Trustee Duties in New Zealand: What Every Trustee Must Know

Trustee duties in New Zealand come from the Trusts Act 2019, which splits them into five mandatory duties that bind every trustee and ten default duties that a trust deed can change or remove.

The mandatory duties require a trustee to know the terms of the trust, act in accordance with them, act honestly and in good faith, act for the benefit of the beneficiaries, and use their powers for a proper purpose.

Many trustees have never read their trust deed closely enough to know which duties actually bind them, and that gap is a common source of trustee liability.

What Are the Duties of a Trustee in New Zealand?

A New Zealand trustee has fifteen statutory duties under the Trusts Act 2019: five mandatory duties in sections 23 to 27 that can never be removed, and ten default duties in sections 29 to 38 that apply unless the trust deed modifies or excludes them.

Section 21 adds a guiding principle over the top of all of them, requiring a trustee to have regard to the context and objectives of the trust when performing any duty.

The table below compares all fifteen duties, showing the section that creates each one, whether it is mandatory or default, and whether a trust deed can change it.

The practical takeaway is that reading the Act on its own will never tell a trustee what they are bound to do.

The Act sets the mandatory floor, and the trust deed decides what sits on top of it.

Two people acting as trustees of two different family trusts will often have quite different obligations, even though the same statute governs both.

This matters more than most trustees realise, because trusts are a mainstream part of New Zealand life rather than a niche arrangement.

Inland Revenue reports that in the 2024 income tax year, the number of trusts and estates filing IR6 returns totalled 233,000, a decrease of 3.2% on 2023.

That figure covers trusts and estates together, and it shows the scale of trust administration being carried out by people who are personally on the hook for the duties described below.

What Are the Five Mandatory Duties a Trustee Can Never Escape?

The five mandatory duties sit in sections 23 to 27 of the Trusts Act 2019.

Section 22 states plainly that they must be performed by the trustee and may not be modified or excluded by the terms of the trust.

No deed, no side agreement, and no settlor instruction will remove them.

They form the irreducible core of holding property for someone else, so a clause in a deed that purports to remove one of them won’t take effect.

What Does the Duty to Know the Terms of the Trust Require?

Section 23 requires a trustee to know the terms of the trust.

That means reading and understanding the trust deed, along with any variations and other documents that have changed the terms of the trust since.

It is an easy duty to breach without noticing, because many trustees sign an appointment document and never look at the deed again.

A trustee who doesn’t know whether the deed allows a loan to a beneficiary, or whether it requires unanimous decisions, is unable to make a valid decision about either.

If you are appointed part way through the life of a trust, this duty applies from the day you accept the role, not from the day you get around to reading the file.

What Does It Mean to Act in Accordance With the Terms of the Trust?

Section 24 requires a trustee to act in accordance with the terms of the trust, so the deed sets the boundaries of what you are permitted to do.

A trustee who makes a distribution to someone who isn’t a beneficiary has breached this duty, even if the decision seemed sensible at the time.

The same goes for investing in an asset class the deed prohibits.

Good intentions are not a defence, and neither is the fact that every other trustee agreed.

Where a deed is unclear, the safer course is to get advice or apply to the court for directions rather than to act and hope the interpretation holds up later.

What Does the Duty to Act Honestly and in Good Faith Cover?

Section 25 requires a trustee to act honestly and in good faith, which goes further than simply avoiding fraud.

It calls for genuine engagement with the role, honest disclosure of relevant matters to co-trustees, and decisions made for real reasons.

A trustee who signs documents without reading them, or who lets one dominant co-trustee run the trust while staying deliberately uninformed, is exposed on this duty and on the duty of care in section 29.

Whether that conduct crosses into bad faith turns on the facts, but a passive trustee carries the same liability as an active one.

Section 22 puts this duty beyond the reach of the trust deed, and section 40 goes further by stopping the terms of a trust limiting or excluding liability for a breach arising from dishonesty, wilful misconduct or gross negligence.

What Does Acting for the Benefit of Beneficiaries Mean?

Section 26 requires a trustee to hold or deal with trust property, and otherwise act, for the benefit of the beneficiaries in accordance with the terms of the trust.

