NZ Certificate in Financial Services (Level 5) — Trustee Services Strand

Under the New Zealand Trusts Act 2019, what is the maximum duration (maximum life) that a trust can exist?

• A80 years
• B125 years
• C100 years
• DThere is no limit; a trust can exist in perpetuity.

Under the Trusts Act 2019, which of the following is considered 'basic trust information' that trustees have a presumption to disclose to every beneficiary?

• AA full list of the trust's investment assets and bank balances.
• BThe fact that the person is a beneficiary of the trust.
• CThe historical reasons why the trust was established by the settlor.
• DA copy of the settlor's confidential Letter of Wishes.

On what date did the New Zealand Trusts Act 2019 come into full force?

• A1 August 2019
• B1 January 2020
• C31 March 2022
• D30 January 2021

What legislative act repealed and replaced the old Trustee Act 1956 in New Zealand?

• AThe Trusts Act 2019
• BThe Trust Law Reform Act 2018
• CThe Administration Act 1969
• DThe Fiduciary Duties Act 2020

What is the legal term used to describe a trust created during a settlor's lifetime, as opposed to one created by a will?

• AA testamentary trust
• BA constructive trust
• CAn inter vivos trust
• DAn implied trust

Under New Zealand law, who is the person who creates and funds a trust?

• AThe trustee
• BThe beneficiary
• CThe settlor
• DThe administrator

When a trustee is deciding whether it is reasonable to withhold trust information from a beneficiary under Section 52 of the Trusts Act 2019, which of the following is NOT a statutory factor they must consider?

• AThe current net asset value of the trust.
• BThe age and circumstances of the beneficiary.
• CThe expectations of the settlor when the trust was created.
• DThe effect of disclosure on family relationships.

Under the Trusts Act 2019, if a trust has multiple trustees, which documents must every individual trustee keep?

• AAll financial statements, tax records, and asset receipts.
• BMinutes of all trustee meetings and written resolutions.
• CThe trust deed and any variations made to it.
• DAll letters of wishes and communications with beneficiaries.

Under the Trusts Act 2019, if a trustee wishes to distribute document retention duties among co-trustees, what is the minimum statutory requirement for core records?

• AEvery trustee must hold the trust deed and variations, and ensure at least one trustee ho…
• BOne trustee can hold all records, including the trust deed, with no copies required for o…
• CAll trustees must hold duplicate physical copies of every single trust document.
• DOnly the professional or corporate trustee is legally required to keep records.

What is the legal effect of the 'presumption of disclosure' under the Trusts Act 2019?

• ATrustees are legally prohibited from withholding any trust document requested by any bene…
• BTrustees must automatically mail all trust deeds and financial accounts to every benefici…
• CBeneficiaries must apply to the High Court to gain access to basic trust information.
• DTrustees must regularly consider whether to disclose basic trust information and must pro…

What is the primary difference between an express trust and a constructive trust in New Zealand law?

• AAn express trust must be registered with the FMA, whereas a constructive trust is registe…
• BAn express trust cannot hold real property, whereas a constructive trust only holds land.
• CAn express trust is intentionally created by the settlor, whereas a constructive trust is…
• DAn express trust has a maximum duration of 125 years, whereas a constructive trust has a…

Which party in a trust structure holds the equitable or beneficial interest in the trust property?

• AThe beneficiary
• BThe trustee
• CThe settlor
• DThe protector

Who has the default power to appoint new trustees under the Trusts Act 2019 if no person is nominated in the trust deed?

• AThe High Court of New Zealand
• BThe beneficiaries by majority vote
• CThe surviving or continuing trustees
• DThe executors of the settlor's estate

How can a settlor of a discretionary trust express their wishes regarding the ongoing administration and distribution of trust assets without binding the trustees legally?

• ABy executing a codicil to the trust deed
• BBy issuing a formal deed of variation
• CBy providing a Letter of Wishes
• DBy drafting a memorandum of understanding signed by the beneficiaries

What is the legal outcome under the rule in Saunders v Vautier in a New Zealand trust context?

• AThe court can terminate a trust if the trust assets fall below a certain economic thresho…
• BA settlor can unilaterally revoke a trust if they change their mind about the distributio…
• CIf all beneficiaries are of full age and capacity, they can unanimously agree to terminat…
• DTrustees can terminate a trust if they cannot agree on investment decisions.

If an express trust deed created in 2022 specifies that the trust duration is 150 years, what is the legal outcome under the Trusts Act 2019?

• AThe trust is void from its inception for violating public policy.
• BThe trust is legally valid, but its duration is restricted to the statutory maximum of 12…
• CThe trust can run for the full 150 years as the terms of the trust deed override the Act.
• DThe trust is automatically wound up after 80 years under the old common law rules.

In which scenario is a trust most likely to be declared a 'sham trust' by a New Zealand court?

• AWhen the trustees fail to keep proper accounting records for two consecutive financial ye…
• BWhen the settlor and trustees intend to create the appearance of a trust, but in reality,…
• CWhen the trust deed is signed by the settlor but not witnessed by an independent lawyer.
• DWhen the trust's investments suffer significant losses due to a market downturn.

