Trusts Act 2019.


2nd September, 2019

New trusts legislation coming in 2021

New Zealand has one of the highest rates of trusts per capita in the world, but the law regarding trusts has been long overdue for an update. If you’re a trustee, there are some things you should know before changes come into force in 2021, writes Henry Brandts-Giesen. 

Some long-awaited changes to the law of trusts in New Zealand have finally been made with the introduction of the Trusts Act 2019.

The new law is intended to:

  • Make the law relating to trusts in New Zealand more accessible to people who are not legally trained
  • Clarify core trust principles and essential obligations for trustees
  • Preserve the flexibility of the law

The new law generally achieves these objectives, but it’s more of an evolution rather than a revolution in the law of trusts in New Zealand.

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Some commentary suggests the new law imposes more onerous duties on trustees than currently exist under the law. For the most part this is misconceived and the basic duties and powers contained in the new law already exist. Problem is, they’re not well known or properly applied in New Zealand.

Trustee duties

The new law specifies two types of trustee duties in the form of mandatory trustee duties and default trustee duties.

Mandatory trustee duties include:

  • The duty to know the terms of a trust
  • The duty to act in accordance with the terms of a trust
  • The duty to act honestly and in good faith
  • The duty to act for the benefit of beneficiaries or to further the permitted purpose of a trust
  • The duty to exercise powers for a proper purpose

Default trustee duties (which can be modified or excluded by the terms of a trust) include:

  • The general duty of care
  • The duty to invest prudently
  • The duty not to exercise a power for a trustee’s own benefit
  • The duty to consider the exercise of a power
  • The duty not to bind or commit trustees to future exercise of discretion
  • The duty to avoid a conflict of interest
  • The duty of impartiality
  • The duty not to profit
  • The duty of a trustee to act for no reward
  • The duty to act unanimously

One of the reasons for some of the concerns expressed by commentators is that the new law highlights some significant issues for the trustees of trusts in New Zealand.

The trust industry in New Zealand is unregulated and unsophisticated and, as a result, the quality of governance and administration of trusts is often well below the standards of other countries. It’s these poorly governed trusts that the new law is targeted towards, but it will result in a higher level of scrutiny on all trusts. This scrutiny is, however, no greater than would be expected in many other countries.

Disclosure of information

The most controversial aspect of the new law is the obligation to make available ‘basic trust information’ to beneficiaries. In New Zealand it’s common for not all (or sometimes any) beneficiaries to be properly engaged with trustees and often beneficiaries are unaware of trusts under which they may have an interest. As a general principle, the new law requires there to be at least a basic level of reporting to all the adult beneficiaries and to the parents/guardians of all the minor beneficiaries.

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This is somewhat controversial in a New Zealand context, because most domestic trusts are governed by people (including many lawyers and accountants) who are not well versed in the law relating to trusts. As a consequence, trusts are often governed with the interests of the class of beneficiaries as a whole being subordinate to the interests of the people who set up the trust. This is plainly incorrect and the new law is intended to raise standards of governance and administration to levels similar to those high standards that have been applied in certain other countries for many years.

Other changes

The most significant changes to the law of trusts in New Zealand also include:

  • An extension of the maximum duration period of a trust from 80 years to 125 years
  • Obligations on trustees to keep certain information about trusts
  • A mechanism to request the court to review the decisions and actions of trustees
  • Flexible powers for trustees to manage trusts

Next steps

The new law comes into force on 30 January 2021. People who’ve set up or are beneficiaries or trustees of trusts and their advisors have the benefit of a transition period.

Given the vast amount of wealth in New Zealand held in family trusts and the risks associated with being a trustee, it’s very important that good advice is taken to make certain trusts are compliant and optimised.

In some situations, this may require changes to the terms of trusts (if possible) and/or the current modus operandi for governance and administration.


The information provided in this article is general in nature and does not constitute financial advise. If you have any interest in how the Trusts Act may impact you, please consult an advisor with appropriate expertise in the law of trusts.