Q & A

Understanding Your Trust Deed

 

A well written Trust Deed will be prepared in plain English and consist of many (if not all of the below sample) clauses.

The Trust Deed provides a rule book on how you are to operate your family trust as a responsible trustee. We've tried to cover off a good range of practical clauses for you.

If after reading the below you still have further questions, please email us at trust.specialist@trustus.co.nz.

 

 

Common Sample Clauses

 

The trustee

By this deed, I/we declare myself/ourselves to be the trustee(s) of the property described in XXXXX. I/we may appoint further trustees or change trustees under XXXXX at any time.

 

The name of the trust

 

The trust is to be known as the XXXXX.

 

The beneficiaries of this trust

 

I/we will be the primary beneficiary(ies): Any other beneficiary… and the final beneficiaries are XXXXX.

 

Declaration of trust

 

I/we now declare that I/we hold the Property described XXXXX as trustee(s) on the terms set out in this trust deed.

 

Trust Fund

 

The trust fund of this trust will include: XXXXX. Any asset purchased in place of XXXXX. The proceeds of XXXXX or any such asset. Any money or asset received by the trustees as an addition to the Trust Fund.

 

 

How are the beneficiaries to benefit from the trust assets?

 

I/we do not want to restrict the trustee’s ability

 

To use the trust assets under the terms of this deed. But I/we ask the trustee(s) to give preference to the beneficiaries in the order of priority set out in XXXXX. This means the trustees do not have to give equal consideration to all of the beneficiaries.

 

 

The main purpose of the trust

 

Is to provide a XXXXX for me/us and my/our family. But the trustees may hold other assets or money at sometimes.

 

At any time, the trustees may use any money belonging to the trust

 

For any of the following purposes: 

  • To pay expenses (from capital or income).
  • To set aside a reserve to meet further future needs.
  • For the maintenance, education, advancement, or benefit of any of the beneficiaries.
  • To pay money to any underage beneficiary's parent or guardian for the beneficiary's maintenance, education, advancement, or benefit (a signed acknowledgement from the parent or guardian will release the trustees from any further responsibility).

 

At any future time, I/we may sign a deed giving the trustee(s) directions

 

About how the trust fund is to be distributed on the distribution day. Unless that deed says otherwise, I/we may change the deed or cancel it at any later time. I/we may attach terms and conditions to the directions I/we give.

 

Any deed signed

 

Must be signed by me/us personally. The deed must not be anyone acting on behalf of me/us and it must not be signed after I/we have died.

 

If I/we have not given any directions before the distribution day

 

Or the directions cannot be carried out or they do not deal with the whole of the trust fund, then the rest of the trust fund is to be divided equally among the final beneficiaries who are living on the distribution day. If any of them have died before the distribution day their children will take their share.

 

My/our power to hire and fire

 

At any time I/we may sign a deed to appoint or remove any trustee or trustees. I/we will not be obliged to give any reason for doing this. This also means I/we have power to: 

  • Add more trustees if I/we wish to;
  • Appoint a custodian trustee or custodian trustees under section 50 of the Trustee Act 1956;
  • Appoint an advisory trustee or advisory trustees under section 49 of the Trustee Act 1956;
  • Appoint myself/us to any of these positions.

At any time I/we may sign a deed saying who is to take over my/our powers

 

Under XXXXX the deed may say that it is to take effect immediately or at some later time or when some later event occurs. If, at any time I/we do not have full legal capacity but there is no one appointed to take over my/our powers to appoint or remove, then my/our powers are to be exercised by whoever is acting as my attorney under an enduring power of attorney for property.

 

After I/we have died

 

My/our powers under XXXXX are to be given to whomever I/we have named in my/our will(s). If I/we do not name anyone by will to take over those powers, then the executor or administrator of his or her estate can exercise those powers and can continue do so even after the estate administration has been completed.

 

I/we may also from time to time by deed (or by will) nominate a discretionary beneficiary

 

Any person or persons; Any specified group or category of people; The trustee or trustees of any trust or trusts; or Any charitable entity registered under the Charities Act 2005.

 

I/we can at any time by deed to remove any person

 

Or group of people as discretionary beneficiary.