In the landmark New Zealand case Clayton v Clayton [2016] NZSC 29, what did the Supreme Court determine regarding Mr. Clayton's powers under the VR Clayton Trust?

• AThe trust was declared a sham because Mr. Clayton was both the settlor and a trustee.
• BThe trust was invalid because it did not name a corporate trustee as a co-trustee.
• CThe trust assets were protected from the relationship property claim because the trust wa…
• DMr. Clayton's powers to appoint/remove trustees and distribute all capital to himself wer…

Under the Trusts Act 2019, which of the following is classified as a 'special trust' that is subject to modified rules regarding beneficiary information disclosure?

• AA family discretionary trust holding residential property.
• BA trading trust operating a commercial business.
• CA trust where the settlor is also a beneficiary.
• DA charitable trust.

What is the legal effect of a discretionary beneficiary's interest in a trust prior to any trustee decision to distribute?

• AThey have a vested equitable share in the trust assets proportional to the number of bene…
• BThey have a mere expectancy, which does not constitute a vested proprietary interest in t…
• CThey hold a legal charge over the trust property to secure their future distributions.
• DThey can register an interest on the Personal Property Securities Register (PPSR) to secu…

Which of the following is a mandatory duty of a trustee under the Trusts Act 2019 that cannot be modified or excluded by the trust deed?

• AThe duty to invest prudently.
• BThe duty to act honestly and in good faith.
• CThe duty to act unanimously.
• DThe duty to avoid conflicts of interest.

Which of the following is a default duty under the Trusts Act 2019 that can be modified or excluded by the terms of the trust deed?

• AThe duty of care when administering the trust.
• BThe duty to know the terms of the trust.
• CThe duty to act for the benefit of beneficiaries.
• DThe duty to exercise powers for a proper purpose.

What is the default standard of care required of a professional trustee (such as a lawyer, accountant, or trust company) under the Trusts Act 2019?

• ATo exercise the same care as an ordinary layperson managing their own personal family aff…
• BTo exercise the care, diligence, and skill that a prudent person in that profession or bu…
• CTo guarantee that the trust capital does not suffer any investment loss.
• DTo consult with a financial adviser before making any transaction exceeding $10,000.

Can a trust deed validly exclude a trustee's liability for gross negligence?

• AYes, if the settlor signs a separate waiver when the trust is established.
• BYes, provided all beneficiaries consent in writing to the exclusion clause.
• CYes, but only if the trustee is a family member and is not charging fees.
• DNo, the Trusts Act 2019 prohibits any exclusion of liability or indemnity for gross negli…

Under the Trusts Act 2019, what is the default rule regarding how decisions must be made by trustees if there are multiple trustees?

• ADecisions are made by a simple majority vote of the trustees.
• BThe trustee appointed as 'managing trustee' has the sole power to decide.
• CThe settlor has the casting vote in the event of a tie.
• DTrustees must act unanimously.

Which mandatory duty under the Trusts Act 2019 requires a trustee to read, understand, and comply with the terms of the trust deed?

• AThe duty to act in accordance with the terms of the trust.
• BThe duty to act actively and not pass responsibility to others.
• CThe duty to keep proper accounts and financial statements.
• DThe duty to know the terms of the trust.

What does the default duty to 'invest prudently' require of a trustee under Section 30 of the Trusts Act 2019?

• ATo achieve a return on investment that exceeds the current rate of inflation.
• BTo invest trust property with the care, diligence, and skill that a prudent person of bus…
• CTo invest only in government-backed bonds and low-risk bank deposits.
• DTo invest in accordance with the personal preferences and risk tolerance of the settlor.

Under what circumstances may a trustee charge a fee for their services under the Trusts Act 2019?

• AAutomatically, as all trustees are legally entitled to charge standard hourly rates under…
• BOnly if the trustee is a registered charity or a government department.
• CWhenever the trustee spends more than 10 hours per month on trust administration.
• DOnly if payment is authorized by the trust deed, by court order, or by the unanimous cons…

If a trustee signs a contract with a third party on behalf of the trust, what is the default position regarding the trustee's personal liability?

• AThe trustee is not personally liable; the third party can only sue the beneficiaries dire…
• BThe trustee is personally liable to the third party, but has a right of indemnity to be r…
• CThe trustee is not personally liable; the trust itself is a separate legal entity that is…
• DThe trustee has unlimited personal liability and cannot use trust assets to pay the debt.

Which default duty is breached if a trustee uses trust property to purchase shares in their own personal company?

• AThe duty not to profit from the trust and to avoid conflicts of interest.
• BThe duty to act honestly and in good faith.
• CThe duty to know the terms of the trust.
• DThe duty to act actively.

If a trustee blindly follows the instructions of the settlor without exercising independent judgment, which default duty is breached?

• AThe duty to know the terms of the trust.
• BThe duty to act actively and not abdicate control.
• CThe duty to invest prudently.
• DThe duty to act for the benefit of beneficiaries.

