There has been a lot of commentary recently as to whether or not trust structures continue to be relevant in New Zealand given changes to trust law under the new Trusts Act.
We have many of our existing trust clients contacting us indicating they have “heard” that they should be winding up their trust or their trust is no longer appropriate.
In terms of dismissing some of the hysteria while there have been changes to the Trust Act and definitely there are provisions that refocus the obligations of trustees under trusts our position is that a well run trust with effective trustee administration has not overly changed in terms of trustee obligations. Many of the reporting and other disclosure requirements under the new act have been part of professional trustee routine for a number of years.
The disclosure requirements themselves are not a reason to abandon the trust that you may have already in place.
In each case the purpose of the trust and its reasons for continued operation must be considered. The predominant general reasons for trusts generally fall into 3 broad categories:
- Asset protection from business and other risks;
- Protection and planning in respect to Relationship Property matters;
- Estate and other succession planning.
These are all still relevant considerations and why trusts still have potential purpose.
Simply deciding to abandon a trust because of broad statements that trusts are now irrelevant or problematic is not in our opinion a basis for deciding whether to unwind an existing trust structure or indeed whether a new trust is appropriate.
After due consideration winding up of a trust may be a sensible consideration but the mere fact of the new Trust Act coming into force on 30 January 2021 will not of itself generally be a reason for winding up a trust.
Appropriate professional legal advice should be taken in each case. We are able to advise both our existing and new clients in relation to this area of law.
If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:
Paul Farry
pfarry@farry.co.nz
09 353 6671
The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.