Trusts Act 2019

Trustees’ duties and information obligations - Exemption and indemnity clauses

43: Adviser must alert settlor to liability exclusion or indemnity clause

You could also call this:

"People helping you create a trust must warn you about clauses that limit their responsibility."

If you pay someone to help you create a trust, they must tell you about any clauses that limit their responsibility. They have to make sure you understand what these clauses mean before you create the trust. You need to know how these clauses affect you.

If the person helping you is also going to be a trustee and they do not tell you about these clauses, the clauses do not apply to them. This means they can still be held responsible for their actions. The trustee's responsibility is to manage the trust properly.

A liability exclusion or indemnity clause is a part of the trust that limits or removes a trustee's responsibility for mistakes. It can also allow a trustee to use the trust's property to pay for their own mistakes. You should be aware of what this means when you create a trust.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

This page was last updated on 18 July 2025

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM7382922.

Topics:

Money and consumer rights > Banking and loans

42: Invalidity of exemption clause or indemnity clause, or

"When trust rules are broken, some clauses are not allowed"

44: Court consideration of gross negligence, or

"When a court checks if a trustee was very careless, it looks at their actions and decisions to see if they were unreasonable."

Part 3Trustees’ duties and information obligations
Exemption and indemnity clauses

43Adviser must alert settlor to liability exclusion or indemnity clause

This section applies if—
a person (the adviser) is paid to—
1. advise on the creation of a trust; or
2. prepare the terms of a trust; and
the adviser recommends that the settlor should, or causes the settlor to, include a liability exclusion or indemnity clause in the terms of the trust.

Before the creation of the trust, the adviser must take reasonable steps to ensure that the settlor is aware of the meaning and effect of the clause.
The liability exclusion or indemnity clause has no effect with respect to an adviser who is or becomes a trustee of the trust and who is in breach of subsection (2).
Failure to comply with subsection (2) does not of itself invalidate the clause (except as provided in subsection (3)).
In this section, liability exclusion or indemnity clause means a clause that has the effect of—
limiting or excluding the liability of a trustee for breach of trust; or
granting a trustee an indemnity against the trust property for the trustee’s liability for breach of trust.