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)

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Trust Law And Potential Changes In Nz

  1. 1. New Zealand Trust Law under review By Ian Mellett, Principal of Quay Law
  2. 2. NZ most Trusted country <ul><li>New Zealand has a high number of trusts per head of population relative to other countries. </li></ul><ul><li>Current estimated stats </li></ul><ul><li>There are at least 237,500 trusts but this could be as high as 400,000. </li></ul>
  3. 3. Proposed abolition of Gift Duty <ul><li>Gift duty has applied in New Zealand for many years. </li></ul><ul><li>On 1 November 2010, the Minister of Revenue, Peter Dunne, announced the Government’s intention to repeal gift duty from 1 October 2011. </li></ul><ul><li>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. </li></ul><ul><li>Result: Easier to transfer assets into trusts </li></ul>
  4. 4. Trusts and 2011 <ul><li>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. </li></ul>
  5. 5. The Law Commission <ul><li>Publishing papers on Trusts </li></ul><ul><li>1 st – November 2010: Summarized the history of trusts. </li></ul><ul><li>2 nd – December 2010: focuses on the uses of family trusts in New Zealand and potential concerns about some of these. </li></ul><ul><li>3 rd - review will address issues relating to the variation of trusts and the law against perpetuities. It will be published early in 2011. </li></ul>
  6. 6. Law Commission’s concerns <ul><li>The transferring of assets into trusts to avoid obligations </li></ul><ul><ul><li>to creditors and / or </li></ul></ul><ul><ul><li>spouses or partners under the Relationships (Property) Act 1976. </li></ul></ul>
  7. 7. Looking to the future? <ul><ul><li>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? </li></ul></ul><ul><ul><li>Whether and how legislation should address sham trusts and the problem of trusts that are not really trusts? </li></ul></ul>
  8. 8. Trusts as “look through” entities <ul><li>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. </li></ul>
  9. 9. Trusts as “look through” entities:- Continued <ul><li>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. </li></ul>
  10. 10. Time for New Zealanders to review their trusts <ul><li>Regardless of the outcome of the law changes it is time for New Zealanders to review their trusts. </li></ul><ul><li>Relevant considerations might include – </li></ul><ul><ul><li>The intentions of the settlor in establishing the trust; </li></ul></ul><ul><ul><li>The intentions of the trustee or trustees; </li></ul></ul><ul><ul><li>Whether the trustee was indifferent as to whether a valid trust was intended to be established; </li></ul></ul><ul><ul><li>How the affairs of the trust have been conducted; </li></ul></ul><ul><ul><li>Whether property of the settlor has been intermingled with trust property; </li></ul></ul><ul><ul><li>Whether the settlor has treated trust property as his or her own; </li></ul></ul><ul><ul><li>The degree of control exercised by the settlor over the affairs of the trust; </li></ul></ul><ul><ul><li>Whether the trustees have acted independently of the settlor in carrying out </li></ul></ul><ul><ul><li>their duties; and </li></ul></ul><ul><ul><li>The real nature of the arrangement irrespective of how it is described. </li></ul></ul>
  11. 11. Implications of the repeal of gift duty <ul><li>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. </li></ul><ul><li>Focus </li></ul><ul><li>Independent Trustee </li></ul><ul><li>Trust administration and reporting </li></ul><ul><li>Separation of trust affairs from personal affairs </li></ul>
  12. 12. Review of Trust Law in progress <ul><li>Whilst review of trust law is in progress and the Law commission invites comments </li></ul><ul><li>NOW IS THE TIME </li></ul><ul><li>To review your trust to ensure it is able to withstand any changes to NZ trust legislation. </li></ul>
  13. 13. Thank You By Ian Mellett, Principal of Quay Law