David Foster Smart Law Harris Tate Solicitors, Tauranga

As many people who have a family trust will be aware – or should be – trust law is undergoing a number of significant changes.

These changes have come about because of a number of court actions brought by frustrated trustees and beneficiaries, through the application of an outdated Trustee Act 1956 to modern trusts.

Just around the corner is a new Trusts Act. Government has decided a new act governing trusts is necessary, and is currently considering how the proposed legislation will interact with other legislation, such as the Property Law Act, Companies Act and Property (Relationships) Act.

The new legislation aims to modernise the law of trusts, making it clearer and more user-friendly to non-professional trustees.

Trusts often fail because of the way they are managed, or mismanaged. Too often are trusts poorly managed by ‘passive' independent trustees, whether those trustees are family relatives, an accountant or another disinterested professional who isn't legally qualified.

Running a trust properly requires a great deal of knowledge about ever-evolving trust law. Typically, lawyers keep up-to-date with changing trust law, whereas accountants or cousin Fred may not.

Using the independent trustee services provided by your lawyer and fully involving all trustees in all trust decisions can ensure that, when your trust is called upon to protect your most valuable assets, your trust will withstand an ‘attack'. This is what a trust is designed to do, and what the law allows.

A recent case highlighted an issue we often see in day-to-day practice. Agreements for sale and purchase of land are often prepared by a real estate agent.

And instead of recording all trustees as the vendor and/or purchaser, the agreement only refers to and is signed by Mr and Mrs – not by the independent trustee.

An agreement signed in such a way is, as the recent judgment stated, unenforceable.

Quite simply, where a trust is the vendor and/or purchaser, all trustees must sign.

Anything less is not binding on the trust and is unenforceable. The courts have confirmed an agreement must be signed by all trustees to be enforceable. To lawyers, this is obvious.

The basis of a trust is property is held by all trustees, on behalf of the beneficiaries. This basic principle is often overlooked by many trustees, including non-legal professional trustees.

When undertaking something ‘legal' with your trust, full involvement of all trustees is a must. Legal advice is always recommended when dealing with trust property to ensure
the I's are dotted and the t's are crossed – and most importantly, to ensure your valuable assets remain protected.