Insights & Articles

With recent changes in tax regulations, increased compliance obligations, and rising administrative costs, what used to be relatively simple is suddenly complicated, time-consuming, and expensive. Is it time to simplify your life and wind the damn thing up?

Countless families across New Zealand place their most valuable assets, such as their property, into a discretionary family trust. However, when a couple separate and each party is a trustee to the same family trust, conflict and disagreement will often arise as to the management and enjoyment of trust assets. Disagreements on internal trust matters have the possibility of turning into time-consuming, expensive and public proceedings in court. Mediation is an alternative solution for settling trust disputes and may be a more advantageous option for parties.

The Trusts Act 2019 ("the Act") outlines the obligations of trustees in managing family trusts. Information disclosure requirements to beneficiaries are significantly more demanding than previously applied.

The current 'lockdown' is unprecedented. In times like these your first priority is to ensure you take care of yourselves, friends and family. However, while it is important to protect those close to you, you should also give consideration to the protection of your assets. Accordingly, it may be an opportune time to review your current estate planning to ensure everything is 'as you would like' and, if you have a trust, to make sure that it aligns with the provisions of the Trusts Act 2019 ("the Act") which was enacted this year but comes into force at the beginning of 2021.

A trust exists to hold assets for a certain purpose. For an ‘ordinary’ family trust, commonly conceptualised as a ‘mum and dad’ trust, the ‘mum and dad’ settlors ordinarily transfer their main home to trustees to hold that property for the benefit of their immediate family group. In this scenario it is common for ‘mum and dad’ to be appointed as trustees. They are additionally named as discretionary beneficiaries to ensure they may benefit from the trust assets throughout their lifetimes as well.

During this unprecedented and unsettling time, there is an opportunity here to take advantage of the phone calls and emails slowing down (for some) and use your time to address those things you have been putting off – a bit like that painting job most people have been meaning to get to.

Feeling stressed or anxious about how Covid-19 (coronavirus) and New Zealand entering alert level 4 with nationwide lockdowns will affect you and your family members? Times of crisis can result in a push-and-pull effect with our personal relationships. They bring people together – only those in your household! - but difficult times can also lead to difficulties arising in our relationships with our, quite literally, nearest and dearest.

As you may be aware, the Trusts Act ("Act") has received Royal Assent and will come into effect on 30 January 2021. Amongst other things the Act codifies the duties of trustees and requires greater transparency with beneficiaries. It will affect your current trust arrangements. You should consider reviewing, updating and making structural changes to your Trust if necessary, in order to future proof your Trust. The following is a summary of the key changes and how they may affect you.

A new Trusts Bill has recently been released for public consultation. This bill updates and changes various aspects of trust law. One interesting proposed change is the rights beneficiaries have to trust information. The most recent judicial case involving beneficiaries and trust information is Erceg v Erceg [2017] NZSC 28. The Supreme Court did not find that there was a presumption for or against disclosure of trust documents, but that there is an "expectation that basic trust information will be disclosed to a close beneficiary who wants it". The Supreme Court's analysis did differ from the lower Courts. The Supreme Court listed certain factors to take into consideration when courts receive a request for disclosure.

Gift duty was abolished from 1 October 2011 and while the legislative change itself is simple, it has surprisingly complex consequences. The abolition of gift duty has made it possible for individuals to gift assets directly to a trust and it is likely this practice will supplant the former method of selling property to a trust with a gift back.