Family trusts are one of the most widely used legal structures in New Zealand, yet many trustees fall into the trap of setting up the trust and then treating it as a "set and forget" arrangement. Under the Trusts Act 2019 — and from a practical tax compliance perspective — trustees have ongoing obligations that require regular attention. One of the most important is the annual trustee resolution.

What Is a Trustee Resolution?

A trustee resolution is a formal written record of a decision made by the trustees. It documents that the trustees have met (either in person or by other means), considered the relevant issues, and made a decision in accordance with their duties and the terms of the trust deed.

While the Trusts Act 2019 does not specifically require annual resolutions, it does require trustees to exercise their powers actively and not simply "rubber-stamp" decisions. Keeping regular resolutions is the best way to demonstrate that you are fulfilling this obligation.

Why Annual Resolutions Matter

Tax Compliance

One of the most common reasons for passing an annual resolution is to allocate the trust's income to beneficiaries before the end of the tax year (31 March). Trustee income is taxed at 39%, while beneficiary income may be taxed at the beneficiary's marginal rate, which could be significantly lower. However, to allocate income to a beneficiary, the trustees must make a formal decision to do so — and it must be done before the end of the income year.

Without a resolution allocating income, the default position is that the income is treated as trustee income and taxed at the top rate. This is one of the most costly mistakes trustees make.

Demonstrating Active Decision-Making

The Trusts Act 2019 introduced mandatory duties for trustees, including the duty to act in accordance with the trust deed and to exercise their powers for the benefit of beneficiaries. Annual resolutions provide evidence that trustees are actively fulfilling these duties — not just leaving the trust to run on autopilot.

Protecting the Trust's Integrity

If a trust is ever challenged — for example, in a relationship property dispute, a creditor claim, or a dispute between beneficiaries — the courts will look at how the trust has been administered. A trust with a history of regular resolutions, documented decision-making, and proper governance is far more likely to be upheld than one with no records of trustee activity.

What Should an Annual Resolution Cover?

At a minimum, your annual trustee resolution should address:

  • Income allocation — A decision on how the trust's income for the year will be allocated (to beneficiaries, retained as trustee income, or a combination).
  • Distribution decisions — Any decisions to distribute capital or income to beneficiaries during the year.
  • Review of investments — Confirmation that the trustees have reviewed the trust's investments and are satisfied they are prudent and appropriate.
  • Review of trust deed — Confirmation that the trustees are familiar with the terms of the trust deed and any amendments.
  • Disclosure obligations — Confirmation that the trustees have considered their obligations to disclose basic trust information to beneficiaries under the Trusts Act 2019.
  • Any other decisions — Such as changes to trustees, property transactions, or loans to beneficiaries.

When Should the Resolution Be Passed?

For income allocation purposes, the resolution must be passed before 31 March — the end of the New Zealand tax year. We recommend completing annual resolutions in February or early March to allow time for review and finalisation.

How Indus Legal Can Help

Our wills and trusts team prepares annual trustee resolutions for family trusts across Auckland. We work with your accountant to ensure income is allocated tax-efficiently, and we help you maintain the governance records that protect your trust's integrity. If your trust has not passed a resolution recently, now is the time to get on top of it.

Contact us on 09 869 4888 or email office@induslegal.co.nz.