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Trusts Bill

Trusts Bill released 1 August 2017

The Trusts Bill was introduced to Parliament on 1 August 2017.  The Bill follows the same format as the earlier draft but differs in a number of parts.

The Trusts Bill comprises 168 sections and 5 schedules.

The policy objectives of the Bill  include the objective of providing “clear, simple, and accessible trust law”.  The Bill does not codify trust law in New Zealand and the inherent jurisdiction of the High Court is expressly preserved (see clause 8).  The Bill intends to capture and reflect the existing common law position.  However, there are some exceptions to this.

The “three certainties” are codified in the definition of express trusts.  See clause 15.

Where a trust has a sole trustee, that trustee cannot be the sole beneficiary.  See clause 14.

The Bill abolishes the Perpetuities Act 1964 and provides for a maximum duration of 125 years.  See clause 16.

The Bill applies to express trusts (discretionary trusts) but can also have application to resulting and constructive trusts.  See clause 2.

The Bill provides that when a trust expires the trust property must be distributed in accordance with the terms of the trust, and where that is not possible, to the surviving beneficiaries in equal shares.

Part 3 provides a comprehensive list of mandatory and default trustee duties and places new obligations on advisers who modify or exclude default duties.  See clause 21.  This provision is less onerous than its counterpart in the draft Trusts Bill, which provided that an adviser who was a trustee could not take advantage of any exclusion or indemnity clause if the obligation to alert the settlor was breached.

The Trusts Bill provides that the terms of a trust must not limit or exclude a trustee’s liability for any breach of trust arising from the trustee’s dishonesty, wilful misconduct, or gross negligence.  See clause 37.  There is a corollary restriction on trustee indemnity in clause 38.

The provisions relating to trustee’s obligations to disclose information to beneficiaries are more robust than in the draft.  The definition of qualifying beneficiary has not been retained.  There will be a presumption that trustees  must make available to every beneficiary or representative of a beneficiary basic trust information.

The basic trust information is—

  • the fact that a person is a beneficiary of the trust
  • the name and contact details of the trustee
  • the occurrence of, and details of, each appointment, removal, and retirement of a trustee as it occurs, and
  • the right of the beneficiary to request a copy of the terms of the trust or trust information.

Trust information is broadly defined to mean any information regarding the terms of the trust, the administration of the trust, or the trust property but does not include the reasons for trustee decisions.

Given how broad classes of beneficiaries can be; settlors and trustees will need to be carefully considering the appropriateness of broad classes of beneficiaries and the practical implications of positive disclosure obligations.  It is noted that the disclosure obligations in the Trusts Bill are greater than under the present common law following the Supreme Court decision in Erceg v Erceg.

The disclosure provisions will not apply to charitable trusts.  See clause 46(2).

Part 4 provides for trustees powers and indemnities and also explains the general principles of trustees’ liability, indemnities, and protections so trustees, and people who are dealing with trustees, have a good understanding of their legal position.

Part 5 will provide for clearer and more cost effective appointments and removals of trustees.  This will avoid otherwise costly court applications in many situations, for example where a trustee becomes incapacitated.  Wher

Part 6 provides for termination and variation of trusts.

Part 7 contains provisions relating to court powers and alternate dispute resolution.

Part 8 contains miscellaneous provisions.

Part 9 provides for consequential amendments.

The Trusts Bill will come into force 18 months after the date on which it receives Royal assent.  This is a longer transition than that provided for in the draft Bill.



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