12 Sep Trusts rule makeover floated and the impact on Family Trusts
This article on Trusts and Family trusts is shared by the Trust Specialists and lawyers at Auckland law firm Quay Law. The article was sourced from stuff.co.nz on 11 September 2013.
Up to one in four Kiwis could be affected by changes to the laws covering trusts, which are being recommended by the Law Commission.
The commission, an independent body funded by the Government to review and update laws, has called for a makeover of the trust rules.
In particular, it proposes a Trusts Act to replace the Trustee Act 1956 which it believes has become “outdated and convoluted”.
Default settings, such as the default powers of trustees, no longer lined up with what happened in practice.
In other cases, some trust matters were being governed only by case law.
Catherine Atchison, a spokeswoman for the Auckland District Law Society, said Kiwis were big users of trusts, not just for protecting family assets, but also by businesses, Maori landowners and charities.
Her organisation conservatively estimated that any new laws surrounding trusts would impact about 1 million New Zealanders.
Atchison said an explosion of trusts occurred after stamp duty was removed in 1993.
“The consequence is you have a lot of laypeople acting as trustees, who don’t have the knowledge of perhaps lawyers or people who work in the trust area the whole time.”
The proposed new law would clearly set out the core characteristics of trusts and duties of their trustees.
It would also firmly underline that a trust could be found invalid if the trustees were not steering it towards its ultimate purpose, the benefit of its beneficiaries.
“It’s basically codifying the traditional trust law and saying this is what a trust is.”
The Law Commission has also set out to rectify what it sees as an unjust aspect of family trusts, when they are used to keep former partners from their share of assets made during the relationship. It recommends courts be given the ability to transfer trust assets to compensate disadvantaged partners after a marriage or relationship breakdown.
Other recommendations include an expansion of the rights of beneficiaries, improved procedures to appoint or remove trustees, and a longer maximum time frame for the duration of a trust.
It is proposed that trusts be able to exist for up to 150 years, rather than the current 80 years. Atchison said such a move would be “fantastic” for charitable trusts and more practical for creating generational wealth. “Eighty years these days is only really covering one and a bit generations. A hundred and 50 years gives a settlor some certainty that at the time they establish the trust that it is for a specific reason and a specific term to achieve an outcome.” – © Fairfax NZ News
This article was sourced for you by the Auckland lawyers and family trust specialists at Auckland law firm | Quay Law . To contact a trust lawyer.