With the new Trusts Act 2019 coming into force, Good Returns is speaking to industry experts on what advisers need to know.
Wednesday February 3, 2021, 6:00 a.m.
The new trust law of 2019 came into effect on January 30, 2021. The law updates and improves the law governing trusts for the first time in over 60 years. It will apply to all existing trusts in New Zealand, as well as to any trust created upon or after its creation.
With trusts being a key part of financial planning, it is essential that all advisors understand the impact of the new law.
The Justice Department said that “clarifying the role of the administrator could mean in practice that administrators need to broaden their current level of accountability.”
This sentiment is echoed by Henry Stokes, General Counsel at Perpetual Guardian, who says: âThe most important thing for anyone who has, or is looking to establish, a family trust is [to be aware of] is the increase in information to which beneficiaries are entitled.
âOne of the most significant changes in the law concerns mandatory disclosures to beneficiaries. The mandatory part is that the trust exists, that they are beneficiaries of the trust and that the beneficiaries have the right to request access to additional information. beneficiaries to the extent of the new law.
Stokes says: âThe purpose of the legislation is for beneficiaries to have access to the right information, to make sure that the trustees are actually doing their job correctly.
For Stokes, the important thing that counselors need to be aware of is how the act can impact their client’s family dynamics. âI think it’s just a matter of discussing what’s good for the client and their family.
âIf you have a family where there is no problem with financial transparency, trust will not cause any problems. For other families, they may be worried about particular members and therefore may not wish to share information. Therefore, a trust under the new law may not be the best vehicle for every situation.
“Is it about making sure that a trust doesn’t just meet your financial needs, but works for your family dynamic?” These are discussions that financial advisors will need to bring up with their clients.
Alistair Robertson, financial advisor at MinterEllisonRuddWatts, says that while the law is largely a reestablishment of long-standing common law, it “can increase the administrative burden on those who operate trusts.”
While the administrative burden is essential, Robertson says, âFinancial advisers involved in trusts should also be aware of the new obligation placed on paid advisers who advise on the establishment of trusts to inform beneficiaries of certain things.
âThe other key point for advisors is that the trust law has put in place clear statutory language limitations regarding the exemption and indemnification clauses for trustees. If you are involved in a trust as a trustee, you will want to determine if the deed affected your indemnification position.
While there is a lot going on with the new law, Robertson advises, âThe key message is that if you are involved in the administration of trusts as a trustee, you should assess your trust document as a whole to see if. you have to make amendments.
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