Stewart & Co Blog

Time To Review Your Family Trust


A Trust should be administered in a way that is consistent with its terms and objectives and avoids unnecessary costs and complexity.   Now is the time to review your Family Trust, make any amendments necessary and be prepare for the changes on 30 January 2020 when the new Trusts Act 2019 comes into effect.  Trust Deeds were written to reflect what was considered appropriate at the time that they were created, however that may no longer be the case.  The following areas are the most likely to need consideration:

Purpose of the Trust

  • Is the trust still fit for purpose?
  • Would it be appropriate to wind up the Trust?
  • Remember, there may be tax and legal implications of winding up the Trust.  Please seek appropriate advice.


  • As Trustee do you have access to all the relevant Trust documents and are these up to date?



  • With the increased obligations and responsibilities imposed by the Act, are your current Trustees willing to continue on or should they retire and do new Trustees need to be appointed. 



  • Who will the Trustees need to make disclosures to?
  • How wide are the beneficiary classes?
  • Do the number of beneficiaries need to be changed?
  • The Act provides that if there is a wide class of final beneficiaries and no clarity is provided as to how assets are to be divided on wind up, these are to be equally distributed. 


Priority of Beneficiaries

  • Has the priority of beneficiaries in terms of distributions been set out.  The Act specifies that the Trustees must act impartially, and this can give rise to issues where the settlors intended that certain beneficiaries would be given distributions before other beneficiaries.  For example, the settlor may also be a beneficiary and expect that they will receive preferential distributions over their children during their lifetime.  This may have been set out in a memorandum of wishes but should be reviewed and consideration given to whether this should now be inserted into the Trust Deed.   

Prudent Investment

  • Are the Trusts assets held in a diversified fashion or are all the investments in one or two places?  There is a default duty that the Trustees should invest prudently however, this can be overruled by the trust deed by adding a clause that the assets can be held in a non-diversified manner. 


Conflict of Interest

  • Are Trustees of the Trust also Beneficiaries.  If so, there is a default duty that the Trustees cannot exercise their power for their own benefit.  Ensure that your Trust Deed allows for decisions which will effect the Trustee as Beneficiary can be made safely.   This can be by way of a clause being added to expressly allow a Trustee to act in their own benefit as beneficiary or by allowing the other Trustees to make decisions to benefit that Trustee as beneficiary. 

The Trust Act 2019

From 30 January 2021 new rules around the management and administration of trusts will come into effect.  Historically many trusts were set up to hold assets such as the family home and have required minimal effort from the Trustees in their management.  The new Act will require a much more active role from Trustees with regards to disclosure of information, holding of records and the introduction of Mandatory Duties.  Trustees may therefore like to take this opportunity to review their Trust and whether it is still the most appropriate option. 


Beneficiary Information

Under the new Act, there are two categories for trust information:

  • Basic Trust Information; and
  • Trust Information

Trustees are expected to give Basic Trust Information about the Trust to all beneficiaries (or their representative).  This information includes:

  • The existence of the Trust and that they are a beneficiary
  • The names and details of the Trustees, and any changes to the Trustees when these occur; and
  • The beneficiaries right to request a copy of the Trust Deed and Trust Information. 

Trust Information, which can be requested by the beneficiaries, includes the terms of the Trust, the administration of the Trust or the Trust property and information that is reasonably necessary for the beneficiary to have to enable enforcement of the terms of the Trust and the Trustees duties.  But this information does not include the reasons for Trustees decisions. 

The information above which beneficiaries or their representative can request includes details of the Trust's assets, along with information on what distributions and loans the Trust has made and to whom. 

The increased level of disclosure may be of concern to some settlors, especially if they have not previously disclosed to beneficiaries, such as their children or grand-children, that they are a beneficiary of the trust, or if the Trust has a wide class of beneficiaries including multiple generations and their spouses.  In some cases we have seen trust deed which include reference to "any relative" which is very far reaching. 

