Greater Transparency for Trusts in New Zealand

Significant changes are on the horizon for the landscape of trust law. The Trusts Act 2019 (“Trusts Act”) comes into force on 30 January 2021.

Trusts are extremely prominent in New Zealand, it is estimated there are between 300,000 and 500,00 trusts in New Zealand. There are a vast number of reasons why trusts are set up, for example, asset protection and tax purposes.

The changes being adopted by the Trusts Act gives the beneficiaries of a trust more power to hold the trustees to account.

Changes in Trust Law

Trustees will be required to retain and hold on to integral trust documents which set out the terms of the trust, records of trust property and accounting and financial statements.

Upon request by a beneficiary, trustees may also be required to disclose trust information to beneficiaries who request it. This information can range from the fact that a person is a beneficiary, to the terms of the trust and the administration of the trust. Trustees can withhold information from beneficiaries if they reasonably consider it should not be disclosed.

Below are some of the factors trustees will consider when weighing up whether to disclose trust information to beneficiaries.

  • The nature of the beneficial interest (what does the beneficiary stand to receive from the trust);
  • Whether any personal or commercial sensitive information is present (confidentiality issue);
  • Age of beneficiary;
  • Expectations of the settlor; and
  • Context or necessity of any request for information

It is likely the weight each factor is given, will become more clear when trustees decide not to disclose, and their decisions are challenged by a beneficiary through the courts.

Steps to take in the interim

Over the next year, trustees should discuss the process they plan to follow in respect of retaining and disclosing information to beneficiaries. Where required, trustees should seek advice to ensure they follow the Trusts Act. If processes are put in place now, then adhering to the new Act will not be an issue. It will also mean that when trustees change, there will be a robust process in place, which enables the new trustee to get up to speed on their obligations quickly.

Summary

The new law regarding disclosure allows greater transparency of trusts in New Zealand. Whilst this is a positive, the change is also likely to bring about exposure to matters which were previously kept confidential, often for good reason. It is now more crucial than ever that trustees understand their obligations in their role.

Talk to us

For expert advice on this area talk to our Trusts and Estate Planning Team.

Disclaimer: The information contained in this publication is of a general nature and is not intended as legal advice. It is important that you seek legal advice that is specific to your circumstances.

Topics: All Select

Oliver Jones Allen

Position: Solicitor
Email: oliver.jones-allen@pittandmoore.co.nz
DDI: +64 3 548 7893