Guide · 14 min read
The Trusts Act 2019: what every settlor, trustee, and beneficiary should know
A plain-English walk-through of the Trusts Act 2019: mandatory and default trustee duties, mandatory beneficiary disclosure, record-keeping obligations, the 125-year maximum duration, and why some pre-2021 family trusts are now being unwound. Information only — not legal advice.
What the Act actually changed
The Trusts Act 2019 took effect on 30 January 2021 and replaced the Trustee Act 1956, the Perpetuities Act 1964, and most of the Trustee Companies Act 1967. It is the most significant overhaul of New Zealand trust law since the 19th century. Three things changed in substance: (1) trustee duties are now codified into five mandatory duties and ten default duties (default duties can be excluded by the trust deed; mandatory duties cannot); (2) trustees must give certain basic information to every beneficiary, with active record-keeping if they decide to withhold it; (3) the maximum permitted trust duration extended from 80 to 125 years. Existing trusts settled before 2021 are caught — there is no grandfather clause.
The five mandatory trustee duties
Section 23 to section 27 set the five mandatory duties that cannot be excluded by the trust deed: (1) the duty to know the terms of the trust (read the deed, understand the purposes); (2) the duty to act in accordance with the terms of the trust (do what the deed says, no freelance interpretation); (3) the duty to act honestly and in good faith; (4) the duty to act for the benefit of beneficiaries or to further the permitted purpose of the trust; (5) the duty to exercise powers for a proper purpose. A breach of any mandatory duty is actionable by any beneficiary or by the court on application. The mandatory duties bind trustees personally — if you are a trustee of your own family trust, these apply to you regardless of how casually the trust has historically been managed.
The ten default trustee duties
Sections 29 to 38 set ten default duties that apply unless the trust deed excludes them. These cover: the duty of care; the duty to invest prudently; the duty not to exercise a power for the trustee's own benefit; the duty to consider the exercise of trustee powers actively; the duty not to bind future exercises of discretion; the duty to avoid conflicts of interest; the duty to act impartially among beneficiaries; the duty not to profit from the trusteeship; the duty to act for no reward (excludable if professional); and the duty to act jointly. Most well-drafted modern trust deeds exclude or modify several of the default duties (especially the no-profit and no-reward duties for professional trustees). If your trust deed predates 2021 and has not been refreshed, default duties apply by operation of law — which sometimes produces surprises.
Mandatory beneficiary disclosure — the headline change
Sections 51 to 53 require trustees to give every beneficiary certain basic trust information: that they are a beneficiary; the trustees' names and contact details; their right to request a copy of the trust deed and trust accounts; and any changes in the above. Trustees may decide not to disclose, but they must actively decide so — taking account of the factors listed in section 53 (nature of the trust, age and circumstances of the beneficiary, likely effect of disclosure, family dynamics, etc.) — and document the reasoning. The decision must be reviewed regularly. This is the single biggest practical change for pre-2021 trusts: many settlors set up family trusts without ever telling adult children they were beneficiaries, and that approach is now non-compliant unless the trustees actively document the decision to withhold under section 53.
Record-keeping and trust documents
Section 45 requires every trustee to keep core trust documents: the trust deed and any variation; the names and contact details of every settlor, trustee, beneficiary, and any protector or advisor; records of trustee decisions; trust financial statements; tax returns; and any letters of wishes from the settlor. The records must be kept for at least the duration of the trust plus a reasonable period after termination. If there are multiple trustees, at least one must hold the originals. The standard is now significantly above the "minutes book in a drawer" approach common in pre-2021 family trusts. Professional trustees are expected to maintain digital records with audit trails.
125-year maximum duration
Section 16 extends the maximum permitted trust duration from 80 to 125 years for trusts created on or after 30 January 2021. Pre-2021 trusts retain their original 80-year limit unless varied by court order. The extension is mostly relevant for long-horizon dynastic or charitable trusts; for typical family trusts (set up for the lifetime of the settlors plus distribution to children), the duration is rarely the binding constraint.
