Methods of managing Māori land: Trusts, incorporations and reservations
Māori land trusts
What is a Māori land trust?
Māori land trusts are today a popular means by which multiple owners of Māori land can manage the land. Under any trust, whether a Māori land trust or a private family trust, one or more people – the “trustees” – are the legal owners of the land or other property, but they have a special obligation to look after this property for the benefit of some other person or people, called the “beneficiaries”. With a Māori land trust, the trustees must manage the land for the benefit of all the owners of the land.
If the owners of Māori land decide to place their land into a trust, the trust needs to be formally approved and established by an order from the Māori Land Court.
Types of Māori land trusts
There are five types of Māori land trusts specified in Te Ture Whenua Māori Act:
- Pūtea trust – This is a trust that allows the landowners of small and uneconomical interests in land to pool their interests together.
- Whānau trust – A whānau trust combines the shares of a related group of owners into one; it provides a means of preserving ancestral land by preventing individual whānau members dealing with their shares separately. Under a whānau trust, trustees make decisions on behalf of the whānau, who together own shares within land blocks. The beneficiaries of a whānau trust are the tīpuna/tūpuna (ancestors) named in the whānau trust order and their descendants, including children, grandchildren, great grandchildren and so on.
Note: All descendants of the relevant tīpuna/tūpuna are beneficiaries by virtue of their birth. The trust does not need to be varied to include descendants.
- Ahu whenua trust – This is the most common type of Māori land trust. It’s used to promote the use and administration of Māori land – often for commercial purposes – in the interest of the beneficial owners.
- Whenua tōpū trust – This is an iwi-based or hapū-based trust. It’s designed to allow the land to be used and managed in the interest of certain iwi or hapū. It’s also used for receiving Crown land as part of a settlement.
- Kaitiaki trust – This is a trust that relates solely to an individual who is a minor or who has a disability and is unable to manage their affairs. Generally the kaitiaki trustee is just one person who has legal title and must act in the best interests of the person who can’t otherwise manage their affairs. A kaitiaki trust over a minor ends when the minor turns 20.
Setting up a Māori land trust
How do we set up a Māori land trust?
The landowners will need to first hold a meeting, nominate the people they want to be the trustees of the trust, and then apply to the Māori Land Court for an order establishing the trust.
Holding a landowners’ meeting
Before a trust can be set up the owners need to have a meeting to provide all the owners with the opportunity to discuss and make decisions about the proposed trust.
All owners must be given sufficient notice that the meeting is to be held.
The meeting will need to discuss and decide:
- to set up the trust
- which blocks or shares will be included in the trust
- who will be the trustees of the trust
- the terms of a draft trust order, setting out the powers, rights and obligations of the trustees
- what the name of the trust will be (some trusts are named after a common tipuna/tupuna of the owners who are putting their shares into the trust).
The people attending the meeting should choose someone to take accurate minutes, so that all decisions made at the meeting are clearly recorded.
Note: To avoid confusion, you should be precise when using a common tipuna/tupuna (ancestor) as a trust name.
Who can apply to set up a trust?
The application can be made by any of the owners of the land or by someone nominated for this at the owners’ meeting.
How do we apply to set up the trust?
The application process in the Māori Land Court is explained elsewhere in this chapter (see “The Māori Land Court / Applying to the Māori Land Court for an order” in this chapter).
Applications to establish a Māori land trust also need to include the following:
- a copy of the minutes of the owners’ meeting, and a list of who attended
- details of how advance notice of the meeting was given to the owners
- a schedule of the land and ownership interests to be included in the trust
- a draft trust order approved by the owners (a template for this is available from the court)
- the names of the proposed trustees and how they were selected
- the proposed trustees’ written consent to being appointed as trustees
- the grounds on which the application is made, and
- a list of those who voted against the proposal to set up a trust.
Note: The requirements for applying for a kaitiaki trust are different from the requirements for the other types of Māori land trust.
The trust is established by the making of a trust order by the Māori Land Court, stating the objectives of the trust, the rights and obligations of the trustees, and the rights of the beneficiaries.
A trust order – often also called a “trust deed” – is a document that sets out the rules that will govern the trust. The trustees must follow those rules.
Can the terms of the trust be changed?
Yes. The trust order can later be amended if necessary if the needs of the trust change. The owners will need to meet together to decide what the new terms of the trust should be, and then apply to the Māori Land Court for it to amend the original trust order.
Financial issues: Bank accounts and tax obligations
A separate bank account must be set up to receive any money from the land that’s subject to the trust.
The trustees must also register the trust with Inland Revenue and receive an IRD number. Trustees must file an IR6 income tax return for the trust each year, whether or not the trust has received money (see further below, “Trustees’ duties”). All financial records must be kept by the trustees for seven years. Inland Revenue must be notified if any trustees are changed or the trust is dissolved.
