Trust Law And Potential Changes In Nz

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Trust and Family Trust Law in New Zealand. Proposed law changes for 2011 by Lawyer Ian Mellett of Quay Law NZ (Remuera, Auckland)

Trust and Family Trust Law in New Zealand. Proposed law changes for 2011 by Lawyer Ian Mellett of Quay Law NZ (Remuera, Auckland)

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  • 1. New Zealand Trust Law under review By Ian Mellett, Principal of Quay Law
  • 2. NZ most Trusted country
    • New Zealand has a high number of trusts per head of population relative to other countries.
    • Current estimated stats
    • There are at least 237,500 trusts but this could be as high as 400,000.
  • 3. Proposed abolition of Gift Duty
    • Gift duty has applied in New Zealand for many years.
    • On 1 November 2010, the Minister of Revenue, Peter Dunne, announced the Government’s intention to repeal gift duty from 1 October 2011.
    • While legislation to this effect is yet to be passed, it seems that from that date gift duty will no longer be a factor for people settling trusts.
    • Result: Easier to transfer assets into trusts
  • 4. Trusts and 2011
    • Proposed abolition of Gift Duty together with major changes to qualifying companies and the Law Commissions re-examination of trust law will mean this will be a momentous year for those with trusts.
  • 5. The Law Commission
    • Publishing papers on Trusts
    • 1 st – November 2010: Summarized the history of trusts.
    • 2 nd – December 2010: focuses on the uses of family trusts in New Zealand and potential concerns about some of these.
    • 3 rd - review will address issues relating to the variation of trusts and the law against perpetuities. It will be published early in 2011.
  • 6. Law Commission’s concerns
    • The transferring of assets into trusts to avoid obligations
      • to creditors and / or
      • spouses or partners under the Relationships (Property) Act 1976.
  • 7. Looking to the future?
      • How should legislation address the need to look through trusts in certain circumstances in order that trust property can be made available to a creditor, spouse or partner or for government asset testing?
      • Whether and how legislation should address sham trusts and the problem of trusts that are not really trusts?
  • 8. Trusts as “look through” entities
    • The Law Commission is evaluating if it should allow trust assets to be made available to creditors, spouses and partners, and to be considered as a part of the assets of the settlor or a person with control over the trust for assessing eligibility for government assistance.
  • 9. Trusts as “look through” entities:- Continued
    • As an alternative, the law could continue to leave it to individual statutes to address how a disposition of property or income to a trust is to be treated in a context where such a disposition defeats a government policy. Because of the difficulties in creating look-through provisions that meet the needs of the various contexts to which they must be applied, this may be the preferred approach.
  • 10. Time for New Zealanders to review their trusts
    • Regardless of the outcome of the law changes it is time for New Zealanders to review their trusts.
    • Relevant considerations might include –
      • The intentions of the settlor in establishing the trust;
      • The intentions of the trustee or trustees;
      • Whether the trustee was indifferent as to whether a valid trust was intended to be established;
      • How the affairs of the trust have been conducted;
      • Whether property of the settlor has been intermingled with trust property;
      • Whether the settlor has treated trust property as his or her own;
      • The degree of control exercised by the settlor over the affairs of the trust;
      • Whether the trustees have acted independently of the settlor in carrying out
      • their duties; and
      • The real nature of the arrangement irrespective of how it is described.
  • 11. Implications of the repeal of gift duty
    • The repeal of gift duty may exacerbate some of the problems associated with trust use and may reduce the effectiveness of the existing legislative approaches to trusts.
    • Focus
    • Independent Trustee
    • Trust administration and reporting
    • Separation of trust affairs from personal affairs
  • 12. Review of Trust Law in progress
    • Whilst review of trust law is in progress and the Law commission invites comments
    • NOW IS THE TIME
    • To review your trust to ensure it is able to withstand any changes to NZ trust legislation.
  • 13. Thank You By Ian Mellett, Principal of Quay Law