Is it time to wind up my Family Trust?
Is It Time To Wind Up My Family Trust?
Written by: Tracey Gibb, Client Advisor
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If you are a Trustee of a Trust, you should be aware the law governing Trusts in New Zealand has changed. The Trusts Act 2019 came into force at the end of January 2021 and replaces the Trust Administration Act 1956. The Act has an impact on your obligations as a Trustee, and has no doubt led to many Trustees in New Zealand considering whether they still need their Family Trust.
The answer to this question is – it depends. In most instances, the Family Trust is still doing what it is meant to do. Trusts are still a useful tool in asset protection and succession planning – provided all the relevant documentation is updated. One of the new obligations introduced by the Trusts Act is the obligation to tell all beneficiaries that they are beneficiaries of a Trust.
In the past when a Family Trust was created, best practice was to include an extensive list of beneficiaries – this was purely a ‘just in case’ method. Family Trusts are discretionary in nature so including someone as a beneficiary did not necessarily mean they would receive any allocations from the Trust. This was perfectly fine - until the new Act came into force and stated that all beneficiaries over the age of 18 need to be notified. Traditionally, it was best practice to include brothers, sisters, nieces, and nephews, but should they still be included?
Most Trust Deeds do allow beneficiaries to be added and removed from a Trust, but we do find some of the earlier Trust Deeds are reasonably inflexible and are unable to be altered. Does this situation apply to you? Again, the answer is, it depends. It is impossible to know without a thorough review of the Deed whether your Trust falls into this situation.
In response to the new Trusts Act, it is essential that all Trusts are reviewed and updated where possible. Best practice would also dictate that as part of reviewing the Trust Deeds, your Wills and Memorandum of Wishes are also reviewed and updated – when was the last time your Wills were updated?
Malloch McClean can assist in this review through our Trust Review Service. This service involves a two-hour meeting with one of our team to review all the relevant documents and ensure these all align and accurately reflect your wishes. After this meeting, Malloch McClean will provide a list of recommendations to you and your solicitor to be documented. For more info, get in touch