There are many types of trusts that can be tailored to achieve a specific purpose. The general purpose of a trust is to protect your assets and provide for desired succession planning for future generations. A trust is created by a trust deed whereby a person (the settlor) transfers property to the trustees of the trust. The trustees control the property in accordance with the trust deed for the benefit of the beneficiaries (which can include the settlor).
This article focuses on four types of trusts that are commonly used within New Zealand. These include family trusts, inheritance trusts, business trusts and charitable trusts.

Family trusts: A family trust is generally set up by a couple that have combined assets such as a family home, investments, etc. for the benefit of the next generation. This type of trust can provide income and capital benefits to its beneficiaries who can be (including but not limited to) the settlor(s) themselves, their children, grandchildren, parents or other trusts. The benefits of a family trust are:
* to assist in protecting family or a family business from potential relationship property claims or someone contesting a will;
* ensuring assets are retained for family members who may need rest home care;
* to manage assets of someone who may not be able to manage their own affairs;
* maintaining separation between business and personal assets; and
* maximising tax efficiency for the beneficiaries.

Inheritance trusts: An inheritance trust is generally created by parents for their children. It not only benefits children when their parents pass away, but also during their parents'  lifetime. The benefits of an inheritance trust are:
* allowing parents to ensure that their children's inheritance is protected from future relationships, business partners or creditors; and
* protecting separate property from relationship funds if you are expecting to inherit significant assets.






 

Business trusts: A business trust generally holds assets that are separate from family and personal assets to protect you from a business failure or major loss. It also protects your personal or family assets from potential creditors. A common scenario is to have your business trust own shares in your private company, which allows dividends to flow through the business trust and to the beneficiaries. A business trust provides for succession planning if a business partner dies or becomes incapacitated, and also may result in tax advantages.

Charitable trusts: A charitable trust as the name implies, is a formal arrangement set up for a charitable purpose. This can relate to relieving poverty, advancing education, religion or any other matter that benefits the community. The benefit of a charitable trust is that as a donor, you can provide long-lasting contributions that continue after your lifetime. Furthermore, registering a charitable trust with the Charities Commission can provide tax advantages.
Whether a trust is suitable for your needs is best determined by a lawyer. This article is simply an overview of the more general points about the common trust structures. Each case is different as it depends on the purpose of the trust. It is advisable to discuss your overall asset planning goals, financial and relationship situations with your lawyer who can also liaise with your accountant (if applicable) to determine the best course of action for you.

The New Zealand Adoption Act 1955 ("the Act") has been widely viewed as being in need of an overhaul to bring it up to date with the modern times. In 2016 the Human Rights Review Tribunal ruled that sections of the Act were discriminatory and outdated. This article will take a closer look at the specifics of the Act that are not in keeping with today's New Zealand.

Surrogacy - The Act sees the natural mother (the woman who births the child) as the legal guardian of the child. The natural mother is named on the birth certificate and her partner, if she has one, as the father. This occurs even in the case of surrogacy where the natural mother and/or her partner have no biological connection to the child. This means that the biological parents have to go through the adoption process to become the legal guardian of their biological child.
The Act does not allow for surrogacy agreements to be enforced. This leaves the biological parents with little or no security that when their baby is born it will legally become their child if the natural mother decides to keep it. On the other hand, except for direct costs such as the hospital invoices, surrogates cannot be compensated for their time or loss of wages.
Not the nuclear family - Currently under the Act single men cannot adopt a female child unless the court is satisfied that the man is the child's father, or that there are special circumstances that justify the adoption. There is nothing in the Act that states a
single woman is not allowed to adopt a male child.


 

Until the Marriage Amendment Bill was passed in 2013, same sex couples could not legally adopt children. In New Zealand the number of children available for adoption has declined substantially over the years, meaning many New Zealanders now have to adopt from overseas. The problem for same sex couples in this regard is that New Zealand has overseas adoption agreements with five countries (India, Lithuania, Philippines, Russia, Thailand) but none of these countries will accept applications from same sex couples, whether they are married or de facto.
Magic numbers - The mandatory age requirements for adopters are found in section 4 of the Act. This section explains that you must have reached the age of 25 years and be at least 20 years older than the child that you wish to adopt; or you have reached the age of 20 years old and the child that you wish to adopt is a relative.
You are considered a child in the Act until you have reached the age of 20. This means that adoptees are not able to obtain their birth certifications or know any medical background regarding their biological parents until they reach the age of 20.
The Act is a reflection of New Zealand society in 1955, and perceptions have changed over the 64 years since the Act was brought in, with different views now on adoption. With that said, the Act requires an overhaul to bring it in line with the modern views of today's world.

