Trust law in 2018 – what you need to know
By Vicki Ammundsen
The dominant theme for trust law in 2018 is likely to be that of review and reflection as to the relevance and fit of trusts moving forward, and the role and responsibility of trusteeship.
Liability
Many practitioners will need to decide whether to continue offering trust services, and to reflect on their expertise as a trust adviser. There is a need to better appreciate the risks of trusteeship – both financially and professionally. Many trustees still believe that if they are independent they cannot have any liability provided that there is no breach of trust. As noted by the Supreme Court judgment in Macalister Todd Phillips Bodkins v AMP:
“Liabilities incurred by a trustee in relation to a trust are always the personal liabilities of the trustee … A creditor has a personal right to sue a trustee and to get judgment and make the trustee bankrupt.”
This was further reinforced in the recent decision in Courtney v Pratley where a lawyer who was appointed by the Court as a trustee was not able to have the trustee’s legal fees and a costs award against the trustee met from the trust fund. The trustee had been appointed in difficult circumstances and immediately following appointment had to decide whether to defend a claim against the trust. The case usefully considers the practicality of seeking a Beddoe order and directions under the Trustee Act where time is short and reinforces the need for proportionality in decisions trustees make, and the wisdom of seeking directions to ensure that costs can be met.
AML/CFT
The impact of AML/CFT and FATCA on trustees acting through corporate trustees to isolate risk will also need to be reviewed and considered as will the new reporting responsibilities for trustees of foreign trusts.
Trusts Bill
Another area of upskilling is the Trusts Bill (the Bill), which was introduced on 1 August 2017, and which represents that first major change to trust law legislation in New Zealand for over 60 years. The Bill had its first reading in Parliament on 6 December 2017 and has been referred to the Justice Committee, which is scheduled to report back by 5 June 2018. Although much of the Bill restates and confirms current trust law, perhaps the single biggest change, if the Bill is enacted in current form will be the presumption that trustees will advise all beneficiaries that they are beneficiaries and their rights to trust information. To date trusts have been largely private and often under the practical control of the settlors. How many beneficiaries are unaware of current account entitlements is unclear, but may become a matter of considerable practical importance as decisions are made as to whether trusts should be retained moving forward. Where decisions are made to wind up trusts the practical reality of tax considerations will need to be balanced against the utility of the trust moving forward.
Control considerations
Trusts under the effective control or a settlor or protector will also need to be considered in light of the recent decision Mezhprom Bank v Pugachev where the true effects of a trust found to be under the control of a protector meant that the trust’s assets were available to creditors.
Trusts SIG
Trust practitioners who are members of the Trusts SIG will have the benefit of an array of trust professionals ensuring that they are kept up to date with trust law developments.
If you have any questions about Trust SIG membership, please get in touch with us.