For information about Inland Revenue’s Kaitakawaenga Māori service, see “Other resources” at the end of this chapter.
Note: Beneficiaries must also specify in their yearly tax returns that they have received money from a trust.
Trustees and their duties
Who can be a trustee?
Anyone who meets the following requirements can be a trustee:
- they must be nominated, and must agree, in writing, to being appointed
- they must agree with the final draft trust order
- they must be approved by a majority of owners present at the owners’ meeting
- they must be acceptable to the court; the trustees are appointed by court order once the court confirms that the trustee is a worthy appointee.
It’s very unlikely that the court will appoint as a trustee anyone who is bankrupt, imprisoned, convicted of a crime involving dishonesty, under mental disability, a minor, known to the court to have previously been guilty of misconduct as a trustee, or involved with a corporation that is in liquidation or no longer in business.
Trustees are appointed for life or until they resign, unless the trust order states otherwise.
Types of trustees
There are three types of trustees for Māori land trusts. When it establishes the trust the Māori Land Court must appoint one or more “responsible trustees”, and it can also appoint one or more “custodian trustees” and one or more “advisory trustees”:
- Responsible trustees are responsible for:
- carrying out the terms of the trust order
- administering and managing the trust business
- preserving the trust assets, and
- collecting and distributing the trust income.
- Custodian trustees are responsible for:
- gathering together and holding the trust assets
- investing funds
- disposing of assets, and
- signing documents as directed by the responsible trustees.
- Advisory trustees give advice to the responsible trustees.
The powers, rights and duties of the trustees are set out in the trust order by the Māori Land Court. The trustees must also comply with Te Ture Whenua Māori Act and the Trustee Act 1956.
The trustees’ key duty is to maximise the assets and minimise the liabilities of the trust to the best of their ability.
Māori Land Court publications summarise the duties of trustees in terms of 12 principles:
- Acquaintance – The trustees must be familiar with:
- the property administered by the trust
- the terms of the trust order, and
- all issues affecting the trust
- Adherence – The trustees must act in accordance with the terms of the trust order.
- Impartiality – The trustees must treat all beneficiaries equally. The trustees must act in the beneficiaries’ best interest.
- Investments – The trustees must invest in accordance with the Trustee Act 1956 and the terms of the trust order. When making investments trustees must be prudent (that is, exercise reasonable skill and care) and should seek expert financial advice.
- Diligence and prudence – The trustees must act with the same care, diligence, prudence and good judgment expected of businesspeople managing the affairs of others.
- Delegation of responsibilities – Trustees can only delegate their responsibilities if the trust order allows this or it’s permitted by law.
- Act jointly – All trustees are accountable to the beneficiaries and must share responsibility for any mistakes.
- Act without personal profit – Trustees must not personally benefit from being a trustee. They may be entitled to reasonable reimbursement for expenses incurred in carrying out their role, if the trust order allows this.
- Pay the right people – Trustees will not be excused if they pay the wrong person. Trustees must only pay trust money to the people named on the trust order.
- Trust account information – Full and proper trust accounts must be kept. Beneficiaries may access the accounts if they ask to see them, along with other information about the trust.
- Declare conflicts of interest – Trustees must where possible avoid any conflicts of interest (that is, conflicts between their personal interests and their responsibilities as trustees). When a conflict can’t be avoided, the trustee must declare the conflict and must not take part in any related negotiations or decision-making.
- Regular disclosure – Trustees must keep the beneficiaries regularly informed and provide full details of the trust’s financial position and performance. Trustees must consult with the beneficiaries on major policy issues and obtain the beneficiaries’ consent to any proposed changes in the trust order.
Trustees’ meetings and decision-making
First meeting: Election of chair, secretary and treasurer
At the first meeting of the trustees they elect a chairperson, a secretary and a treasurer.
The secretary doesn’t have to be a trustee.
The chairperson is responsible for:
- organising meetings (together with the secretary)
- making sure that proper processes are followed and all matters are dealt with
- endorsing minutes of trustee meetings, and
- making sure that each trustee who wants to speak is a given a fair hearing.
The secretary is responsible for:
- recording, endorsing and distributing the meeting minutes
- keeping a current record of the trustees’ details and making sure the Māori Land Court has an up-to-date version of these details
- receiving and sending the trust’s correspondences, and
- keeping information in order and readily accessible for the trustees and beneficiaries.
The treasurer is responsible for keeping detailed records of the trust’s financial transactions. He or she should make sure that:
- the signatories to the trust’s bank account are in order
- financial information is accessible so that it can be used in the annual report
- the trustees don’t exceed their financial limits
- all records of the trust’s spending are in order
- all trust funds are accounted for
- the financial reports are presented at each meeting, and
- all information is kept in order and made available to trustees and beneficiaries.
How often do trustees have to meet?
