Trust Agreement (New Zealand)

A family trust is the most common type of trust in New Zealand. It is a legal arrangement established by a trust deed under which a person (the settlor) transfers assets to trustees to hold for the benefit of the settlor's family (the beneficiaries). Family trusts have historically been used in New Zealand for several purposes: asset protection (protecting assets from potential creditors and commercial risks); income splitting (distributing income to beneficiaries who pay lower rates of tax, subject to the Income Tax Act 2007); estate planning (providing for the distribution of assets after death in a flexible way); and residential care means testing (prior to law changes, family trusts were used to manage assets in relation to residential care subsidies — however, the rules around this have changed significantly and professional advice is essential). Under the Trusts Act 2019, all trusts must now comply with enhanced disclosure requirements, and trustees face higher accountability standards. The maximum duration of a trust in New Zealand is 125 years under the Trusts Act 2019.

The Trusts Act 2019 (TA 2019) introduced mandatory trustee duties that apply to all trusts and cannot be excluded by the trust deed. These mandatory duties under section 24 of the TA 2019 are: (1) to know the terms of the trust; (2) to act in accordance with the terms of the trust; (3) to act honestly and in good faith; (4) to act for the benefit of the beneficiaries or, for a charitable trust, to further the charitable purpose; and (5) to exercise the powers of trustee for a proper purpose. In addition to these mandatory duties, the TA 2019 contains a range of default duties that apply unless modified or excluded by the trust deed, including the duty to invest prudently (the 'prudent investor' standard), the duty to consider the exercise of powers, the duty not to profit from trusteeship, and the duty not to act where there is a conflict of interest. Trustees who breach their duties can be personally liable to the beneficiaries for loss suffered as a result.

One of the most significant changes introduced by the Trusts Act 2019 (TA 2019) was the introduction of mandatory disclosure obligations on trustees to beneficiaries. Under sections 51–60 of the TA 2019, trustees must disclose basic trust information to every beneficiary who is not a minor or incapacitated, including: the fact that the person is a beneficiary; the name and contact details of the trustees; and information about the beneficiary's right to request further trust information. If a beneficiary requests further information, the trustees must consider whether to provide it having regard to factors including: the size of the trust, the nature of the interest, the reason for the request, the age of the beneficiary, and the interests of other beneficiaries. The TA 2019 also requires trustees to keep core trust documents including the trust deed, any amendments, trustee resolutions, financial statements, and documents recording trustee decisions. Trust documents must be retained for at least 7 years from the date on which the matter is concluded. These obligations have significantly increased the administrative burden on trustees.

Under the Trusts Act 2019, the maximum duration of a trust in New Zealand is 125 years, measured from the date on which the trust is created. This replaced the old perpetuity period under the Perpetuities Act 1964 (which was based on a life in being plus 21 years, or an 80-year fixed period). The 125-year maximum applies to all new trusts created on or after 30 January 2021 (the date the Trusts Act 2019 came into force). Trusts created before that date that were already subject to a fixed perpetuity period under the old law continue to be subject to that old period, unless the trustees elect to convert to the new 125-year period. Most family trusts in New Zealand are now established with a trust period of 80 years (below the maximum) to provide a balance between longevity and flexibility. The trust deed specifies the trust period, and the trustees must distribute the trust assets and wind up the trust before the end of the trust period. If the trust continues beyond the trust period, the trustees hold the remaining assets on a resulting trust back to the settlor or the settlor's estate.

A Trust Agreement (New Zealand) does not legally require a lawyer in New Zealand, and individuals and businesses may draft and execute the document independently. The Wills Act 2007 does not mandate legal representation for the creation or signing of this type of document. However, seeking independent legal advice from a qualified New Zealand lawyer is recommended for transactions involving substantial financial value, complex regulatory requirements, or cross-border elements where multiple legal jurisdictions may apply. A lawyer can verify that the document complies with all applicable statutory requirements, identify potential risks specific to the transaction, and confirm that the terms adequately protect the interests of all parties involved. The High Court of New Zealand has jurisdiction over disputes arising from this type of document, and Companies Office may impose additional compliance obligations depending on the nature of the underlying transaction. Professional legal review is particularly advisable where the document will be submitted to government agencies or used as evidence in legal proceedings.