Trust Legislation Changes

What impact will the new trust legislation have on trusts as to financial reporting and tax management?

When did this come into effect?

The new Act came into force on 30 January 2021 There were three main changes that will increase trustee responsibilities:

1. Clearly articulated mandatory duties and default duties for trustees;
2. Requirements to hold and retain core records for the trust; and
3. Disclosure obligations to beneficiaries and obligations to respond to information requests from beneficiaries.

Key focuses of the changes

A key focus of the new Act is to ensure beneficiaries have information to enforce trusts in which they have an interest in. Generally speaking, beneficiaries of a Trust need to know:

1. That they are a beneficiary,
2. Who the Trustees are, and
3. That they are able to request information about the Trust from the Trustees. This can include a request for financial information.

You may be concerned that Trustees must advise beneficiaries that they are in fact a beneficiary of the Trust and that this may open the floodgates for requests on the financial position of the Trust. If so, you may need to reassess your list of discretionary beneficiaries as set out in your Trust Deed.

The new mandatory and default duties for trustees set out in the Act may contradict the terms of your existing Trust deeds thereby requiring a variation to your Trust deed.

The new Act will mean that people need to:

1. Review whether their trust is still necessary and why; and
2. If it is necessary, determine whether their trust is fit for purpose, or what changes are needed to comply with the new Act.

Thanks to Breanna Fuller from Sutcliffe Matson Law for the above summary.

Our suggestions

From a practical point of view, we suggest that:

• Trustees’ minutes, resolutions, and evidence should be kept in a trust minute book/folder.
• All resolutions and minutes are signed, or acknowledged and accepted in writing, by all the trustees.
• The trustees should regularly communicate about trust matters and the administration of the trust and this should, where possible, be in writing. Trustees going out and acting on behalf of the Trust without consulting other trustees is a big no-no.
• Annual financial statements or, at a minimum, a Balance Sheet should be prepared. This will assist the trustees in complying with their duties and save time and cost in the future when the trust assets are distributed.

If you have any further questions about the implications of the changes, please feel free to contact us.

Brendan Price, CA