 

 

Any deed I/we sign under XXXXX must be signed personally by me/us

 

So this can only happen while I/we am/are living and have full legal capacity. For the purposes of this deed, a person is to be treated as no longer having full legal capacity if: 

  • An order has been made under the Protection of Personal & Property Rights Act 1988 protecting his or her property or personal care and welfare; or
  • He or she is mentally disordered as defined by the meaning of the Mental Health (Compulsory Assessment and Treatment) Act 1992 and is subject to an order made under that Act; or
  • Any trustee or beneficiary has received written certificates from two medical doctors saying that in their opinion the person does not have the mental or intellectual ability to carry out his or her duties under this deed.

 

Trustees' obligations

 

If there is more than one trustee they must always act unanimously. That means they cannot make a decision unless all trustees agree. Trustees may join in a decision even if some or most of them benefit from it. But only if at least one of the trustees does not benefit from the decision or all the people who have power to appoint and remove trustees have joined in the decision.

 

The trustee(s) has duties to make trust information available

 

The trustee(s) has duties to make trust information available to the beneficiaries. In addition, the trustee must also: Provide XXXXX with any information relating to the trust which is requested at any time; and

  • Give each of the final beneficiary’s copies of deeds, financial statements and trustees' decisions if they ask for these (unless I tell you not to).
  • The trustee may give copies of trust documents or trust information
  • To any other beneficiary if I ask the trustees to at any time.

The trustee(s) can join in decisions as trustees even though they have a conflict of interest

 

For example: If a trustee(s) is/are connected with a company or trust or partnership which is buying, selling or leasing assets to or from this trust; or a trustee(s) is acting in more than one role e.g. both vendor and purchaser or both landlord and tenant.

 

The trustee(s) will not be obliged to accept assets into the trust

 

If there is a liability attached or potential liability. 

 

 

The trustee(s) will not be liable for any loss to the trust fund

 

Or to any beneficiary unless the trustee(s) has/have: Done something which the trustee(s) knew the trustee(s) ought not to do; or the trustee(s) has/have not done something which the trustee(s) knew the trustee(s) ought to do.

 

The trustee(s) will not be obliged to sue any other trustee or former trustee

 

Who has/have acted wrongly or failed to act correctly as trustee.

 

The trustees powers

 

This trust has been set up mainly to XXXXX. This XXXXX property may be the only asset of the trust fund or the main asset. The requirements of the Trustee Act and the rules of law relating to trust investment and acting prudently will XXXXX.

 

The trustee is to have the widest possible powers

 

The trustee is to have the widest possible powers necessary in order to hold and provide a XXXXX. This will include acquiring an interest in land or shares or a lease or a right to occupy or anything similar. The trustee(s) is to be guided only by my/our needs and those of my/our family in providing us with a XXXXX. The trustee will not be liable if XXXXX loses value. The trustee(s) will not be obliged to XXXXX. The trustee(s) can agree to let a beneficiary live in a property on condition he or she pays expenses.

 

At any time, the trustee(s) may sign a deed to resettle

 

Any of the capital or income of the trust fund. Or all of it for any of the beneficiaries even if others may benefit. The trustee(s) can attach any terms or conditions they think fit. Resettlement means transfer of assets or money from one trust to another trust. There are legal requirements and there can be tax consequences. The trustee must not resettle money or assets that have already been distributed or allocated to a beneficiary or beneficiaries. They must not resettle onto a trust which would continue beyond the period allowed by law.

 

At any time before the distribution day

 

The trustee(s) can sign a deed which makes changes to this deed. The trustee(s) can only do this if I have agreed in writing; The changes will not affect the rights of any beneficiary to assets or money already given to that beneficiary. The changes will not mean this trust is to continue beyond the period allowed by law.

