Justice Minister Amy Adams has released a draft Trusts Bill for consultation. It is intended to replace the current Trustee Act 1956 which is now 60 years old and in need of modernisation.
Amy Adams explained that, "Our 60 year old trust law is complex and hard to navigate, partly because it is scattered across the Trustee Act and a variety of decisions made by Courts over many years." With an estimated 300,000 to 500,000 trusts in operation in New Zealand, and an estimated 15% of private houses being held in a trust, Adams feels that trust law should be simple to understand so that families can manage their affairs with confidence.
The purpose of the new Act is to restate and reform New Zealand trust law by setting out the core principles of the law relating to trusts. It will not be an exhaustive codification of the law relating to trusts, and the rules of common law and equity relating to trusts will continue to apply provided they are not inconsistent with the new Act.
The draft Bill clearly sets out mandatory and default trustee duties in an attempt to assist Trustees with understanding their responsibilities. It also introduces a standard of care and specifies requirements around disclosure of information to beneficiaries.
The draft Bill also introduces another long overdue change which makes it easier to appoint and remove trustees where an existing trustee may have lost capacity to act on behalf of the Trust. Currently trustees would need to apply to the Court to do this, which is a time consuming and costly process. This will no longer be the case for most trusts.
Another notable change is the abolition of the common law 'rule against perpetuities' in relation to Trusts. Most trusts state that they must not extend past the perpetuity period, which is currently 80 years. Under the draft Bill, the maximum lifetime of a Trust will be extended to 125 years. It will, of course, depend on the wording of each trust deed as to whether existing trusts can be extended from 80 to 125 years.
The draft Bill adopts 48 of the Law Commission's 51 recommendations. The other three recommendations which related to relationship property, and the official assignee, are being considered by Government in other reviews and Bills.
The intention of the Bill is that it would not require existing trust deeds to be changed, given that it is considered to be a unified restatement of the existing law, with key rules being set out in a way that can easily be understood and applied by everyday people. Whether this will be the case remains to be seen and will need to be assessed on a case by case basis.
So when will we see the change? This is a draft Bill, open for consultation. It is expected to be introduced as a Bill to Parliament in 2017 and will then need to undergo select committee review. Once the Bill receives royal assent, it will become operative 6 months later, so it will still be some time before we see this draft Bill enacted.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
