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New Zealand: New Zealand to restate and reform trust law

26 October 2017

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In August 2017, the Trusts Bill was introduced in New Zealand's Parliament. The bill seeks to restate and reform New Zealand's trust law and is the first significant change in New Zealand's trust law in more than 60 years.

Trusts play a significant role in the life and economy of New Zealand. It is estimated that there are between 300,000 and 500,000 trusts in New Zealand. Consequently, any reform of trust law has the potential to affect a wide cross-section of New Zealand's economy.

The bill, if enacted, will apply to all express trusts (including trusts that existed before enactment). It is proposed that there will be an 18-month delay between enactment and the bill taking effect to allow time for those involved in trusts to review and consider the application of the bill to existing trusts.

The main features of the bill include:

  • A description of the key features of a trust to help people understand their rights and obligations;
  • Mandatory and default trustee duties (based on established common law principles) to help trustees understand their obligations;
  • Requirements for managing trust information and disclosing it to beneficiaries (where appropriate), so they are aware of their position;
  • Flexible trustee powers, allowing trustees to manage and invest trust property in the most appropriate way;
  • Provisions to support cost-effective establishment and administration of trusts (such as clear rules on the variation and termination of trusts); and
  • Options for removing and appointing trustees without having to go to court to do so.

The bill also abolishes the rule against perpetuities and provides that the maximum duration of an express trust is 125 years. The terms of a trust may specify or imply a duration shorter than 125 years, and there are certain trusts, such as charitable trusts, that are not subject to the maximum duration rule and may continue indefinitely.

The bill is not intended to codify New Zealand's trust law and, subject to certain exceptions, largely reflects existing legal principles. It is intended that the Trusts Bill will be applied and interpreted by reference to existing case law. However, the bill does not indicate which provisions restate the law and which provisions reform the law, so it will be left to the courts to determine when reference may be had to existing case law.

The bill reflects recommendations by the New Zealand Law Commission following its comprehensive review between 2009 and 2013 of general trust law. Those recommendations focused on supporting the use of family trusts, rather than trusts used for commercial purposes. While the bill recognises that not all of the provisions of the bill should apply to commercial trusts, and provides that certain provisions will not apply to commercial trusts, there are problems with the drafting of those carve outs. The bill has yet to be referred to a select committee. Users of New Zealand trusts should take the opportunity to consider the bill and prepare submissions for the select committee to ensure the bill will not adversely affect trusts used for commercial purposes.

  Tim Stewart

Tim Stewart (
Russell McVeagh
Tel: +64 4 819 7527

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