Introduction
The Trusts Act 2019, a landmark legislation in New Zealand, came into force on January 30th, 2021, it marked a significant modernisation of the country's trust law for the first time in over six decades. The new Act was aimed at making trust management more transparent, accessible, and efficient, it clarifies the obligations of trustees and addresses the ever-changing needs of trust beneficiaries.
So, why the need for an update? The previous Trustee Act 1956 had become outdated, and the new Trusts Act 2019 was designed to reflect the evolving dynamics of modern trusts. Its intent was to provide a more comprehensive, user-friendly framework that simplifies the administration of trusts, while also ensuring greater accountability and protection for beneficiaries.
A major change in the Act was the introduction of mandatory and default trustee duties. These duties help to establish clear expectations for trustees, ultimately making the administration process more effective. The Act also requires trustees to disclose certain information to beneficiaries, fostering better communication and transparency.
So that’s all well and good, but what impact does it have on professionals, such as law and accounting firms managing trusts? Several changes were introduced, with the most important being:
- Greater clarity on trustee duties and responsibilities,
- More stringent record-keeping requirements,
- Increased focus on the management of trust property,
- And, additional obligations regarding the provision of information to beneficiaries.
Ultimately, the Act ensures a more modern way for accounting and law firms to stay up-to-date with their responsibilities and maintain high standards of service. Now whilst knowing how to meet the Trusts Act obligations is crucial, it’s also a big chunky piece of legislation that you might not quite have your head around – but that’s where we come in. Out of the box, you can use Connectworks to easily meet your obligations, and have peace of mind everything is under control. In this article, we’re going to share five of the key obligations you have, and how to meet them with our system.
1️⃣ Beneficiary Disclosure Documents
The Act requires trustees to inform beneficiaries (including discretionary) of the fact that they are beneficiaries of a trust, the name and contact details of trustees and that they have the right to request a copy of the terms of the trust and trust information.
The purpose of this is to ensure that beneficiaries have sufficient information to enable the terms of the trust and the trustees’ duties to be enforced against the trustees.
With Connectworks
You’re able to email the required documents and reports directly from your electronic trust files within Connectwork or download them for distribution – we give you that ‘one-stop shop’, for document storage, and the ability to send them to beneficiaries via email from within the tool.
2️⃣ Perpetuity period extended to 125 years
As people’s life expectancy is now longer, the life of trust can now be extended from the current maximum of 80 years to 125 years. To enact this, it may require a variation of the trust deed.
With Connectworks
Luckily for you, your trust professional can utilise our Deeds of Variation template to auto-populate with trust details and distribute them for electronic signing, right from within the tool itself. Signed documents are then stored in Connectworks automatically, removing the risk of documents being incorrectly filed or misplaced – giving you one source of truth.
3️⃣ Document retention requirements
Each trustee of a trust must keep, all key documents relating to the trust - the exact wording from the Act is on document retention states ‘so far as is reasonable’. Alternatively, you just need to be satisfied that at least one of the trustees holds the key documents and that copies of them can be made available to other trustees if requested. If a trusteeship of a trustee ends and the trust continues, the trustee must give at least one replacement or continuing trustee the documents that they hold.
With Connectworks
The language the Act uses itself can make this one sound confusing – but simply put the truth is it’s all about making sure you’ve got the right documents, in the right places, with the right people being able to access them. In Connectworks, we made that extremely easy – all authorised parties can have access to all trust information and they are able to upload and download information, sign documents and approve resolutions all within the tool. Thanks to our flexible role types, access rights can easily be changed if there are any changes of the trustee, enabling the record-keeping requirements of the Act to be met, the best part, everything is in one place with a digital track record of what’s going on.
4️⃣ Restriction on trustee exemption and indemnity clauses
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. The terms of a trust must not give a trustee any indemnity against the trust property for liability for any breach of trust arising from the trustee’s dishonesty, wilful misconduct, or gross negligence.
With Connectworks
With this one, a more rigorous process of dealing with issues relating to trusts is going to be required. This will include that all trustees take part in discussions relating to trust matters. And for any trust resolutions, the recording of minutes and decisions is going to need to be approved by all parties in advance of any transactions. In Connectworks, you can do all of the above, generating minute books, creating resolutions, sending them and getting them approved – and the cherry on top is that all of this gets recorded in Connectworks, so you always have visibility on what decisions were made, and the ‘paperwork’ associated with them.
5️⃣ Mandatory and default duties
The Act has prescribed mandatory duties that must be adhered to.
They are:
- a duty to know the terms of the trust,
- a duty to act in accordance with the terms of the trust,
- a duty to act honestly and in good faith,
- a duty to act for the benefit of beneficiaries or to further permitted purpose of the trust,
- and, a duty to exercise powers for proper purpose.
Additionally, there are default duties that must be adhered to unless the trustees modify or opt out of them. These are:
- a general duty of care,
- a duty to invest prudently,
- a duty not to exercise power for own benefit, to consider exercise of power,
- a duty not to bind or commit trustees to future exercise of discretion,
- a duty to avoid conflict of interest,
- a duty of impartiality,
- a duty not to profit,
- a duty to act for no reward
- and, a duty to act unanimously.
With Connectworks
Phew 😓, that’s a lot of duties – luckily we’ve made it easy to create a place where any changes to mandatory or default duties can be documented and maintained. You have the ability to use Connectworks as a centralised repository of all trust information with our document management functionality so that adherance with the requirements is able to be recorded.
There may be valid reasons for the trustees to vary or modify the default duties, and if that’s the case, Connectworks contains Deeds of Variation for all this to be undertaken correctly (so you meet the obligations of the Act), and then for all records to be maintained in one place.
Wrap-up
To summarise, Connectworks is an effective system to help you meet your Trusts Act 2019 obligations, so you can have total peace of mind that you’re doing everything correctly, and you’ve got a ‘paper trail’ should you ever need to look back at why, how and what decisions were made.
If you like the sound of what we’ve shared – we’d be more than happy to show you a personalised tour of our product, and help make your firm feel confident in meeting the requirements of the Act – complete the form on this page to schedule a 30-minute discovery call and to talk to us about a free trial to get you started.
