Trust Administration Requirements in NZ

Trustees must meet strict obligations to remain compliant under the Trusts Act 2019, including maintaining detailed records and demonstrating ongoing decision-making.

Annual Administration Requirements

1. Annual Trustee Meeting

Mandatory:

  • At least one formal meeting per year
  • All trustees should participate
  • In-person or virtual
  • Properly documented

Agenda typically includes:

  • Review trust assets
  • Financial position
  • Distribution decisions
  • Gifting resolutions
  • Trustee appointments/removals
  • Investment strategy
  • Compliance review
  • Beneficiary communications

2. Minutes and Resolutions

Document all decisions:

  • Meeting date and attendees
  • Matters discussed
  • Decisions made
  • Reasons for key decisions
  • Actions required
  • Next meeting date

Required resolutions:

  • Accept annual financial statements
  • Approve distributions
  • Forgive gifting debt
  • Investment decisions
  • Trustee changes
  • Trust deed variations

3. Trust Financial Statements

Annual accounts showing:

  • Assets and liabilities
  • Income and expenses
  • Distributions made
  • Debt balances (gifting)
  • Cash position
  • Investments performance

Prepared by:

  • Accountant (recommended)
  • Trustees (if capable)
  • Professional trustee

Standards:

  • Accurate and complete
  • Comply with accounting standards
  • Support tax return

4. Gifting Documentation

If gifting programme:

  • Annual deed of gift
  • Trustee resolution accepting gift
  • Updated debt balance
  • Record in financial statements

Even if paused:

  • Document decision not to gift this year
  • Record in minutes

5. Distribution Records

For all distributions:

  • Trustee resolution approving
  • Amount and beneficiary
  • Reason for distribution
  • Tax treatment
  • Beneficiary statement
  • Payment records

Keep forever: Distribution records critical.

6. Updated Beneficiary Details

Maintain register:

  • Current names and addresses
  • Contact information
  • Changes in circumstances
  • New beneficiaries (births)
  • Deceased beneficiaries

Review annually and update.

7. Asset Register

Comprehensive list:

  • Property owned
  • Bank accounts
  • Investments
  • Shares
  • Business interests
  • Personal property
  • Debts owed to trust

Update:

  • When assets acquired/sold
  • Value changes
  • Annual review

8. Tax Compliance

Annual IR6 return:

  • Trust income
  • Distributions to beneficiaries
  • Trustee income
  • Tax payable

Beneficiary statements:

  • Show income allocated
  • Tax credits
  • Due by 7 July

GST (if registered):

  • Returns as required
  • Usually 2-monthly or 6-monthly

Why Good Administration Matters

Strengthens Asset Protection

Demonstrates:

  • Genuine trust
  • Independent trustees
  • Real separation from personal assets
  • Proper governance

Weak administration:

  • Suggests sham trust
  • Easy to challenge
  • Asset protection fails

Reduces Dispute Risk

Clear records show:

  • Why decisions made
  • Fair process followed
  • All beneficiaries considered
  • Proper deliberation

No records:

  • Open to allegations
  • Hard to defend
  • Disputes more likely

Supports Trustee Defence

If challenged:

  • Minutes show proper process
  • Decisions documented and justified
  • Records demonstrate compliance
  • Legal defence stronger

No documentation:

  • Trustees exposed personally
  • Hard to prove proper conduct
  • Breach of duty claims easier

Trusts Act 2019 requires:

  • Keep proper records
  • Provide information to beneficiaries
  • Act in accordance with terms
  • Document decisions

Non-compliance:

  • Breach of mandatory duties
  • Trustee liability
  • Court orders
  • Potential removal

Tax Compliance

IRD expects:

  • Annual returns filed
  • Records support positions
  • Distributions documented
  • Proper accounting

Poor records:

  • IRD challenges
  • Penalties and interest
  • Audit stress
  • Tax reassessments

Enables Trustee Changes

New trustees need:

  • Complete records
  • Trust history
  • Current position
  • Past decisions

Gaps in records:

  • Difficult handover
  • New trustees handicapped
  • Continuity lost

Trustee Duties Under Trusts Act 2019

Mandatory Duties (Cannot Be Excluded)

1. Know terms of trust

  • Read and understand trust deed
  • All variations
  • Applicable law
  • Your powers and duties

2. Act in accordance with terms

  • Follow trust deed
  • Respect beneficiary interests
  • Exercise powers properly

3. Act honestly and in good faith

  • Integrity in all dealings
  • No hidden agendas
  • Transparent decisions

4. Act for benefit of beneficiaries

  • Beneficiaries’ interests paramount
  • Not trustee’s interests
  • Consider all beneficiaries

5. Exercise powers for proper purpose

  • Use powers as intended
  • Not for collateral purposes
  • Proper motivations

Default Duties (Can Be Modified by Deed)

1. Prudent person rule

  • Act as prudent person would
  • Careful and considered
  • Proper skill and care

2. Not profit from trusteeship

  • No personal benefit
  • Unless deed allows
  • Declare conflicts

3. Act unanimously

  • All trustees agree
  • Unless deed allows majority
  • Document decisions

4. Duty not to delegate

  • Can’t delegate duties
  • Unless deed allows
  • Some delegation permitted (investments, admin)

5. Duty to avoid conflicts

  • Disclose conflicts of interest
  • Manage appropriately
  • May need to abstain from decisions

Record-Keeping Requirements

Core Trust Documents

Must maintain:

  • Original trust deed
  • All variations and supplemental deeds
  • Settlor details
  • Current trustees
  • Beneficiary register
  • Memorandum of wishes

