Until the last few years, it was common for people to be a trustee of a trust – one that owns their home, shares in their business and other assets – and to only consider the trust if one of those assets was being transferred or refinanced.
However, with the changes brought about by the Trusts Act 2019, more attention and focus is now being put on regular trust administration – not just by lawyers, but by trustees, beneficiaries and the courts too.
In this article, Nick Robertson walks us through an overlooked area of trust administration: delegation.
What is delegation?
Many trustees incorrectly assume that if they’re outside the country travelling or physically incapacitated, their co-trustees will be able to step in seamlessly for them. Or, they might mistakenly believe that powers of attorney they’ve set up to deal with their personal assets will also cover their responsibilities as trustee.
While the new Trusts Act 2019 does aid trustees in removing a permanently incapacitated or uncontactable trustee (and a properly updated Trust Deed will usually simplify the process), this doesn’t account for situations where it’s merely inconvenient – or perhaps even impossible – for a trustee to sign a document because they’re overseas or due to a temporary physical incapacity.
Therefore, if you’re a trustee and are heading overseas or have concerns about physical incapacity (such as an upcoming surgery), you should consider completing delegation documentation.
What if I’ve already completed this documentation under the previous legislation?
Delegations completed under the old Trustee Act 1956 are technically still valid, but there are a few issues with relying on this documentation.
First, there are some questions around whether the documents must have been activated prior to the change in law to still be effective or whether they simply had to be signed.
Second, unless the document explicitly provided otherwise, any delegation under the Trustee Act 1956 was automatically revoked as soon as the delegator returned to New Zealand (or recovered from their temporary physical incapacity), even if it had never been used. Many trustees don’t realise that delegations completed during this time were single-use documents, and still believe them to be effective.
Why is delegation necessary?
A temporarily physically incapacitated or overseas trustee can pose significant challenges for a trust.
Getting necessary documents signed – whether it be for the bank, a property purchase or sale, or any other transaction – can be difficult, especially in cases where time is of the essence.
Similarly, if all trustees need to sign documents in front of a particular witness (such as a lawyer or Justice of the Peace), arranging for that to be done while a trustee is travelling overseas can be extremely difficult, adding to the trust’s legal costs.
What if I’m relocating overseas?
Delegation is more appropriate for temporary situations (such as holidays) as opposed to relocation.
If a trustee is relocating overseas, they should seek appropriate legal, accounting and tax advice regarding retaining their trusteeship overseas or retiring as trustee.
What should I do from here?
If you’re a trustee of a trust and you’re planning on travelling for extended periods, are concerned about physical incapacity or you have a deed of delegation completed under the previous legislation (the Trustee Act 1956) you still intend to rely on, please contact us to discuss your situation further.
We can help you put new delegation documents in place or review your existing documentation to ensure it’s fit for purpose. To get in touch, contact our team on enquiries@armstrongmurray.co.nz or 09 489 9102.
This article is brief and general in nature. You should not treat it as legal advice and should seek professional advice before taking any action in relation to the matters dealt with in this post. Armstrong Murray accepts no liability for losses suffered by any person or organisation who may rely directly or indirectly on this post.
