The Trusts Act 2019 (the Act) comes into force on 30 January 2021. The new Act is the first major reform to the law of trusts in New Zealand in over 60 years, replacing the Trustee Act 1956 and the Perpetuities Act 1964.
The Act will not be applied retrospectively, however, it will apply to all express trusts governed by New Zealand law already in existence at the time the Act comes into force.
Broadly speaking, the Act increases the rights and protections of beneficiaries, whilst at the same time, imposes more responsibility and prescriptive requirements on trustees. These changes are likely to make trusts more transparent for beneficiaries, but also more intensive for trustees to administer on a day-to-day basis.
The Act now sets out a number of 'mandatory' duties that trustees must comply with as well as a number of 'default' duties and obligations that trustees must abide by unless they are modified or excluded by the trust deed.
Of particular note are the new disclosure and record-keeping obligations imposed on trustees. This should bring a new level of rigour to trust record-keeping.
Specified commercial trusts
We note that many of these obligations and duties set out in the Act that are compulsory for other express trusts may be contracted out of by 'specified commercial trusts'.
Under the Act, a specified commercial trust is essentially an express trust created for the purpose of:
- Facilitating a commercial transaction
- Offering financial products to wholesale investors
- Lending to or borrowing from wholesale investors
- Holding security as part of a financing arrangement (of a borrower, guarantor etc) by the trustee for a counterparty (ie by way of a security trust deed).
If you would like advice on how these changes might impact you, please contact a member of our financial services regulation team.