If you are involved with a trust as a trustee, or are considering taking this role on, it is crucial to understand the laws that apply to that role. The landscape of trust law in New Zealand underwent significant changes in 2021. While the fundamental principles of the law remained intact, the changes introduced more straightforward guidelines and heightened responsibilities for trustees. Following the changes, the role of trustee is subject to express mandatory duties, and there is greater scrutiny around trust management. This article will explain:<\/p>\n\n\n\n
While this article includes valuable insights, we always recommend seeking professional legal advice advice for specific situations or complex trust matters.<\/p>\n<\/div>\n\n\n\n
The concept of a trust itself is fairly simple. It is the legal relationship created when someone (the settlor) gives their property to you (the trustee) to hold and maintain for the benefit of a third party (the beneficiary). You are the legal owner of the property held in the trust and are responsible for it. It is essential to note that the settlor can be both a trustee and a beneficiary; however, they cannot serve as the sole trustee and beneficiary.<\/p>\n\n\n\n
For example, say that you decide to put your business premises into a trust<\/a>. If you are also the trustee, then the property is held in your name. For a valid trust to exist, three elements must be present:<\/p>\n\n\n\n Without these elements, a trust may not be legally recognised or enforceable.<\/p>\n\n\n\n Trustees are responsible for managing the trust and have comprehensive control over the trust\u2019s property and assets. This involves maintaining the trust\u2019s assets and distributing any capital generated to the beneficiaries, as outlined in the trust deed. This level of control comes with significant power and, consequently, substantial responsibilities.<\/p>\n\n\n\n As a trustee, your primary duty is to maintain and manage the trust\u2019s property for the beneficiaries\u2019 benefit. There are specific duties you must fulfil to achieve this purpose. The trust deed is your primary point of reference, as it outlines how you should carry out your responsibilities and manage the trust’s operations.<\/p>\n<\/div>\n\n\n\n The law imposes certain duties on trustees, but the trust itself will also have mandatory responsibilities. If you fail to fulfil your duties as a trustee, the beneficiaries can initiate legal proceedings against you in court. You have a fiduciary obligation to operate in the trust\u2019s best interests. This means that you have a legal duty to act in good faith and place the interests of the trust and its beneficiaries above your own. When performing your duties, ensure that you do so in accordance with the trust\u2019s context and objectives.<\/p>\n\n\n\n There are two types of duties given to trustees by the law. These are:<\/p>\n\n\n\n\n
What Are Trustee Duties?<\/h2>\n\n\n\n
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