 

The trustee is to have the widest possible powers

 

Although I/we have already said the trustee(s) is/are to have the widest possible powers to hold property and provide my/our family with XXXXX, I/we want to make it clear that this includes (among other things) doing any of the following:

  • Retain any investments that come into the Trust Fund.
  • Deposit money with any Bank.
  • Accept money, investments or other property as an addition to the Trust Fund.
  • Let, lease or bail any assets of the Trust Fund on any terms the Trustees think fit and manage tenancies, leases and bailments and accept surrenders of them.
  • Sell any asset of the Trust Fund to anyone on any terms the Trustees think fit.
  • Exchange property on any terms the Trustees think fit.
  • Subdivide or develop any land within the Trust Fund and employ anyone the Trustees wish to carry this out.
  • Maintain, manage and improve any property in the Trust Fund in any way the Trustees think fit and use capital and/or income of the Trust Fund to pay for this.
  • Borrow money as the Trustees think fit and give mortgage or other security over any trust asset or assets.
  • Lend money to anyone (including any Beneficiary) on any terms the Trustees like.
  • Acquire property alone or as co-owner or in the name of a nominee.
  • Set aside income as a depreciation or reserve fund and decide if this is to be income or capital.
  • Insure any trust asset (for full replacement value or less) but the trustees will not be held liable for any loss due to lack of insurance or inadequate insurance.
  • Give a guarantee if the trustee thinks this will be of benefit to the Trust Fund or any beneficiary and give supporting security over any trust asset or assets.
  • Get a legal opinion from a lawyer practising in New Zealand or anywhere else.
  • Apply to any court if the trustee thinks this is necessary and charge the cost to the trust fund.
  • Deal with any trust assets as we would be able to do if we owned personally.
  • Join with anyone else in doing any of these things.

Each of the trustee powers under this deed

 

Are to be read independently and not limited by reference to any other clause.

 

 

How disputes are to be resolved

 

I/we want to avoid disagreements and bad feelings So, any dispute about the trust must be decided in accordance with the following clauses, unless it is resolved by mediation or some similar agreement. This applies to all disputes involving the trust and/or any beneficiary or beneficiaries, about this deed or any rights under this deed, or about any trust property.

 

 

Each party to any such dispute

 

Must not start any court proceedings relating to the dispute unless he or she has first followed XXXXX. Unless the dispute is resolved by mediation or in a similar way, the dispute must be referred to one expert decision maker (e.g. a lawyer) appointed by agreement between everyone involved in the dispute. If they cannot all agree, whoever has power at the time to appoint trustees under XXXXX must appoint the decision maker.

 

 

The previous XXXXX are not to be treated as an arbitration agreement 

 

Under the Arbitration Act 1996, but instead as an agreement to accept a decision by a duly appointed expert.

 

 

Despite the last XXXXX clauses, any of those involved in such a dispute

 

May apply to a court if there is a need for urgent interim action, e.g. to stop a property being sold or proceeds being sent overseas. Written notice must first be given to everyone else involved and the court action must be limited to the specific problem. Once the urgency has passed, clauses XXXXX to XXXXX will apply again.

 

 

New Zealand Courts Jurisdiction

 

Except for what is required by clauses XXXXX to XXXXX the New Zealand courts have jurisdiction over this trust (although the trustees can apply to other courts if they need to), and there can be no objection that a New Zealand court is not a convenient place to hear disputes.

 

 

Anyone who claims any rights as beneficiary under this deed

 

Must be treated as agreeing to be bound by clauses XXXXX to XXXXX.

 

Definitions 

 

In this deed where an Act of Parliament is mentioned in this deed, this includes any Act or law which replaces or changes it. The following definitions apply to all of this deed unless it is clear in the circumstances that the defined meaning could not apply:

  • Beneficiary: All the beneficiaries described in clause XXXXX.
  • Child, Children and Issue: Any natural child or descendant including anyone who qualifies because of adoption before or after the date of the deed, provided the adoption was before the distribution day.
  • Distribution Day: The date which is 80 years after the date on which this deed is signed or any earlier date we may specify by deed for all or any part of the Trust Fund.
  • The Settlor: Me/us the settlor(s) of this trust named in clause XXXXX.
  • Trustee: The person or persons acting as trustee under the terms of this deed.
  • Perpetuity Period: The period of 80 years from the date of this deed as permitted under the Perpetuities Act 1964.
  • Will: Any document which takes effect as a will including a codicil or change to a will.

 

Acknowledgement

 

As Settlor, XXXXX confirm I/we have carefully read through all the information and advice about this trust deed. I/we understand that this deed reduces the strict duties and requirements that would otherwise apply to trustees. I/we also know that I/we are entitled to ask for independent legal advice before I/we sign this deed.

 

 

Execution of this Deed

 

By any person is to be treated as execution in all capacities in relation to the trusts created by this Deed.