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 (tim.stewart@russellmcveagh.com)
Russell McVeagh
Tel: +64 4 819 7527
Website: www.russellmcveagh.com