Access:

  • All trustees must have access
  • Secure storage
  • Copies distributed
  • Digital backups

Trustee Minutes

Every meeting:

  • Date and attendees
  • Matters discussed
  • Decisions made
  • Actions required
  • Signatures

Store:

  • Chronological order
  • Easily accessible
  • Secure
  • Permanent record

Financial Records

Comprehensive:

  • Bank statements
  • Investment records
  • Income documentation
  • Expense receipts
  • Tax returns
  • Financial statements

Retention:

  • Minimum 7 years
  • Longer for major items
  • Property records forever

Distribution Documentation

For each distribution:

  • Trustee resolution
  • Amount and recipient
  • Reason for distribution
  • Tax treatment
  • Payment evidence
  • Beneficiary statement

Asset Records

Each asset:

  • Acquisition documents
  • Purchase price/valuation
  • Title documents
  • Insurance
  • Maintenance records
  • Sale documents (when sold)

Correspondence

Keep:

  • Letters to/from beneficiaries
  • Lawyer correspondence
  • Accountant advice
  • Bank communications
  • Government agencies

Compliance Records

Annual:

  • Annual meeting minutes
  • Financial statements
  • Tax returns
  • Gifting deeds
  • Distribution resolutions

Practical Administration Systems

Annual Cycle

January-March:

  • Prepare financial statements
  • Prepare tax return
  • Annual trustee meeting
  • Review prior year

April-June:

  • File tax return (by 7 July)
  • Provide beneficiary statements
  • Review investments
  • Plan next year

July-September:

  • Mid-year review
  • Consider distributions
  • Update asset register

October-December:

  • Year-end planning
  • Prepare gifting deed
  • Review compliance
  • Plan annual meeting

Digital vs Physical Records

Digital advantages:

  • Easy backups
  • Searchable
  • Space saving
  • Access from anywhere

Physical advantages:

  • Original signatures
  • Legal requirement for some
  • Tangible and secure

Best practice: Both

  • Original signed documents in physical file
  • Scanned copies digitally
  • Secure cloud backup

Who Does the Administration?

Options:

1. Trustees themselves

  • Cost: $0
  • Pros: Direct control
  • Cons: Time, expertise, liability

2. Professional trustee

  • Cost: $2,000-$10,000/year
  • Pros: Expert, comprehensive
  • Cons: Expensive

3. Accountant/lawyer services

  • Cost: $500-$2,500/year
  • Pros: Professional, regular
  • Cons: Cost adds up

4. Hybrid

  • Cost: $500-$1,500/year
  • Pros: Balance of control and expertise
  • Cons: Coordination needed

FAQs — Trust Administration

How often should trustees meet?

Minimum: Annually

Recommended:

  • Simple trusts: Annually
  • Complex trusts: Quarterly or semi-annually
  • Active distributions: As needed
  • Significant decisions: Additional meetings

Do all trustees need to sign minutes?

Best practice: Yes

Legally:

  • Depends on trust deed
  • May allow majority
  • Non-signing trustees should note objections

Risk of not all signing: Questions about validity of decisions.

What if records are missing for past years?

Can be reconstructed:

  1. Gather any existing records
  2. Bank statements
  3. Tax returns
  4. Property records
  5. Statutory declarations
  6. Retroactive minutes (with legal advice)

Get help: Lawyer and accountant.

Can trustees be held personally liable for poor administration?

Yes:

  • Breach of mandatory duties
  • Loss to trust from negligence
  • Tax penalties from non-compliance
  • Creditor claims

Protection:

  • Proper administration
  • Professional advice
  • Trust deed indemnity (if proper conduct)
  • Trustee insurance

Do trustees need professional help?

Strongly recommended for:

  • Financial statements
  • Tax returns
  • Major decisions
  • Deed variations
  • Disputes

Can DIY:

  • Simple trusts
  • Minimal activity
  • Competent trustees
  • Willing to learn

But: Cost of error often exceeds cost of advice.

What happens if trustees disagree?

Resolution:

  • Discussion and compromise
  • Professional mediation
  • Trust deed dispute mechanism
  • Court directions (last resort)

Prevention:

  • Clear trust deed
  • Odd number of trustees
  • Good communication
  • Document disagreements

How long must records be kept?

Minimum: 7 years for tax purposes

Recommended:

  • Trust formation documents: Forever
  • Trustee minutes: Forever
  • Distribution records: Forever
  • Financial statements: Forever
  • Tax returns: 7+ years
  • Routine correspondence: 7 years

Best practice: Keep everything forever (digital storage cheap).

Can records be stored electronically?

Yes:

  • Acceptable for most records
  • Easy to backup and search
  • Space efficient

But keep originals of:

  • Trust deed
  • Signed minutes
  • Deeds of variation
  • Property documents

What if a trustee isn’t keeping proper records?

Action:

  • Discuss with trustee
  • Require compliance
  • Appoint someone responsible
  • Consider removing trustee
  • Professional trustee appointment

All trustees responsible for ensuring proper records.

Do beneficiaries have right to see all records?

Under Trusts Act 2019:

  • Beneficiaries can request information
  • Trustees must generally provide
  • Some information can be withheld
  • Balance competing interests

Default: Transparency, but with limits for good reasons.

What’s the penalty for not filing trust tax returns?

IRD penalties:

  • Late filing: $50/month up to $500
  • Incorrect return: Up to $2,000
  • Evasion: More serious
  • Interest on unpaid tax

Other consequences:

  • Audit risk
  • Trustee liability
  • Beneficiary issues