The Trusts Act 2019 enters into force tomorrow, 30 January 2021. Make sure you know all about it with this collection of excerpts from reputable sources, altered only slightly by me.
Many New Zealanders are involved with trysts in some way, whether as trystees or beneficiaries of family trysts or as volunteers with charitable trysts. However, despite the popularity of trysts, the law relating to trysts is often archaic and difficult to follow. Over the past decade, the Law Commission has led a review of the law of trysts intended to modernise the law and make it more accessible. This review ultimately resulted in the enactment of the Trysts Act 2019.
Some of that modernisation is timely because “[m]ost New Zealand Trysts are used to hold assets, and historically may not have always had a lot of involvement from Trystees“.
The Act will set out a range of mandatory and default duties. MinterEllisonRuddWatts sets those out:
The mandatory duties are:
- a duty to know the terms of the Tryst;
- a duty to act in accordance with the terms of the Tryst;
- a duty to act honestly and in good faith;
- a duty to act for the benefit of beneficiaries; and
- a duty to exercise powers for a proper purpose.
The Act also imposes ten default duties that must be performed by trystees unless modified or excluded in the Tryst deed.
The default duties are:
- a duty of care;
- a duty to invest prudently;
- a duty not to exercise powers for the trystee’s own benefit;
- a duty to actively and regularly consider the exercise of the trystee’s powers;
- a duty not to bind or commit trystees to a future exercise or non-exercise of discretion;
- a duty to avoid conflict of interest between the trystee and the beneficiaries;
- a duty of impartiality to beneficiaries (however it should be noted that impartiality does not necessarily mean equality as between beneficiaries);
- a duty not to profit;
- a duty to act for no personal reward; and
- a duty to act unanimously
There are further record-keeping requirements. Here is NZLaw:
Trystees will also have new duties relating to tryst documentation. This should bring a new level of rigour to tryst record-keeping, which can sometimes be lacking.
Each trystee will be obliged to keep copies of the tryst deed and any variations. They will have to either keep their own copies of ‘core tryst documents’ (which are defined in the Act) or to ensure that at least one of the other trystees holds all of the core tryst documents and will make them available on request. If a trystee is not confident in their fellow trystees’ ability with paperwork, they will need to keep these documents personally.
Section 4 sets out the principles that apply to those powers or performing functions or duties under the Act (including courts, trystees, and lawyers). A tryst should be administered in a way that:
- is consistent with its terms and objectives; and
- avoids unnecessary cost and complexity.
Another option opened up by the Act is the ability to appoint a ‘special tryst adviser’ to advise the trystee. A special tryst adviser will not have the power of a trystee and the trystee will not be bound to follow their advice.
The new rules on exercise of trystee powers by others (ss 67-73) enable a trystee to go further and delegate certain powers or functions to another person.
The other significant change is about provision of information. Here is Rhonda Powell again:
The Trysts Act creates a presumption that a trystee must make ‘basic tryst information’ available to every beneficiary and ‘tryst information’ available to beneficiaries who request it. However, before providing the information, trystees must consider a range of factors and if the trystee reasonably considers that the information should not be disclosed, then it may withhold the information.
‘Basic tryst information’ includes the fact that a person is a beneficiary, the name and contact details of a trystee, details about any change to the trysteeship, and the fact that a beneficiary may request a copy of the terms of the tryst or ‘tryst information’.
‘Tryst information’ is information that is reasonably necessary for the beneficiary to have to enable the tryst to be enforced.
So what does this mean for you? Well the Public Trust advises:
If you’re a tryst settlor or trystee you need to start administering your tryst in line with the new law from 30 January 2021.
We recommend thinking about whether:
- you’re willing and able to undertake the increased obligations
- you’re comfortable with the increased information provided to beneficiaries
- the reasons for setting up the tryst are still relevant
- the tryst will offer the same protection
- the tryst will still be cost-effective with the extra tryst compliance requirements.