Where the trust is a purpose trust, the duty is to further the permitted purpose instead.

The trust exists for the beneficiaries, not for the trustee and not for the settlor.

This duty is most often tested when a settlor is also a trustee and keeps treating trust assets as personal property.

Living rent free in a trust-owned home, using trust funds for personal expenses, or making decisions that suit the settlor’s plans rather than the beneficiaries’ interests will breach this duty unless the terms of the trust authorise it.

A settlor who is also a beneficiary is often entitled to occupy a trust property, so the answer always starts with the deed.

What Is the Duty to Exercise Powers for a Proper Purpose?

Section 27 requires a trustee to exercise their powers for a proper purpose, meaning a power must be used for the reason it was given rather than for a collateral aim.

A power to resettle trust assets exists to serve the beneficiaries.

Using it to defeat a relationship property claim, or to put assets beyond the reach of a creditor, raises a serious proper purpose problem and will often attract claims under relationship property or insolvency law as well.

The same applies to a power to remove or add beneficiaries when it is used to punish a family member rather than to reflect a genuine change in circumstances.

Courts look at the substance of why a power was used, not the label the trustee put on the resolution.

What Are the Default Duties and Which Ones Can Your Trust Deed Change?

The ten default duties sit in sections 29 to 38 of the Trusts Act 2019, and section 28 confirms they must be performed unless they are modified or excluded in accordance with section 5(4) and (5).

Unlike the mandatory duties, these are the settings a settlor can adjust when the trust is created.

They cover the standard of care, investment, conflicts, impartiality, reward, and how trustees make decisions together.

How Careful Must a Trustee Be When Administering the Trust?

Section 29 requires a trustee administering a trust to exercise the care and skill that is reasonable in the circumstances.

The Act tells the court to look in particular at any special knowledge or experience the trustee has, or holds themselves out as having.

The standard rises for anyone acting as a trustee in the course of a business or profession, who is judged against the knowledge reasonably expected of someone in that line of work.

A retired accountant sitting as a family trustee is measured against the financial knowledge they actually have, so the standard applied to them on the trust’s accounts sits above the standard applied to a friend with no relevant background.

This duty applies to administration rather than to the exercise of a discretion to distribute trust property, which the Act treats separately.

What Does the Duty to Invest Prudently Require?

Section 30 requires a trustee exercising any power to invest trust property to use the care and skill that a prudent person of business would exercise in managing the affairs of others.

The comparison is deliberately not with how you manage your own money, because a prudent person is generally more cautious with someone else’s.

In practice that usually means diversifying so far as is appropriate to the circumstances of the trust, reviewing investments periodically rather than setting and forgetting, and documenting why each decision was made.

Leaving a large trust balance in a low interest transaction account for years will breach this duty where there is no reasonable justification for holding cash.

A pending distribution, a known liability or a short investment horizon will all justify it, and the written record of that reasoning is what protects the trustee.

Can a Trustee Benefit Personally From the Trust?

Sections 31, 34, 36 and 37 work together to keep a trustee’s personal interests separate from the trust.

They require a trustee not to exercise a power for their own benefit, to avoid conflicts of interest, not to make a profit from the trusteeship, and to act for no reward.

Section 37 preserves the right to be reimbursed for legitimate expenses and disbursements, so a trustee is never out of pocket for costs properly incurred.

All four are default duties, which is why professional trustees such as law firms and trustee companies are able to charge fees, and why deeds commonly allow a settlor-trustee to also be a beneficiary.

Where the deed is silent and there is no other lawful authority for payment, the default position applies in full and a trustee who pays themselves will be in breach.

Section 139 gives the court power to order payment of remuneration to a trustee, which is the usual route where a deed makes no provision.

Do Trustees Have to Treat All Beneficiaries Equally?

Section 35 requires a trustee to act impartially and not to be unfairly partial to one beneficiary or group to the detriment of the others.

It expressly does not require all beneficiaries to be treated equally, and that distinction matters, because impartiality is about the process rather than the outcome.

A trustee is entitled to distribute more to a beneficiary in genuine need, provided the decision was reached by properly considering the relevant beneficiary interests against the terms of the trust.

