There is no legal requirement for a trust in New Zealand to have an independent trustee. Generally, an independent trustee is a person or entity which is not a beneficiary of a trust, although it is always important to read the terms of the trust deed to ascertain whether a person or entity would be considered “independent”.
Although it’s not a legal requirement, it is recommended that a trust has an independent trustee for the following reasons:
- An independent trustee provides objectivity and third-party input can help prevent the trust from being seen as a sham. A trust is more open to attack if the trustees are thought to be simply dealing with the trust’s assets as if they were their own. This is more likely to occur when there is no independent trustee. The independent trustee provides some separation between you personally and the trust assets, which is crucial to show that the trust is not a sham.
- An independent trustee assists in the better management and administration of the Trust. Often the independent trustee is a solicitor or accountant who is familiar with trust legislation and can ensure that the trust is complying with the Trusts Act 2019.
- An independent trustee encourages the co-trustees to discuss the merits of a proposed transaction and to ensure that the decisions of the trustees are documented. An independent trustee can assist with the decision-making process as they don’t have an emotional connection to the assets held in the trust and they can guide other trustees to consider the needs of all beneficiaries This will likely include holding an annual general meeting of trustees.
To find out more about Trusts or whether one might be right for you, please do not hesitate to contact any of the experienced members of our Trusts team.
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