REVIEW OF TRUST LAW IN NEW ZEALAND

LAW COMISSION

The  Law  Commission is re-examining 'TRUST LAW' and the 'USE of TRUSTS'.

They have released their  discussion papers on 'TRUSTS' and say for the most part, they are set-up by all sorts of people for a number of legitimate reasons. But the Law Commission also has some concerns about 'TRUSTS'.

Are 'TRUSTS' a way to get RICH?

FAMILY TRUSTS

So what is the attraction of 'Family Trusts?'

Are they legitimate or just a way of avoiding one's obligations?

Troubled millionaires, hungry creditors and angry irate Ex's...We have seen the big cases that give Family Trusts a Bad Name.

Rich people can hide their assets in 'Family Trusts' Are they just a way for the wealthy to hide their money or a 'Piggy Bank' for ordinary people to save for their future?

I put all my property and those of my late parents in a TRUST a couple of years ago to protect what I have bought and paid for and my inheritance because my understanding of New Zealand Law is that if I entered into a relationship with somebody, after 3 years they would be entitled to a fair chunk of my property.

Luckily, I am single and not married or in a defacto relationship, but for those who are nuptially tied or in a defacto relationship, under the 'Property Relationships Act'  a partner would get half if they separated as long as they had lived together for 3 years Unless,  of course real estate and money are put into a 'Trust' then the partner will be fresh out of luck because the 'Matrimonial Property Law' Cannot Bust Trusts.

MONEY

REAL ESTATE

INVESTMENTS - BIOTECHNOLOGY

Another concern of the Law Commission is whether 'TRUSTS' are being used to Transfer Assets and Dodge Creditors. A possible change for the future could be making 'TRUSTS' Look Through Entities, so anyone pursuing an individual with assets in a 'TRUST' can see inside them to get to the assets.

Many lawyers concur that there is nothing wrong with the 'LAW on 'TRUSTS'. They've been around for hundreds of years, and what is wrong in trying to Preserve Wealth for the Next Generation? Like anything there are a few Bad Apples that Give Trusts a Bad Name.

'TRUSTS' cost money to operate, but by putting one's assets in a 'TRUST' means one can Pay a Lower Tax Rate, One can protect the Family Home, if One's Business Goes Belly-Up, One still gets Benefits like Cheap Resthome Care and One Can Ward off the Angry, Irate Ex. But the Law Commission's Review means that New Zealand's 'TRUST' Culture is under Scrutiny, as well as Sheltering Wealth and Liabilities - New Zealand citizens hide an estimated  $300million dollars a year in TAX.

So Kiwi's, not only is 2011 a Big Year with the Rugby World Cup Tournament prevailing upon us,this is also a 'BIG YEAR FOR 'TRUSTS' as well. Not only to be scrutinized by the Law Commission but 'GIFT DUTY' is due to be abolished on October 1st, 2011 also.

There are also major changes install for the Qualifying Company Regime, and only time will tell what affect this will on New Zealander's Love Affair with 'TRUSTS'.

 

So what are 'TRUSTS' and how do they work?

A 'TRUST' is a relationship between Trustees and Beneficiaries, in terms of which the TRUSTEE is the LEGAL OWNER of Property and they administer it for the Benefit of the Beneficiaries and the Beneficiaries can then in turn, Hold Their Trustee (s) to account if the Trustee (s) do not administer the 'TRUST' properly OR if the 'TRUSTEE (S) MISAPPROPRIATE FUNDS.

So, in what circumstances is a 'TRUST' a good idea?

Let us bring it down to 3 situations;

1. Where you want to protect your assets from potential, that is if you are in business with creditors making a claim;
2. A second scenario which has been common in the past, where people are concerned about Resthome Subsidies, they then put their assets in a 'TRUST';
3. Thirdly, the most common one nowadays, are 'Relationship Property Claims'  and assets are put into a 'TRUST'...an example, You receive an inheritance and you want to protect that inheritance for yourself and/or for your children, and you want to protect it from a "Potential' Breakdown in your Relationship or Future Relationship, so people put assets into a 'TRUST' to protect that money from 'Potential Property Relationship Act Claims'

Poor Baby...

New Zealand has a history of 'TRUSTS' going back to the Estate Duty Days. We had high rates of Death Duties in New Zealand and at one stage were up to 40 percent, so many people put their assets in "TRUSTS' to Avoid that Death Duty Tax. An example of a terrible situation was where a husband died and his farm was fully taxed in his hands and the farm passed to his wife and when she passed away, the farm was taxed again under the Estate Duty Laws'  so there were some very heavy tax laws imposed on the same piece of property, as it passed down from one to another. In many cases the farms or property had to be sold to meet these 'Estate Duty Tax Laws' because the owners' who inherited them could not meet all these costs.

There has of course has been some...Boom Times in the History of 'TRUSTS'.

Review of the Law of Trusts

Part One: Examines the rules that limit the duration of a trust: the common law rule against perpetuities and the Perpetuities Act 1964. The Commission explores the underlying rationale for the rule against perpetuities and asks whether the rule continues to meet a relevant policy need or whether either the mechanism for achieving this policy or the policy basis itself should change. The paper canvasses different options, including retaining the statutory perpetuity rule, adjusting or extending the statutory rule and abolishing the rule altogether, as has been done in a number of overseas jurisdictions.

Part Two: Looks at the rules that allow trusts to be altered. Trusts may be revoked and varied through various common law, judicial and statutory mechanisms. These rules are examined to ensure that they are clear and workable, and to determine whether reform is needed.

I think as far as my own 'TRUST' is concerned, I am just...Ka Pai!

                                                          Hei kona (Stay Well) ;)