Most New Zealanders are aware the Legislature has recently added a bright new shiny piece of law to its books called the Trusts Act 2019. In essence, this legislation is the first major trust law reform undertaken in the past 70 years and it’s weighty in words and action. In totality, it contains 184 sections and those suffering from insomnia may have found a cure if they care to read a few pages of the legislation before heading to dreamland.
Behind the Act lays objectives of making law more comprehensible, accessible and transparent to all those involved in Trusts. Whether those objectives are achieved only time will tell. Most certainly codifying principles of equity, common law and statute, should create a better balance between Settlors’ intentions and rights of Beneficiaries. Trustees should benefit from the Act too, as their duties are expressly stated in black and white for all to see and follow. The other side of this coin however is Trustees are likely to find their role more onerous. Gone are days where the Settlor centric approach can prevail, where one person directs how the Trust is governed with other Trustees acquiescing. With the Act making it much easier for Beneficiaries to hold Trustees to account, it would be a brave Trustee indeed who accedes to the directions of one party only.
WAYS TRUSTEES ARE AFFECTED
In the midst of this new law, independent Trustees will undoubtedly be affected. Those acting as an independent Trustee in their personal capacity will review their roles as they gain a full appreciation of the inevitable possibility of personal liability their position brings to bear. Insurers will reinforce this perspective as they require a greater level of detail when determining insurance risk and premiums. At the same time, clients will increasingly seek out the services an independent Trustee offers in a bid to give their Trust legitimacy, avoiding successful sham Trust allegations and providing impartiality by having an independent Trustee who is not a Beneficiary, who brings a robust and objective perspective on decisions and administration.
GREENLION LEADS THE ROAR
Since the new Act came on the books, Greenlion has been leading the roar by providing educational seminars and ensuring Trustee services are provided to our clients. In particular, Greenlion has been busy ensuring it carries out its role as an independent Trustee in a company. This means a company is incorporated to act as a Trustee, with the Greenlion Partner appointed to hold director and shareholder roles. In effect, a bespoke company, for a specific client is created. Benefits to a client using this model of trusteeship are numerous… for example if their Greenlion Partner is not available to sign documents, another Greenlion Partner can do so on their behalf, ensuring a client’s transaction is never held up. Greenlion has also led the charge by invoking new processes, now having its clients’ financial statements and transactions reviewed, ensuring appropriate Trustee Resolutions and other documents are put in place, thus minimising and negating allegations of sham Trust. Finally, Greenlion are safeguarding clients Trust documents, holding them electronically, and in doing so, satisfying the duty the new Act bestows upon Trustees in respect of document keeping.
ARE TRUSTS STILL USEFUL?
Given the new level of oversight, administration and management Trusts now require, clients may well wonder if having a Trust is still the right thing to do. This is a legitimate question. The answer could lay in areas of asset protection against potential creditor and relationship claims. Alternatively, inheritance and estate planning may be reasons to retain a Trust. Possibly even tax planning is a rationale to maintain a Trust, especially given the top personal income tax rate is now 39% opposed to the Trustee rate of 33%. Trusts for all these reasons will dominate the New Zealand landscape for eons yet, especially considering Settlors now have a real opportunity to create a legacy for their families with Trust’s lifetimes being set at 125 years under the new Act.
I welcome the introduction of the Act in our legislative environment. It will undoubtedly encourage all Trustees to increase their levels of communications. This should lead to better administration of Trusts overall. Additionally, I believe the Act will have a real and meaningful impact upon independent Trustees. Acting as a client’s independent Professional Trustee is both a privilege and a responsibility. This Act reinforces those points. The legislation is likely to lead to many independent Trustees taking steps to improve their processes in administration, management, and stewardship – all of which will benefit their clients and the Beneficiaries of the Trusts they serve.
If you’re a Trustee and have queries but aren’t so keen to read the 184 sections contained in the Act to find your answers, or if you need assistance with your Trust, please contact us. We’re here and happy to help where we can.
by Janet Xuccoa