Under Section 30 of the Trusts Act 2019, what should a trustee consider when investing trust property to manage portfolio risk?

• AInvesting only in residential real estate in high-growth Auckland suburbs.
• BWhether to invest in high-risk speculative derivatives to maximize gains.
• CThe appropriateness of diversifying the trust investments.
• DApplying the exact same investment allocations as the New Zealand Superannuation Fund.

What is the legal consequence if a trustee breaches a mandatory duty?

• AThe trustee is automatically disqualified from being a trustee of any other trust in New…
• BThe beneficiaries must pay the loss out of their own personal assets.
• CThe trustee is personally liable for any loss caused, and the terms of the trust deed can…
• DThe breach is treated as a criminal offense, and the trustee is fined by the FMA.

If a trust deed contains an 'exoneration clause' that purports to relieve trustees of all liability for breaches of trust, what is its legal limit under current New Zealand law?

• AIt is completely void under the Trusts Act 2019, and trustees are fully liable for all br…
• BIt protects them from all liability, including fraud, as the trust deed represents the se…
• CIt can only relieve them of liability for ordinary negligence; it cannot protect them fro…
• DIt only protects lay trustees, but has no legal effect for professional trustees.

Who has standing to apply to the High Court for the removal of a trustee who is unfit to act?

• AOnly the settlor who established the trust.
• BAny beneficiary, co-trustee, or person with the power to appoint and remove trustees.
• COnly the Financial Markets Authority (FMA).
• DOnly a majority of the creditors of the trust.

What is the legal test for determining whether a trustee has committed 'gross negligence' under the Trusts Act 2019?

• AWhether the trustee intended to cause a financial loss to the trust.
• BWhether the trust assets decreased in value by more than 50% in a single financial year.
• CWhether the trustee acted without obtaining written legal advice from a senior barrister.
• DWhether the trustee's conduct was a serious breach of the duty of care that fell signific…

Under the Trusts Act 2019, if a trustee is also a discretionary beneficiary, can they vote on a resolution to distribute trust funds to themselves?

• ANo, they are legally barred from voting due to an absolute statutory conflict of interest.
• BYes, but they must obtain prior written approval from the High Court before making the di…
• CYes, if the trust deed permits it, but they must still act honestly, in good faith, and f…
• DYes, but only if they resign as a trustee immediately after the vote.

In the context of trustee investment, what does the 'offsetting' rule under Section 129 of the Trusts Act 2019 allow a court to do when assessing liability for a breach of trust?

• AOrder the settlor to offset the trust's losses using their personal business income.
• BAllow the trustee to offset their liability by transferring their personal home to the tr…
• COffset the trustee's liability against the beneficiary's future tax liabilities.
• DSet off all or part of a loss resulting from an investment against all or part of a gain…

When can trustees validly delegate their decision-making powers to an agent under the Trusts Act 2019?

• AOnly for administrative or ministerial tasks, or where delegation is specifically permitt…
• BWhenever they find the administration of the trust too complex or time-consuming.
• COnly if they delegate the power to a close family relative of the settlor.
• DAt any time, provided the agent is a registered financial adviser.

Under the New Zealand Wills Act 2007, what is the minimum number of witnesses required to sign a will in the presence of the testator?

• AOne witness
• BTwo witnesses
• CThree witnesses
• DNo witnesses are required if the will is notarized.

What is the default legal effect of a subsequent marriage or civil union on an existing will under the Wills Act 2007?

• AThe existing will is automatically revoked.
• BThe existing will remains fully valid.
• CThe new spouse is automatically appointed as the sole executor.
• DThe will is suspended until the birth of the first child.

If a witness to a will is also named as a beneficiary under that same will, what is the legal status of the gift to that witness?

• AThe entire will is declared void.
• BThe will remains valid, but the gift to the witness is void.
• CThe gift is valid, but the witness cannot act as executor.
• DThe gift is reduced by 50% under the Wills Act.

What is a codicil in New Zealand estate law?

• AA document appointing a guardian for minor children.
• BAn amendment or addition to an existing will that must be executed with the same formalit…
• CA letter containing non-binding funeral instructions.
• DA court order confirming the appointment of an administrator.

Under the Wills Act 2007, what is the minimum age at which a person can generally make a valid will?

• A18 years old
• B16 years old
• C20 years old
• D21 years old

What is the legal term for a person who makes and signs a will?

• AExecutor
• BAdministrator
• CTestator
• DTrustee

What is the purpose of Section 14 of the Wills Act 2007?

• AIt prevents children from claiming against an estate if they were omitted from the will.
• BIt automatically updates wills to reflect changes in relationship status.
• CIt allows the High Court to validate a document that does not meet the formal execution r…
• DIt permits executors to distribute assets without applying for Probate.

What does the legal concept of 'testamentary capacity' require a testator to understand when making a will?

• AThe complex trust structures and tax implications of their estate plan.
• BThe exact legal definitions of all terms used by their drafting solicitor.
• CThe nature and effect of making a will, the extent of their estate, and the moral claims…
• DThe precise mathematical values of all their global assets down to the nearest dollar.