NZ CFS L5 Trustee Services flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Mandatory duties

Ten core duties under Trusts Act 2019 ss 22-27 that a trust deed cannot exclude or modify, including honesty, good faith, and acting for beneficiaries' benefit.

Default duties

Trustee duties under Trusts Act 2019 ss 28-38 that apply unless the deed modifies or excludes them, such as impartiality and avoiding conflicts.

AML/CFT customer due diligence

Process of identifying and verifying customers, beneficial owners, and controlling persons, and monitoring the relationship, required under the AML/CFT Act 2009.

Suspicious activity report

Report a reporting entity must file with the Financial Intelligence Unit when it suspects money laundering, terrorist financing, or other specified offences.

Trustee Act 1956

New Zealand statute that supplied default trustee powers and duties before the Trusts Act 2019; still relevant to some pre-2021 trusts and transitional matters.

FMC Act licensing

Regime under the Financial Markets Conduct Act 2013 requiring providers of financial services, including certain trustees, to hold a market services licence.

Three certainties

Requirements for a valid express trust: certainty of intention to create a trust, certainty of subject matter, and certainty of objects (beneficiaries).

Fiduciary duty

Equitable obligation of loyalty requiring the fiduciary to act in another's interest, avoid conflicts, and not make unauthorised profit from the relationship.

Legal versus beneficial title

In a trust, the trustee holds legal title to trust property while beneficiaries hold the equitable or beneficial interest enforceable in equity.

Constructive trust

Trust imposed by law, regardless of intention, to prevent unconscionable conduct or to remedy a breach of fiduciary duty.

Resulting trust

Trust arising by operation of law where beneficial ownership is not fully disposed of, so property reverts to the settlor or their estate.

Beneficiary principle

Rule that a trust must have identifiable beneficiaries or a valid charitable purpose; otherwise the trust is generally void for uncertainty.

Discretionary trust

Trust where trustees decide whether and how much to distribute among a class of beneficiaries; beneficiaries have no vested entitlement until distribution.

Fixed trust

Trust in which each beneficiary's entitlement is specified in the deed, giving them a vested interest in the trust property.

Bare trust

Trust where the trustee holds property absolutely for a beneficiary who is entitled to demand transfer at any time.

Trust deed

Document that establishes the trust and sets out trustees, beneficiaries, trust property, powers, discretions, and administrative provisions.

Charitable trust

Trust established for charitable purposes recognised under the Charities Act 2005, which may qualify for registration and tax-exempt status.

125-year trust duration

Maximum duration of a trust under the Trusts Act 2019, replacing the former rule against perpetuities for trusts governed by the Act.

Trustee indemnity

Right of a trustee to be reimbursed out of trust assets for properly incurred expenses and liabilities, subject to the trust deed and statute.

Section 131 relief

Court power under the Trusts Act 2019 to relieve a trustee from liability for breach of trust where the trustee acted honestly and reasonably.

Unanimous trustee decisions

Default rule that co-trustees must act together unless the deed allows majority decision-making or a trustee is disqualified.

Improper purpose

Exercise of a trustee power for a reason outside the purpose for which the power was conferred, which is a breach of trust.

Trustee resolutions

Written records of trustee decisions setting out the decision, reasons, and any conflict considered, kept as evidence of proper administration.

Commingling

Mixing trust funds with the trustee's own money, which is a breach of trust and a risk indicator under AML/CFT rules.

IR6 return

New Zealand income tax return filed by trustees disclosing trust income, deductions, and distributions to beneficiaries for the year.

Trustee tax rate

Rate of 39% applying to trustee income for most New Zealand trusts from the 2024-25 income year, subject to specific exceptions.

Prudent person standard

Standard requiring trustees to exercise the care, diligence, and skill of an ordinary prudent person managing their own affairs.

Diversification duty

Default duty under the Trusts Act 2019 requiring trustees to diversify investments unless the deed excludes it or concentration is justified.

Delegated investment management

Arrangement where a trustee appoints an investment manager but retains oversight, monitoring, and ultimate responsibility for the trust.

Beneficiary information rights

Rights under Trusts Act 2019 ss 45-51 to request trust terms, trustee details, and certain financial information, subject to withholding grounds.

Conflict of interest

Situation where a trustee's personal interest or duty to another party may conflict with the trust's interests; must be disclosed and managed.

Unauthorised profit

Personal gain obtained by a trustee from their position without authorisation in the deed or by statute, which is a breach of fiduciary duty.