Do you have a family trust or are you thinking of forming one as a way to future-proof your assets for you and your children?
Take note – the Trustee Act is getting a makeover!
While there are still a few parliamentary hurdles to jump, now’s the time to get your head around what the new bill will mean for you and your business.
In August 2017, a new Trusts Bill was introduced to Parliament – the first big change to New Zealand’s trust law in more than 60 years. With up to 500,000 trusts operating in our country, they are an essential part of our legal system but the current legislation is no longer cutting it.
In simple terms
The current Act: Narrow in scope, expensive and too complicated.
The proposed bill: More efficient, better guidance for trustees and beneficiaries and easier to resolve disputes.
How these changes affect your business
1. Extending perpetuity laws – The new legislation suggests extending family trust time limits from 80 to 125 years, which may involve significant succession planning adjustments.
2. More information access for beneficiaries – In its draft form, the Trusts Bill proposes to give most trust beneficiaries the legal right to financial reports on the state of the family trust.– meaning they’ll be able to request more information including ‘who’s getting what’. Whether beneficiaries have the right to request this information under our current law is a bit of a grey area.
Because this potentially opens a can of worms for trustees, this proposal has been controversial and has attracted a lot of feedback from trust advisers. We will have to wait until later in the year to see what changes (if any) are made to this proposal.
How will the Act changes your role as a Trustee
Up until now, a trustee’s job description has been clear as mud with many families getting into strife unaware of their trustee’s responsibilities. If the new bill comes into place, a trustee’s role will be clearly outlined, and include:
- Knowing the terms of the trust
- Acting according to the terms of the trust
- Acting honestly in good faith
- Acting for the benefit of the beneficiaries or the permitted purpose of the trust
- Exercising trustee powers for a proper purpose
If you have a Family Trust, here’s what you need to do
1. Get your paperwork in order –Document your trust actions carefully (if you don’t already) and make sure they’re accurate.
2. Revisit your succession planning – Talk to us to make sure your succession plans still make sense if this legislation goes through.
3. Review your trust – There might be opportunities to improve your tax structure, reduce your risk profile and better your family’s financial situation.
4. Know your CRS obligations – New Zealand uses the Common Reporting Standard for the automatic exchange of information (AEOI) to help tackle global tax evasion. This means Reporting New Zealand Financial Institutions (NZFIs) have new IRD obligations, so you’ll need to know if your trust falls into this category.
If you need help to ensure you’re meeting your obligations or want to know if a Family Trust is right for you, get in touch today