 

Following the amendments to the Arms Act 1983 ("the Act") that came into force on 11 April 2019, a second tranche of proposed changes, the Arms Legislation Bill ("the Bill"), is currently under review by the Select Committee. This next step in the reform of the Act looks to establish a firearms registry and amend licensing requirements with the intention of reinforcing positive behaviour that is required of firearms owners.
Not much is currently known about the firearms in New Zealand in respect of how many there are (legally), who has them, who is buying and selling, and how secure the firearms are. The Bill proposes to create a firearms registry that would store this information about firearms and link them to licence holders. Information about licence holders, their weapons, and ammunition would be stored on the registry. This would allow every legally held firearm in New Zealand to be monitored.
The licensing regime would be strengthened with the Bill aiming to tighten the current rules for both individuals and dealers. The licence period would be shortened to five years from the current ten-year period, with potential increases to the fees as well. Licence requirements would also be extended to cover parts, magazines, and ammunition.
A new system for warning flags is proposed in the Bill to give the police more tools to vet people and allow them to intervene if concerns are raised about a licence holder. This system would capture behaviour such as encouraging or promoting violence, hatred or extremism, serious mental health or substance abuse issues, having close associations with gangs or organised crime, and being convicted of certain offences. The aim here is to filter out high risk people that are deemed an unfit and improper person to hold a firearms licence.

 

When trustees act for a discretionary trust, they have a primary duty to act for, and in the best interest of the beneficiaries. Consequently, any benefit received under the trust is provided at the discretion of those trustees.
Trustees of a discretionary trust have a wide-ranging scope of power in terms of the decisions they make for the trust, with a limited liability for such decisions. However, beneficiaries do also have rights under law to monitor the trust/trustees.
Generally, a discretionary beneficiary has the right to:
* request from the trust or its representatives, documentation for the trust (i.e. trust deeds, appointment/removal of trustee documents, details of trust distributions, trust accounts, trustee contact details and details of trust assets and liabilities);
* receive fair treatment from trustees;
* be considered in any decision made by the trustees;
* seek the court to remove a trustee; and
* apply to the court for intervention or assistance.
The ability for a discretionary beneficiary to request and obtain trust information is an important right and can be where disputes arise. It is important for beneficiaries (especially if you have only just found out you are a beneficiary) to understand what exactly the trust assets and liabilities are, who the trustees are if you want to contact them, and potential history of the trust and trustees. Whilst the request for this information can ruffle the feathers of some trustees, and trustees have been known to deny requests (see the recent case of Erceg v Erceg), the underlining fact remains that the trustee's role is to act for the beneficiaries benefit above all.







 

Discretionary beneficiaries can request, but may not be entitled to receive the reasoning behind trustee decisions. This is to protect the role of the trustee and the trust that is placed in them when the trust was established. However, the court can intervene if an explanation is considered justified.
If a trustee is thought to be acting contrary to the benefit of the discretionary beneficiaries or is refusing to provide information to the beneficiaries, then the beneficiaries can apply to the court to have such information released and potentially have the trustee removed or replaced.
Given that there is no requirement for anyone to inform you that you are a discretionary beneficiary of a trust, sometimes trusts can be wound up before you are made aware. Where this occurs, a beneficiary can request provision of information relating to the winding up and final distributions of the trust to see how the assets and liabilities were distributed.
Under section 68 of the Trustee Act 1956, a trust beneficiary can apply to the court to review a decision or act performed by the trustees if they feel that they have reasonable grounds for being aggrieved by the act or omission. Whether a discretionary beneficiary can apply under this act is not yet set in stone, however, decisions by the court point to the idea that if the number of discretionary beneficiaries is small, it may be permissible.
If you are a discretionary beneficiary and unsure of your rights, it is advisable to contact a legal professional to talk you through this.

The new Trust Act 2019

Trusts are widely used in New Zealand, with the main focus in recent years being on family trusts. These have been utilized in relation to relationship property, succession planning, risk control, and as a vehicle for enabling blended family outcomes; to name but a few.
The previous legislation around trusts has not been overhauled or reviewed for a long time. Aligned to that are a myriad of court cases setting up common law positions, both old and new. Often the current issues fit like square pegs in round holes. Many common-sense outcomes in today's world have been frustrated by the legislation lagging behind. Trust law is no exception.
So, the new Trust Act 2019 is very welcome. While passing into law on 30 July 2019, it does not come into effect until 30 January 2021. The interim time frame allows a true knowledge of what is proposed to be digested; with variations to be made both to documentation and best practice systems. These are being prepared and introduced so immediate compliance with the new parameters are completed and expected.
A heads up then about compliance requirements. You will be reminded about the duties required of those running the trusts, namely the trustees and settlors; that the term of a trust may be longer that the current 80 years; that those who benefit from them may be able to obtain more information in certain circumstances; that written documents must be held and easily accessible; and that reviews of trusts decisions will be more prevalent.

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