A New Trust Act? Our Submission on the Draft Bill

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The Government has appointed a Trusts Bill Consultation Team to draft a new Trusts Act that legislates for the administration of Trusts. The draft Bill was published in November and submissions closed before Christmas 2016.

Click here to read Smith & Partner’s letter to the Trusts Bill Consultation Team on the new Bill. Matters of interest in the Bill are: 

1. A proposal to extend the life of a trust from 80 years to 125 years. 

2. A proposal to abolish the rule against perpetuities. This means that the life a trust will be able to be extended or renewed beyond 125 years by virtue of a resettlement with the consent of the beneficiaries. 

3. A proposal to divide the information to be given by trustees to beneficiaries into two types of information: 

3.1 Basic information means names of beneficiaries, names and contact details of trustees, details of appointment removal and retirement of trustees and the right of a beneficiary to request a copy of the terms of the trust or trust information. 

3.2 Trust information means information regarding the terms of the trust, the administration of the trust or trust property and information that is reasonably necessary for the beneficiary to have, to enable the trust to be enforced. That information does not include reasons for a trustee’s decision. 

4. The Bill proposes that any beneficiary who has a reasonable likelihood of receiving trust property under the terms of the trust be entitled to basic trust information and that all beneficiaries be entitled to trust information if the trustees consider that it is in the interests of the trust that the beneficiary receive that information. 

5. Most trusts in New Zealand are discretionary family trusts set up by a married or de facto couple for the benefit of themselves and their children. Usually these discretionary family trusts are run for the benefit of the settlors who have no wish to involve their children in either the administration of the trust or any information concerning the trust while the settlors are alive. We think it most important that the Trusts Act when it is made law include provisions that permit the settlors while they are alive to refuse to give either basic information or general trust information to their children. 

6. There is also a proposal under the Bill that by agreement between the various parties to a trust and/or at the direction of the High Court the alternative dispute resolution process as described in the Bill (for example mediation) can be used to facilitate the resolution of disputes involving a trust that do not include a dispute about the validity of all or part of a trust. 

7. In other words if there was a dispute about a legal action brought by or against a trustee in relation to the trust or a dispute in relation to the trust between a trustee and a beneficiary or the trustee and a third party that did not involve an argument about the validity of the trust deed or any part of the trust deed then such dispute can be resolved by mediation. 

8. This will make resolution of trust disputes much more efficient and cheaper. 

Review of your Trust Deed
 The proposed Bill, highlights the need for everyone who has a family trust to review their trust deed. Smith & Partners will be producing a draft of a sample Deed of Variation for the Trusts looked after by Smith & Partners once the consultation period for the Bill is over and we have received feedback from the Trusts Bill Consultation Team. 

If you are not already a client of Smith & Partners we will also be happy to review your Trust Deed with you once we have a better idea of the final form of the legislation.

 

 

 

 


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