What breaches the duty is favouring one branch of a family without turning your mind to the others at all.

Recording the reasoning behind an uneven distribution at the time is the clearest way to show the duty was met.

What Do Trustees Have to Actively Consider?

Section 32 requires a trustee to consider actively and regularly whether they should be exercising one or more of their powers.

Section 33 then stops a trustee binding themselves or their co-trustees to a future exercise or non-exercise of a discretion.

Together these mean a trustee can’t go dormant and can’t hand their judgement to someone else in advance.

The Act doesn’t prescribe how often trustees have to meet, but an annual trustee meeting with minuted decisions on distributions, investments and any beneficiary requests is the standard way to show the duty is being met.

A promise to a settlor that you will always vote a particular way, or a blank signed resolution left with another trustee, will breach section 33.

Must All Trustees Agree Before a Decision Is Made?

Section 38 requires trustees to act unanimously where there is more than one trustee, so a majority vote isn’t enough unless the trust deed says otherwise.

This is a default duty, and many modern deeds change it to allow majority decision making or to give a particular trustee a casting vote.

Where the deed is silent, a purported trust decision made without every trustee’s agreement is likely to be ineffective and will be a breach of duty.

A trustee who was left out of the discussion has a genuine complaint, so check the deed before assuming that two out of three trustees is enough.

How Can Default Duties Be Modified or Excluded?

Default duties are modified or excluded under section 5(4) of the Trusts Act 2019, which allows the provisions listed in column 1 of the table in Schedule 2 to be changed by express or implied terms of a trust.

Section 5(5) then limits how far each of those changes can go, to the extent set out in column 2 of that table.

The reference to implied terms matters, because a duty can be excluded by the overall effect of a deed rather than by a clause that says so directly.

That is a real risk with older deeds drafted long before the current Act, where wording written for the Trustee Act 1956 now has to be read against a different statutory framework.

Section 39 adds a safeguard at the front end, and it applies to anyone paid to advise on the creation of a trust or to prepare its terms.

If that adviser recommends modifying or excluding a default duty, they must take reasonable steps to make sure the settlor understands the meaning and effect of the change before the trust is created.

If you are a trustee of a trust settled before the Trusts Act 2019 took effect on 30 January 2021, have the deed reviewed against Schedule 2 so you know precisely which of the ten default duties still bind you.

What Records Must a Trustee Keep?

Section 45 of the Trusts Act 2019 requires every trustee to keep the core documents of the trust, so far as is reasonable, and lists what those documents are.

They include the trust deed and any variations, records of trust property, records of trustee decisions, contracts entered into, accounting records and financial statements, documents appointing or removing trustees, and any memorandum of wishes from the settlor.

Section 46 deals with trusts that have more than one trustee.

At least one trustee must hold all the core documents, while each of the others holds the trust deed and its variations, with the rest available on request.

Section 47 requires a trustee to keep those documents for the duration of their trusteeship, and section 48 requires them to be handed to a replacement or continuing trustee when a trusteeship ends.

Record keeping is the duty that quietly shapes how trust disputes are resolved.

When a beneficiary challenges a distribution years later, the minute recording why the decision was made is often the strongest evidence that the trustees considered the question properly.

A trustee with no records is left arguing from memory against a written claim, which is a position no trustee should accept.

What Information Must Trustees Give Beneficiaries?

Sections 51 and 52 of the Trusts Act 2019 create two presumptions: that a trustee will make basic trust information available to every beneficiary, and that a trustee will provide other trust information within a reasonable time when a beneficiary asks for it.

Basic trust information covers the fact that the person is a beneficiary, the name and contact details of the trustees, notice of any change of trustee, and the right to request further trust information.

Section 49 defines trust information as information about the terms of the trust, its administration, or the trust property that a beneficiary reasonably needs to enforce the trust.

It expressly excludes the reasons for trustees’ decisions.

These are presumptions rather than absolute obligations, and that distinction is one many trustees get wrong in both directions.

