Termination of testamentary trust

In the Matter of the Testamentary Trust of Hanning relates to an application to terminate a testamentary trust pursuant to section 121 of the Trusts Act 2019 and for an order pursuant to section 124 of the Trusts Act approving the application on behalf of minor or future beneficiaries.

The trust in question arose under the applicant’s father’s will, which left 1/2 of the residue to the applicant’s brother provided he had attained the age of 25, which he had, and the other half to be held on trust for the applicant at the trustees’ discretion with the balance payable to her brother or her brother’s children on the applicant’s death.

The applicant explained that when her father made his will she was 17 and goting through a tough period. At almost 25 she now has two children and satisfied the Court that she could make sensible decisions for herself. The applicant’s “share” of the estate had been used to purchase a property that she lived in, but was requred to pay weekly rent of $635.

As noted at [13]”… the current arrangement in relation to her share of her father’s estate subject to the Trust is no longer necessary or appropriate. She and her immediate family and support network are in Auckland. The trustees are based in Wellington. It appears that there have been frustrations in relation to issues relating to the maintenance of the property and that the relationship between [the applicant] and the trustees is somewhat dysfunctional.”

The court was satisfied that there was no deteriment to the applicant or her children and while there was a detriement to her brother and his children. In this regard as set out at [17], the applicant’s brother (Jack)] has consented to the application and can be taken to have considered the interests of his children now or in the future in giving that consent. It is evident that he considers the present situation unfair to his sister, given that he has received half of his father’s residuary estate outright. Any children he has now or in the future will stand to benefit from what he has received. He has also indicated that regardless of what the will says, were he to receive [the applicant’s] “share” he would see that it goes to her children. In the circumstances, I am satisfied that the extinguishment of the remote and contingent rights of Jack’s children now or in the future, is not a material detriment nor a factor that should stand in the way of the termination of the Trust.”

The decision highlights the need for will-makers to be advised regarding testamentary trusts that may arise under a will.

References:

• In the Matter of the Testamentary Trust of Hanning [2026] NZHC 505
• Trusts Act 2019, ss 121, 124