Before giving out Trust Information to beneficiaries, the Trustees should consider a number of factors which are set out in the Act.  Some of the factors to consider include:

  • The nature of the interest in the trust of the beneficiary
  • Commercial or personal confidentiality
  • The intentions and expectations of the settlor at the time of setting up the Trust
  • The effect of giving the information to the beneficiary, this includes the impact on the family relationship and the relationship with other beneficiaries
  • If the trust has a large number of beneficiaries, whether it is impractical to give all beneficiaries information


Trust Records

Trustees are also expected to retain copies of core Trust records.  These can be paper or electronic copies and include the following:

  • The Trust Deed and any other documents which contain the terms of the Trust
  • Amendments and variations to the Trust Deed or Trust
  • Documents for the appointment, removal and discharge of Trustees
  • Records of the Trust property which identify the Trust assets, liabilities, income, and expenses which are appropriate to the value and complexity of the trust property
  • Any record of Trustee decisions
  • Any written contracts entered into
  • Accounting records and financial statements
  • Memorandum of wishes from the settlor
  • Any other documents necessary for the administration of the trust
  • Any documents referred to above that were kept by a previous Trustee and passed onto the current Trustee

Each Trustee must keep copies of the Trust Deed and variations and have access to all the other trust records. 


Mandatory Duties

The Trust Act 2019 sets out a number of Mandatory and Default Duties for Trustees.  The Mandatory Duties are as follows:

  • Know the terms of the trust
  • Act in accordance with the terms of the Trust
  • Act honestly and in good faith
  • Act for the benefit of the beneficiaries; and
  • Exercise Trustee powers for a proper purpose


The following default duties must be performed unless they are modified or excluded in the Trust Deed (or by way of a subsequent variation of the Trust Deed):

  • Exercising reasonable care and skill in administering the trust
  • Investing prudently
  • Not exercising their power for their own benefit
  • Act impartially between beneficiaries
  • Not profit from the Trusteeship of the Trust
  • Act unanimously with the other Trustees
  • Regularly and actively consider the exercise of Trustee powers
  • Not bind or commit trustees to the future exercise or non-exercise of discretion
  • Avoid conflicts of interest between beneficiaries and trustees
  • Not take reward for being a trustee

If you would like to discuss these changes and the impact they will have on your Trust, please do not hesitate to be in touch.  

Small Business Cashflow Loan Scheme Fact Sheet

As another measure to assist eligible small-to-medium businesses adversely affected by COVID-19, the Government has launched the Small Business Cashflow Loan Scheme (SBCS).

From 12 May 2020, businesses employing up to 50 full-time staff may apply to the Inland Revenue Department for loans of $10,000 plus $1,800 per employee. The loans:

  • accrue interest at the rate of 3% for a maximum term of five years
  • will not be liable for interest if repaid within 12 months, and
  • require no repayments for two years

Inland Revenue will administer the scheme. Applications are open through myIR from 12 May 2020 to 12 June 2020. To apply, select 'Apply for a Small Business loan' in the 'I want to' section of myIR.


What you need to apply

To apply for the SBCS loan you need to:

  • provide your New Zealand Business Number (NZBN) – obtain one, if you don't have one
  • confirm that, due to COVID-19, your business is suffering a minimum 30% drop in actual or predicted revenue in the period January 2020 to June 2020
  • confirm your business or organisation:
  • existed before 1 April 2020
  • is viable and ongoing, you have a plan to ensure it remains so, and you are keeping evidence to document this
  • will use the loan to pay for core operating costs (such as rent, insurance, utilities, supplier payments, or rates)
  • will not pass the loan through to the shareholders or owners, for example, by a dividend or a loan
  • confirm you:
  • have appropriate authority to commit your business to this loan. We can't apply for you and nor can other tax agents, bookkeepers, other representatives
  • are 18 years or over and have the legal right to apply for this loan
  • are aware Inland Revenue are not providing financial or other advice about the loan
  • agree to the loan terms
  • provide the number of your full- and part-time employees, if you have not already provided this when applying for the wage subsidy.


Keep in mind

If you provide false or misleading information or receive any subsidy or payment you were not entitled to, you may be subject to investigation, including for offences under the Crimes Act 1961 or the Tax Administration Act 1994.

After the initial two-year period (when repayments aren't compulsory), Inland Revenue will notify you of the regular instalment repayments required. If you miss repayments, you will be charged interest at 3% plus the use of money interest rate (currently 7%).

Under certain circumstances, Inland Revenue may consider you to have defaulted on the loan (the terms currently available set out what constitutes an 'Event of Default'). In such circumstances, the outstanding amount will become immediately due and payable, and subject to interest at 3% (if the event of default has happened after the initial two-year period) as well as use of money interest.

Keep your longer-term finance strategy in mind. For instance, if you plan to go to your bank for funding over the next three years, consider how they will view your application if you already owe up to $100,000 plus interest to the government via Inland Revenue. It may tip the balance against your funding application. If you're not in desperate need of working capital right now, your long-term relationship with your bank may be your better option.


Our Recommendation

Speak to us about whether the SBCS loan is right for your business and if you need support with your application.
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