Before deciding that a presumption doesn’t apply, section 53 requires a trustee to work through a list of thirteen factors, which include:

• the nature of the beneficiary’s interest and the likelihood of them receiving trust property in the future
• whether the information is personally or commercially confidential
• the settlor’s expectations and intentions when the trust was created
• the age and circumstances of the beneficiary and of the other beneficiaries
• the effect of giving the information on the beneficiary, the trustees, the other beneficiaries and third parties
• for a family trust, the effect on family relationships and on the relationship between trustees and beneficiaries
• where beneficiaries are numerous or unascertainable, the practicality of giving information to all of them
• whether restrictions or safeguards can be placed on the use of the information
• whether the information can be given in redacted form
• the nature and context of any request

The final factor is a catch-all, letting a trustee take into account anything else they reasonably consider relevant.

Section 54 then requires a trustee to apply to the court for directions if the result is that no beneficiary would receive any trust information at all.

That application isn’t needed where the gap lasts less than 12 months and the trustee gives basic trust information to at least one beneficiary at the end of it.

The case law shows how carefully this has to be handled.

In Erceg v Erceg [2017] NZSC 28, the Supreme Court confirmed that no beneficiary has an automatic right to every trust document.

Disclosure instead forms part of the court’s supervisory role over trusts, to be weighed against confidentiality and the proper administration of the trust.

That decision predates the disclosure regime in sections 49 to 55, so a trustee’s starting point today is the Act, but the balancing exercise the Court described still runs through the section 53 factors.

In Lambie Trustee Limited v Addleman [2021] NZSC 54, the Supreme Court held that legal advice obtained by trustees to guide them in their duties and paid for out of trust funds is created for the benefit of beneficiaries.

Whether the trustee can claim privilege over that advice turns on whether trustee and beneficiary still share a joint interest in it.

That joint interest ends once their positions have become sufficiently adverse, which can happen before proceedings are filed, though the bare possibility of litigation won’t end it.

The lesson for trustees is that refusing a request is a decision that has to be reasoned and recorded, not a reflex.

[For more information on what information trustees give beneficiaries, see our article here.]

What Happens If a Trustee Breaches Their Duties?

A breach of trust exposes a trustee to personal liability, and the remedies sit across several parts of the Trusts Act 2019 rather than in one place.

The court can compensate the trust for its loss or require the trustee to account for a profit, review a trustee’s act, omission or decision under section 126, and order the removal of a trustee under section 112.

Section 131 works the other way, giving the court power to relieve a trustee from personal liability for a breach of trust in appropriate circumstances.

Personal liability means the trustee’s own assets are exposed, and lay trustees who agree to act as a favour for family regularly underestimate that.

Trust deeds often include exemption and indemnity clauses to soften this, but the Act limits how far they go.

Section 40 states that the terms of a trust must not limit or exclude a trustee’s liability for a breach arising from dishonesty, wilful misconduct or gross negligence.

Section 41 applies the same restriction to indemnity clauses, so a trustee can’t reach into the trust property to cover liability for that kind of conduct.

Section 42 confirms that any clause purporting to do either is invalid to that extent.

Section 44 tells the court what to weigh when deciding whether conduct amounts to gross negligence, including the nature and seriousness of the breach and the type of trust involved.

Section 43 mirrors the section 39 safeguard by requiring a paid adviser who recommends a liability exclusion clause to alert the settlor before the trust is created.

The costs decision in the Lambie litigation, Lambie Trustee Limited v Addleman [2023] NZSC 7, showed a further risk.

The Supreme Court refused the trustee an indemnity from trust assets for the costs of that litigation after it aligned itself with one beneficiary and conducted the dispute unreasonably, leaving it to carry those costs personally.

What Else Should New Zealand Trustees Know Right Now?

Two things sitting outside the duties themselves shape the decisions a New Zealand trustee has to make each year: the trustee tax rate and the maximum life of the trust.

Both feed straight back into the statutory duties, because a trustee who ignores them isn’t actively considering the exercise of their powers or keeping track of the terms of the trust.

How Does the 39% Trustee Tax Rate Affect Trustee Decisions?

Inland Revenue generally applies a trustee tax rate of 39% from 1 April 2024, with trustee income of $10,000 or less in an income year taxed at 33% under a de minimis threshold.

That threshold applies to income after annual deductions and before losses brought forward, and special rules apply to some kinds of trust.

