Tweet
Hello folks,
The new Trust Act 2019 was passed in July, and existing Trusts have 18 months to comply. Some updates were overdue, such as specifying that a sole trustee cannot be a sole beneficiary, and extending Trust life from a maximum of 80 years to a maximum of 125 years. Other changes include:
Along with the AML requirements, this will further add to the inflexibility and expense of managing Trusts (and without proper management, many more may be classified as "sham" Trusts). Trust beneficiaries will have new legal entitlements and be able to review investment decisions and hold trustees to account. One article (couple of years old) makes the implications sound a bit dire:
"In many situations, trustees comprise mum and dad and a friend as the independent trustee, sitting around the kitchen table, signing off the annual accounts and creating a set of minutes. Now, as a trustee, you will be judged against industry experts, who are professionals. You will be expected to perform to the same standard as an expert and, if you are found wanting, the repercussions could be serious. Going one step further, those trustees who have not engaged an investment professional to assist with investment decisions, but have taken on that responsibility themselves, run the most risk. If this is the case, you've taken on management as well as governance responsibilities and, again, you'll be judged against the standard of investment professionals on the job you have done. The key point is, if the bill is passed into legislation, as it works its way through the parliamentary process, the drafted approach to disclosure will pave the way for increased awareness for beneficiaries of their right to hold trustees accountable."
(NZ Herald: "You'd best be prepared if trusts bill becomes law")
Trusts no longer offer the tax benefits they used to, and have been under increasing attack in relationship property cases. NZ has no inheritance or death taxes nowadays. So do readers think it's still worth having a Trust?
The new Trust Act 2019 was passed in July, and existing Trusts have 18 months to comply. Some updates were overdue, such as specifying that a sole trustee cannot be a sole beneficiary, and extending Trust life from a maximum of 80 years to a maximum of 125 years. Other changes include:
- Obligation to notify all beneficiaries that they are beneficiaries, permit them access to Trust information including accounts, and hold trustees to account if they are unhappy with performance.
- Mandatory duties for trustees.
- New record-keeping requirements.
- Restrictions around the use of trustee exemption and indemnity clauses.
- Mechanism to request the court to review the decisions and actions of trustees.
Along with the AML requirements, this will further add to the inflexibility and expense of managing Trusts (and without proper management, many more may be classified as "sham" Trusts). Trust beneficiaries will have new legal entitlements and be able to review investment decisions and hold trustees to account. One article (couple of years old) makes the implications sound a bit dire:
"In many situations, trustees comprise mum and dad and a friend as the independent trustee, sitting around the kitchen table, signing off the annual accounts and creating a set of minutes. Now, as a trustee, you will be judged against industry experts, who are professionals. You will be expected to perform to the same standard as an expert and, if you are found wanting, the repercussions could be serious. Going one step further, those trustees who have not engaged an investment professional to assist with investment decisions, but have taken on that responsibility themselves, run the most risk. If this is the case, you've taken on management as well as governance responsibilities and, again, you'll be judged against the standard of investment professionals on the job you have done. The key point is, if the bill is passed into legislation, as it works its way through the parliamentary process, the drafted approach to disclosure will pave the way for increased awareness for beneficiaries of their right to hold trustees accountable."
(NZ Herald: "You'd best be prepared if trusts bill becomes law")
Trusts no longer offer the tax benefits they used to, and have been under increasing attack in relationship property cases. NZ has no inheritance or death taxes nowadays. So do readers think it's still worth having a Trust?
Comment