This will depend on the business needs of the trust. However, the trustees should expect to have to meet frequently when the trust is being formed.
Notice of trustees’ meetings
Trustees should be given adequate notice of any meeting to allow them to make proper travel and business arrangements. Two to three weeks’ notice is advisable.
There should be a written notice of meeting that states the purpose and agenda items for the meeting.
How do trustees make decisions?
A certain number (a quorum) of trustees must be present to make any decision. To achieve a quorum, at least three responsible trustees must be present (unless the trust order sets a different quorum requirement). Once the quorum is established each attending trustee can vote. Absent trustees can vote by proxy (that is, appoint someone to vote on their behalf), if the trust order allows this. The trust order may also specify that the chairperson will have the deciding vote if voting on an issue is evenly split.
Note: Each office of the Māori Land Court has an advisory team that can provide a free, two-hour education session for trustees about their obligations.
Can trustees change the terms of the trust?
The trustees need the support of the beneficiaries and the court’s approval to change the terms of the trust. A meeting of the beneficiaries should be held and, if the meeting agrees with the proposed changes, an application to change the terms of the trust can be lodged with the court (for information about the application process, see “The Māori Land Court / Applying to the Māori Land Court for an order” in this chapter).
Can trustees be held responsible for making wrong decisions?
Yes. If the beneficiaries believe the trustees have made a wrong decision, they can lodge an application with the Māori Land Court or the High Court alleging that the trustee’s improper or negligent acts caused them loss. If the court finds the trustees were at fault, they may be required to pay for any losses they caused.
Note: A trustee who voted against a decision that caused loss will not be liable.
Getting information about the trustees
How do I find out who the trustees are?
To find out who the trustees of a trust are you can search the name of the block through www.maorilandonline.govt.nz. The management structure details on that website will list the trustees’ names. Alternatively, you can contact the Māori Land Court directly to ask for that information.
How do I find out what the trustees have been doing?
Trustees should hold regular meetings of owners where they should report on trust activities.
However, if you want information you can also write to the trust asking for an update.
Note: When you become an owner of land under a Māori land trust, it’s a good idea to write to the trustees to tell them your current address details.
Beneficiaries of Māori land trusts
How can I find out who the other beneficiaries are?
The Māori Land Court maintains an up-to-date list of beneficiaries. To find out who the other beneficiaries are, you can search the name of the block through www.maorilandonline.govt.nz, or you can visit any office of the court and ask for a copy of the beneficiaries’ details.
The trustees must also maintain a list of beneficiaries’ contact details.
How often do beneficiaries have to meet?
Usually the trust order will set out how often beneficiaries have to meet. Meetings of beneficiaries can also be called to discuss the election of trustees, variations to the terms of the trust, ending the trust, and the trust’s accounts, investments, major purchases or mortgages.
In addition, trustees must keep beneficiaries informed about what is happening with the trust.
How will I know if a beneficiaries meeting has been called?
Every beneficiary should get a notice of any beneficiaries meeting from the trustees. The meeting will also be advertised in the local newspaper. It’s advisable for trustees to give beneficiaries two to three weeks’ notice of the meeting.
Is a quorum required for the meeting?
The trust order may set a quorum for beneficiary meetings – that is, a minimum number of beneficiaries attending in order for the meeting’s decisions to be valid. If the trust order doesn’t specify a quorum, the Māori Land Court will decide whether certain requirements for a quorum were met. The court may consider, among other things, whether the owners had sufficient notice and time to discuss the issues, how much support there was for those matters, and any objections made to them.
What happens if I can’t attend the beneficiaries meeting?
In that case you can appoint someone to vote on your behalf (called a “proxy vote”), if the trust order allows this. The other person must be at least 20 years old, and you must give them written authorisation to vote on your behalf.
If the trust order doesn’t allow proxy voting, you can give a person a power of attorney so that they can vote on your behalf (see the chapter “Decision making and powers of attorney”).
When will I get paid from the trust?
If there is money left over after paying for the trust accounts and expenses, the surplus will in some cases be distributed to the beneficiaries.
Note: Income to owners is paid at the discretion of the trustees by way of dividends, unless the trust order states otherwise. The trust order may include a “community purposes” clause, which will allow for distribution of trust income for purposes such as maintenance of marae, scholarships, and kaumātua grants for older owners.
Cancelling a Māori land trust or removing your shares
How is a trust brought to an end?
To cancel a Māori land trust the landowners must all agree that the trust is no longer required. This can be agreed at a meeting of the owners, or all the people concerned can give their written consent. An application must then be made to the Māori Land Court.
Can I take my shares out of a trust?
If you have shares in a whānau trust you can apply to change the terms of trust to take out your shares and change the beneficiaries of the trust. However, if it’s an ahu whenua, whenua tōpū or pūtea trust, the trust will need to be cancelled for you to take out your shares.