Why some family trusts are being unwound
The combination of mandatory beneficiary disclosure, codified duties, record-keeping obligations, and the 39% trustee tax rate introduced from the 2024–25 tax year has changed the cost-benefit of holding a family trust. Trusts set up in the 1990s and 2000s for marginal-tax-rate planning no longer save tax. Trusts set up for Residential Care Subsidy planning are caught by the MSD gifting thresholds (NZ$7,000 per year per person in the five years before assessment; NZ$27,000 per year before that) and rarely deliver the intended result. Trusts set up for "asset protection" against future creditors are subject to the claw-back provisions in the Insolvency Act 2006 and Property Law Act 2007. Many NZ households are now winding up family trusts that no longer serve a clear purpose, with their lawyer's help.
When a trust still earns its keep
Trusts continue to make sense for specific situations: (1) providing for a vulnerable beneficiary who cannot manage their own affairs (disabled or addicted family member); (2) succession of a closely-held business or farm across generations; (3) blended families where outright gifts could be challenged under the Family Protection Act 1955; (4) holding assets that need to survive a single settlor's death (holiday homes intended for wider family use, art collections, capital for charity). Outside these situations, a well-drafted will plus enduring powers of attorney plus up-to-date KiwiSaver and life-insurance nominations now covers most estate-planning needs at a fraction of the lifetime cost of a trust.
Engaging a NZ lawyer for trust work
Trust work is technical. Engage a NZ-Law-Society-registered lawyer with a regular trusts practice (the Society of Trust and Estate Practitioners — STEP — maintains a register of TEP-qualified practitioners as an additional signal). Typical fees: setting up a new trust deed NZ$1,500–NZ$3,500; annual trustee review and minutes NZ$400–NZ$1,200; annual accounting NZ$300–NZ$1,500; deed variation NZ$1,000–NZ$3,000; winding up an existing trust NZ$2,500–NZ$6,000+ depending on assets to distribute. Always get the estimate in writing under LCA rule 9 before instructing. Verify the lawyer's current practising certificate at registry.lawsociety.org.nz.
Frequently asked questions
Do I have to disclose to my adult children that they are beneficiaries of my family trust?
Generally yes. Section 51 requires trustees to give every beneficiary "basic information" — the fact they are a beneficiary, who the trustees are, and their right to ask for a copy of the trust deed and accounts. Trustees can decide not to disclose under section 53, but the decision must be made actively, documented, and reviewed regularly. Failing to make the decision (and just not telling them) is non-compliant. Most NZ family-law specialists now recommend a quiet, written disclosure letter to adult children of pre-2021 trusts.
What happens if a trustee breaches a mandatory duty?
Beneficiaries (or in some cases the court on its own motion) can apply for relief. The court has broad powers: removal of the trustee, replacement, compensation, an account, a declaration, or an order requiring the trustee to act in a specified way. For serious breaches involving dishonesty, the trustee can be personally liable for losses to the trust. Trustees who are uncertain whether their conduct meets the standard should take their own legal advice early — trustees do not get to rely on the trust's legal advice in their own personal defence.
Should I wind up my family trust?
It depends on why the trust was set up. If the original reason still applies (vulnerable beneficiary, business succession, blended family), keep it but bring the documentation up to date. If the original reason was marginal-tax-rate planning, asset protection from future creditors, or Residential Care Subsidy planning, the trust likely no longer delivers what it was set up for and the ongoing compliance cost may not be justified. Take legal and tax advice before winding up — there can be relationship-property and tax consequences depending on how assets are distributed back.
Are pre-2021 trusts grandfathered out of the new rules?
No. The Trusts Act 2019 applies to all NZ trusts (express, charitable, and resulting), regardless of when they were settled. The only retrospective carve-out is the trust-duration rule — pre-2021 trusts retain their original 80-year maximum. Mandatory duties, default duties, mandatory disclosure, and record-keeping all apply equally to old and new trusts from 30 January 2021.
Can I be both settlor, trustee, and beneficiary of my own trust?
You can be any two of those simultaneously, and you can be all three in limited circumstances, but holding all three roles raises serious questions about whether a genuine trust has been created. New Zealand courts have repeatedly looked behind nominal trust structures where the settlor retained effective control over assets (Clayton v Clayton [2016] is the leading case on relationship-property exposure). If you are the settlor, the sole trustee, and a discretionary beneficiary, the trust may be a "sham" or an "illusory" trust and creditors and former partners may be able to look through it. Use an independent trustee.
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