Trusts are a hot topic right now, especially with the likelihood of an increase in the trustee tax rate after the election, recent changes to trust disclosure rules, and Inland Revenue seeking input on an updated Taxation of Trusts Interpretation Statement. Let’s break it down in simpler terms.The Trusts Act 2019 brought about some significant changes. It made trust administration more onerous and upped the ante on trustee duties. Before this, trust administration was largely governed by statute law and some principles borrowed from English case law.For a trust to exist, you need identifiable beneficiaries, trust property, and the intention to create a trust. While a written trust deed isn’t a must, it’s usually a good idea for clarity. There are three key players in a trust: the settlor(s) who transfer assets, the trustee(s) who make decisions, and the beneficiary(ies) who receive distributions.Why set up a trust? Well, you can ring-fence assets for specific purposes, protect them from creditors, deal with relationship property matters, secure long-term assets, or engage in charitable giving. Despite the likely increase in the trustee tax rate, trusts will likely still be effective for their original purposes.Now, trustee obligations come in two flavors. Mandatory duties apply to all trustees and can’t be skipped, while default duties can be tweaked in the trust deed. Trustees have always been bound by the principle of good faith to beneficiaries.The mandatory duties involve knowing and acting in line with the trust terms, being honest and acting for the benefit of beneficiaries, and exercising powers properly. Trustees also need to maintain core documents and provide certain trust information to beneficiaries, with some conditions.As for trust taxes, there’s talk of a possible increase to 39%, but that’s not set in stone yet. The Taxation (Annual Rates for 2023-24, Multinational Tax, and Remedial Matters) Bill suggests the increase, but it’s on hold for now.Inland Revenue is also updating its Taxation of Trusts Interpretation Statement. The draft covers updated definitions, who qualifies as a “settlor,” trustee roles, income and distributions, and trust compliance.If you have a trust, what should you do? Well, trusts still make sense for many folks despite the potential tax hike. The decision on whether to keep assets in a trust or consider another structure isn’t always straightforward. It depends on your goals and situation. Given all the changes, it’s a good idea to get advice to make sure your trusts are doing what they should and meeting their obligations under the Trusts Act. If you need help, talk to your friendly sidekick.