With 300,000 to 500,000 trusts operating in New Zealand, a new trusts bill introduced to Parliament this year has the potential to deliver wide-ranging impacts.

In the first of this four-part series I gave an overview of the legislation. This week I'll explore the ramifications of changes and what people need to do to protect themselves.

Specifically, I want to address the ramifications for trustees, the key one being disclosure of trust information to beneficiaries. A trustee's duty to inform beneficiaries is a fundamental responsibility.

The proposed law changes will mean the right to have the trust properly managed, in accordance with the trust deed, is paramount. Many trustees will need to balance these considerations, and it will be difficult.

The ability for beneficiaries to question and challenge the decisions of trustees has not been the norm, up to this point.

In many situations, trustees comprise mum and dad and a friend as the independent trustee, sitting around the kitchen table, signing off the annual accounts and creating a set of minutes.

Now, as a trustee, you will be judged against industry experts, who are professionals.

You will be expected to perform to the same standard as an expert and, if you are found wanting, the repercussions could be serious.

Going one step further, those trustees who have not engaged an investment professional to assist with investment decisions, but have taken on that responsibility themselves, run the most risk.

If this is the case, you've taken on management as well as governance responsibilities and, again, you'll be judged against the standard of investment professionals on the job you have done.

The key point is, if the bill is passed into legislation, as it works its way through the parliamentary process, the drafted approach to disclosure will pave the way for increased awareness for beneficiaries of their right to hold trustees accountable.

The global trend in the charity sovereign wealth and trust area has seen stakeholders, such as beneficiaries and donors, expecting more transparency and accountability from trustees.

It is expected New Zealand will follow suit and adopt global best practice.

For those who currently act as a trustee, this is an opportune time to evaluate your governance roles.

There are many people who have signed up to assist a friend or colleague with governance responsibilities on a trust but never properly understood their obligations.

There's never been a better time to ask - are we running this trust correctly, are we meeting our obligations under the current and proposed law? If not, you may wish to take action now.

I frequently talk to people who feel their role as an independent trustee is to rubber-stamp the actions of one or two more dominant trustees, and that just won't cut it under the new legislation.

I meet a lot of people who feel that way and are concerned about their responsibilities. 
Is this you? If yes, do you need to make some changes?

Next week I'll take an in-depth look at the implications for trustees who oversee investment portfolios (known as investment stewards).

Their disclosure obligations in the new trust act will increase the reputational and liability risk of not properly engaging with investment governance practices.

• Nick Stewart is an authorised financial adviser and executive director of Stewart Financial Group. Stewart Group is a Hawke's Bay-owned and operated independent financial planning firm based in Hastings.

• The views expressed in this article are those of Stewart Financial Group, whose disclosure statement is available free by contacting 0800 878 961. This article contains class advice only and does not consider objectives or situation of any particular investor. It should not be construed as a solicitation to buy or sell any financial product, or to engage in or refrain from engaging in any transaction.  We recommend you consider the appropriateness of information to your situation.