Q & A

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 discretionary 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, we declare our accounting firm to be the trustee of the property described in XXXXX. 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 

The company will be the primary beneficiary: Any other beneficiary… and the final beneficiaries are XXXXX.

Declaration of trust 

The settlor now establishes a trust for the benefit of the beneficiaries described in the previous XXXXX of this Deed. For this purpose, the settlor has paid $150 to the trustee. This is to be held on the trusts set out in this Deed. By signing this Deed, the trustee acknowledges XXXXX.

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?

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 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 retain insurance policies so that: The trustee holds life, trauma and/or total and permanent disability insurance equal to or greater than the value of the shares held by each shareholder of XXXXX.

The settlor must XXXXX. The settlor has a funding mechanism to support a buyback of shares and, if required, to enable shareholders to withdraw from the company if: a) A shareholder has been informed that they are dying, suffering total and permanent disablement or XXXXX.

b) A shareholder has suffered a trauma and not returned to full duties (that is the same duties undertaken prior to suffering the trauma)  within 6 months of the trauma; and/or

c) A deceased shareholder’s personal representative is selling any or all XXXXX. 

The trustee is to collect the proceeds of XXXXX. The trustee may select the right time to XXXXX.

The trustee must hold the policy proceeds on trust until: XXXXX.

The final beneficiaries will not be obliged to XXXXX.

The trustee may hold other XXXXX.

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.
• XXXXX.

At any future time, the settlor 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, the settlor may change the deed or cancel it at any later time. The settlor may attach terms and conditions to the directions given.

Any deed signed

Must be signed by the settlor. The deed must not XXXXX.

If the settlor does 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 among the final beneficiaries who are living on the distribution day in proportion to their respective shareholdings in the company. If any of them have died before the distribution day their children will take their share.

The settlors power to change trustees

At any time the settlor may sign a deed to appoint or remove any trustee or trustees. The settlor will not be obliged to give any reason for doing this. This also means the settlor has power to: 

• Add more trustees XXXXX;
• 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 XXXXX.

At any time the settlor may sign a deed saying who is to take over their 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 and must be signed by the directors of XXXXX.

The settlor may from time to time by deed nominate a discretionary beneficiary

By admission of new shareholders of XXXXX. Any person or persons; Any body corporate; or The trustee or trustees of any trust or trusts; After the date of this Deed shall become a party to and bound by this Deed by completing and signing XXXXX.

The settlor can at any time by deed remove any person

Or group of people as XXXXX.

Any deed the settlor signs under XXXXX must be signed personally by the directors of the company

So this can only happen while XXXXX. 

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 has duties to make trust information available

The trustee 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 the settlor tells the trustee 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 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.

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

If there is a liability attached or potential liability.  

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

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

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

Who has 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 is to be guided only by the settlors needs in providing a XXXXX. The trustee will not be liable if XXXXX loses value. The trustee will not be obliged to XXXXX.

At any time, the trustee 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 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 can sign a deed which makes changes to this deed. The trustee can only do this if the settlor has 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 the settlor has already said the trustee is to have the widest possible powers to hold property and provide XXXXX, The settlor wants 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

The settlor and trustee want to avoid disagreements and arguments 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:

• Advisory Trustee: Any advisory trustee or special trust advisor appointed under this deed or any Act of Parliament.
• Beneficiary: All the beneficiaries described in clause XXXXX.
• Current Market Value: As determined by clause XXXXX.
• 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.
• Insurance Company: The company providing insurance on the shareholders.
• The Settlor: Named in clause XXXXX.
• Trauma: Has the meaning assigned to it in the policies. Only a trauma covered by the policies will qualify as trauma under this deed.
• Trustee: The accounting firm acting as trustee under the terms of this deed.
• Total and Permanent Disablement: Means total and permanent disablement as defined in the policies resulting in a payment by the Insurance Company of the benefit under that policy.
• Perpetuity Period: The period of 80 years from the date of this deed as permitted under the Perpetuities Act 1964.

Acknowledgement

The Settlor and Trustee confirm they have carefully read through this trust deed. They understand that this deed reduces the strict duties and requirements that would otherwise apply to trustees. They also know that they are entitled to ask for independent legal advice before signing 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.