For trustees, this feeds into the default duty in section 32 to actively and regularly consider the exercise of their powers.

The choice between retaining income as trustee income and distributing it as beneficiary income now carries a real tax consequence, so it is one of the matters trustees will usually need to weigh when they review their powers.

Tax isn’t the controlling factor, though, because the terms of the trust and the beneficiaries’ circumstances come first.

How Long Can a New Zealand Trust Last?

Section 16 of the Trusts Act 2019 sets the maximum duration of a trust at 125 years and abolishes the common law rule against perpetuities.

Charitable trusts, the trusts of a superannuation scheme, and trusts that another enactment or the general law allows to continue indefinitely sit outside that limit.

Before the Act, most New Zealand trust deeds adopted the 80 year perpetuity period available under the old regime, and a trust whose deed still specifies an 80 year vesting date keeps that date unless it is validly extended.

The section 23 duty to know the terms of the trust includes knowing when the trust is due to end, because vesting brings the trustees’ powers to a close and triggers distribution.

Reaching a vesting date without a plan will create significant cost and complexity.

Should You Accept an Appointment as a Trustee?

Before accepting a trusteeship, read the trust deed in full, ask which default duties have been modified or excluded, confirm what records exist, and find out whether the trust has any liabilities or guarantees attached to it.

Agreeing to act as a trustee is not a ceremonial favour.

The same fifteen duties apply to a friend doing a good turn as to a professional charging fees, though sections 29 and 30 hold a trustee with relevant skills to a higher standard of care.

If you are already a trustee and have never done this exercise, do it now rather than after a beneficiary asks a question you can’t answer.

Retiring as a trustee is possible, but it won’t erase liability for breaches that happened while you held the role.

Need Help Understanding Your Duties as a Trustee?

Trustee duties in New Zealand come from the Trusts Act 2019, and the five mandatory duties bind every trustee while the ten default duties depend entirely on what your trust deed says.

Knowing which is which is the difference between running a trust properly and carrying personal liability you never agreed to.

As trust lawyers in New Zealand, Evolution Lawyers can help you review your trust deed, work out which duties apply to you, and put the records and processes in place to meet them.

Contact our team today to discuss your trustee duties.

Frequently Asked Questions

Can a trustee be paid for acting as a trustee?

Section 37 of the Trusts Act 2019 sets a default duty to act for no reward, so a trustee can’t be paid unless the trust deed changes that duty. Most deeds involving a professional trustee do allow fees. Section 139 lets the court order payment of remuneration to a trustee, and section 37 preserves the right to reimbursement of expenses.

Which trustee duties can a trust deed remove?

Only the ten default duties in sections 29 to 38 of the Trusts Act 2019 can be modified or excluded. The five mandatory duties in sections 23 to 27 bind every trustee. Section 5(4) allows default duties to be changed by express or implied terms of a trust, subject to the limits in column 2 of Schedule 2.

Do trustees have to tell beneficiaries the trust exists?

Section 51 of the Trusts Act 2019 creates a presumption that a trustee will make basic trust information available to every beneficiary, including the fact that the person is a beneficiary. A trustee can depart from that presumption, but only after considering the factors in section 53. If no beneficiary would receive information, section 54 usually requires a court application.

What records must a New Zealand trustee keep?

Section 45 of the Trusts Act 2019 requires trustees to keep core trust documents, so far as is reasonable. These include the trust deed and variations, records of trust property and trustee decisions, contracts, accounting records, financial statements, appointment and removal documents, and any memorandum of wishes. Section 48 requires them to be passed to successor trustees.

What happens if a trustee breaches a duty?

A breach of trust exposes a trustee to personal liability, and the court can compensate the trust for loss, require the trustee to account for profits, review a decision under section 126 of the Trusts Act 2019, or remove the trustee under section 112. Section 131 lets the court relieve a trustee from personal liability in appropriate circumstances.

Are trustees required to treat all beneficiaries the same?

No. Section 35 of the Trusts Act 2019 requires trustees to act impartially and not be unfairly partial to one beneficiary or group to the detriment of others, but it does not require equal treatment. A trustee can distribute unequally where the trust deed allows, provided every beneficiary’s position was genuinely considered.