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New Zealand trust law review

A review of the law of trusts and the Trustee Act 1956 is currently underway.  This review is being carried out by the Law Commission, which to date has published four issues paper in its review of the law of trusts.

The first issues paper provides a comprehensive review of the history of trusts.

The second issues paper considers the use of trusts (especially family trusts) in New Zealand.  This paper also look at the purposes for which family trusts are established including creditor protection, protection from relationship property claims, tax planning and meeting eligibility thresholds for government assistance. The paper also examines different legislative and judicial responses to the use of trusts that look through or disregard a trust where a trust may have been used to frustrate the underlying policies of particular statutes.

The third issues paper  considers the rule against perpetuities and whether the current 80 year rule is still valid.  This issues paper also considers the revocation and variation of trusts.

The fourth issues paper focuses on trustee duties, the office of trustee, and trustee powers.  The Law Society has issued a response to this issues paper, which can be seen at http://www.lawsociety.org.nz/

The fifth issues paper covers jurisdictional issues, trading trusts and other matters including dispute resolution options for trustees, registration and reporting obligations and regulation of trust service providers.

The sixth paper, a final report, Review of the Law of Trusts: A Trusts Act for New Zealand (“the Report”) was tabled in Parliament in 11 September 2013.  This report recomends a new Trusts Act for New Zealand to replace, and significantly exapnd on, the current Trustee Act 1956.  The Report makes a total of 51 recommendations addressing a wide range of matters relating to trusts, trustees, beneficiaries, creditors of trusts and the powers of the courts. Some of the key reforms recomended include:

  • legislating the key duties of trustees to ensure trustees can be fully informed as to their responsibilites
  • codifying the information that trustees must provide beneficiaries
  • improved procedures for the appointment and removal of trustees
  • a new refined two-step  approach to the power of the courts to review the actions of trustees
  • the replacement of the rule against perpetuities and Perpetuities Act with a new rule limiting the maximum duration of a trust
  • a recomendation that s 182 of the Family Proceedings Act is amended so that judges will have greater powers to make orders in respect of trust property on a relationship breakdown.  This proposed amendment would have retrospective effect back to the commencement of the Property (Relationships) Act 1976 (1.2.1977), as would a proposed amendment of that Act with respect to certain distributions onto trust.

A response from the Government is expected in March 2014.

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