coming. The next 18 months will disappear in a flash and professionals need to act now to ensure that they and their clients are ready for the changes to come into effect on January 30, 2021.”

As for trusts and any implications of the Property (Relationships) Act, about which the Law Commission has made a number of recommendations, Stokes says more will become clear over the next couple of years, but it is obvious that further change is yet to come.

Finally, Stokes says, “In the past, the lack of obligation around openness of information enabled a certain degree of secrecy. Now everyone with a stake in a trust will be able to go to the Trusts Act to see what a trustee should be doing in their role. This is not a one-stop shop that sets absolutely everything out, because our legal system doesn’t work that way, but it represents a major improvement in the New Zealand trust environment because basic information for both beneficiaries and trustees is free and accessible via the internet on the government legislation website.”

Tags: Perpetual Guardian trustee trusts

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