In Aotearoa New Zealand, trustees have specific duties and responsibilities under the law, primarily governed by the Trusts Act 2019 and common law principles. These duties are designed to ensure that trustees act in the best interests of the beneficiaries and manage the trust assets responsibly.
The Trusts Act 2019 in New Zealand clearly sets out two types of trustee duties: mandatory duties and default duties.
The key difference is that mandatory duties cannot be modified, restricted, or excluded by the terms of the trust deed. They are the fundamental, irreducible core obligations of any trustee. Default duties, on the other hand, apply unless the trust deed specifically states otherwise.
Here are the five mandatory duties of a trustee under the Trusts Act 2019:
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Duty to know the terms of the trust (Section 23): A trustee must be familiar with and understand all the provisions and conditions laid out in the trust deed and any other documents that constitute the terms of the trust.
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Duty to act in accordance with the terms of the trust (Section 24): A trustee must follow the instructions and rules set out in the trust deed when managing the trust property and making decisions.
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Duty to act honestly and in good faith (Section 25): A trustee must always act with integrity, sincerity, and genuine intent for the trust's purposes, rather than for personal gain or malicious reasons.
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Duty to act for the benefit of the beneficiaries or to further the permitted purpose of the trust (Section 26): All actions and decisions by a trustee must be made to benefit the beneficiaries (or, in the case of a purpose trust, to further that specific purpose). They must not use trust property for their own benefit.
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Duty to exercise powers for a proper purpose (Section 27): Any power given to a trustee must be used for the specific reason it was granted, which is ultimately to further the purposes of the trust and benefit the beneficiaries, not for an ulterior motive.
These mandatory duties are the bedrock of trust law in Aotearoa New Zealand, ensuring that trustees uphold the core principles of trusteeship and protect the interests of the beneficiaries.
Conclusion
Trustees in Aotearoa New Zealand have significant responsibilities that require diligence, integrity, and skill.
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Significant Responsibilities: The mandatory and default duties under the Trusts Act are extensive and demand careful attention. Trustees are managing assets for others, often over long periods.
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Diligence, Integrity, and Skill: These qualities are inherent in the ‘fiduciary’ nature of the trustee role. ‘Diligence’ relates to the duty to act with reasonable care (a key default duty), ‘integrity’ relates to honesty and good faith (a mandatory duty), and ‘skill’ relates to applying appropriate knowledge when managing assets.
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Fiduciary Duties: This is the core legal concept of trusteeship – acting in utmost good faith and loyalty to the beneficiaries. The mandatory and default duties are manifestations of these overarching fiduciary duties
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Default Duties: In contrast to mandatory duties which cannot be changed, default duties are those general obligations imposed on trustees by the Trusts Act 2019 that apply unless the trust deed specifically states otherwise. These duties cover various aspects of trust administration, such as the duty to exercise reasonable care and skill, invest prudently, and act impartially among beneficiaries.
By adhering to their fiduciary duties and operating within the framework of the trust deed and relevant laws, trustees can effectively manage trust assets and ensure the best interests of the beneficiaries are upheld.
However, given the complexity of these duties, it is highly recommended for trustees to seek legal and financial advice to navigate their responsibilities effectively.
