Law Commission recommendations around a Trustees Duty


Six mandatory and eleven default duties of trustees will be imposed which will apply unless the terms of the trust indicate otherwise. This is essentially formalizing what was developed through case law.

Mandatory Trustee Duties would be:

  • To be familiar with the terms of the Trust;
  • To act in accordance with the terms of the Trust;
  • To act honestly and in good faith;
  • To act for the benefit of the beneficiaries or to further the purpose of the trust, in accordance with the terms of the Trust;
  • To exercise stewardship over the Trust property for the beneficiaries or the purpose of the trust;
  • To exercise power for a proper purpose.

Default (applicable to all trusts) Trustee Duties would be:

  • The duty to maintain impartiality or evenhandedness between beneficiaries;
  • The duty not to make profit from the trusteeship;
  • The duty to act without reward;
  • The duty to avoid a conflict of interest;
  • The duty to be active (meaning the duty to consider the exercise of the trustees’ discretions regularly and not to fetter these discretions);
  • The duty to act personally;
  • The duty to act unanimously;
  • The duty to manage the trust;
  • The duty to invest;
  • The duty to keep trust property separate from the trustee’s own property;
  • The duty to keep and render accounts, and to provide information to beneficiaries; and
  • The duty to transfer property only to beneficiaries or persons legally authorised to receive property.

Key Law Commission Recommendations | Keeping New Zealand Trusts in step with the times.


The New Zealand Courts are making it very clear that they expect certain standards to be observed in the investment and administration of Trust assets and (where applicable) trust liabilities or potential liabilities. If the standards are not maintained, then the trustees can be held liable.

In 2009 the Law Commission was asked to review the Trustee Act 1956 and trust law generally. In September 2013 they tabled a report in Parliament, Review of the Law of Trusts: A Trusts Act for New Zealand (R130), which was preceded by six issue papers. At the heart of the report is the recommendation for the introduction of a modern and comprehensive Trusts Act to replace the outdated Trustee Act 1956 – keeping New Zealand Trusts in step with the times.

The main points addressed are:

  • setting out the characteristics of a trust and how a trust is created;
  • setting out the duties of trustees;
  • modernised trustee powers provisions;
  • a modernised, flexible approach to investment;
  • improved procedures for the appointment and removal of trustees;
  • more comprehensive and useful provisions on the variation and revocation of trusts;
  • a refined approach to the power of the courts to review the actions of trustees; and
  • the replacement of the rule against perpetuities and Perpetuities Act with a new rule limiting the maximum duration of a trust.


Essentially the 59 year old Trustee Act is not in step with how trusts are now being used. Over the past 20 years the use of trusts has grown steeply and the current estimate is that New Zealand has now somewhere between 300,000 and 500,000 trusts operating. Although the New Zealand Government agrees that there is need for a new Trusts Act it has called for further research on the implications of the new Act on existing Trusts and work still is needed on many of the Law Commissions recommendations.


Current Responsibilities and Standard of Care required of a Trustee


A Trustee’s duties include:

  1. Efficient Management – the requirement to regularly take stock of trust assets and liabilities, setting up structures for the administration and management of the trust and keeping abreast of trust issues.
  2. Keeping full and candid accounts keeping appropriate and adequate accounting records and preparing financial statements in respect of appropriate accounting periods. Trust accounts kept must be proper, faithful and accurate.
  3. Objectivity / Impartialityacting in the best interests of all the beneficiaries, present and future. Trustees must act impartially in their decision making and at all times protect the interests of the beneficiaries.
  4. The duty to considerconsidering whether or not and in which ways trustees should exercise their powers and discretions having regard to the terms of the trust and the interests of the beneficiaries.

A trustee must take all precautions which would normally be taken by an ordinary prudent person managing the affairs of others.

In addition to these requirements, if a trustee is a professional person (such as a lawyer or an accountant), when investing trust funds, for  example, a professional trustee must exercise the care, diligence and skill that a prudent person engaged in his or her line of business would exercise in managing the affairs of others.