Proposed changes to New Zealand's trust laws have the potential to alter the transfer of property and are long overdue, according to NZ Trustees Services director Jonathon Cron.
The Law Commission has released its third Issues Paper discussing proposed changes to the law of trusts, Perpetuities and the Revocation and Variation of Trusts, and it outlines proposed changes around perpetuities rules and rules that allow trusts to be altered.
While Cron believes any changes will be some time off, he does believe change is required.
"We need to tidy up the whole industry," he said.
"The stuff that we're seeing just leaves you cold. We had clients just in before that have had a trust since 2004 and they don't have any knowledge of what the trust has done, how its been working, why it was set up. They've really been led down the garden path and there's no evidence to support that fact that the trust is actually being run from any point of view, and that's just scratching the surface."
The proposed changes that relate to property are largely within the perpetuities rules, which were established with the intention of ensuring that dead settlors and will makers did not have control over how future generations used their property for too long.
Opponents have argued over the effectiveness of the rule and whether it is overly complex and creates uncertainty.
The Law Commission outlines three options for reform; extend the 80 year perpetuity period, abolish the rule and repeal the Perpetuities Act or replace with a different rule such as one based on the duration of a trust.
Cron explained how the rule effects those looking to safeguard property in a trust at present.
"With the perpetuity rule effectively the trust has to be wound up within that 80 year period. All the assets revert back to the name of the individual beneficiary. If that individual beneficiary now wants to protect that asset they now have to sell it to another trust and commence a gifting programme if one actually exists at that time, or they're now under different rules and regulations because they've owned the asset and they've now got rid of it," he said.
"So it's fairly massive for a lot of people but that's what we're seeing all the time. The majority of mum and dads with a trust right now would not have their children's trust as a beneficiary, they'd have the children themselves."
Source: Landlords.co.nzcomments powered by Disqus