Law Commission to crack down on family trusts

The Law Commission wants to crack down on the "injustice" that allows the use of trusts to protect property during matrimonial or other relationship disputes in its package of proposed changes to trust law released today.

As part of its long-running review of trust law, the commission today released a series of proposals to modernise and clarify legislation governing the use of the structures.

Use of trusts in New Zealand is widespread for a wide range of purposes including minimising tax, protecting property during matrimonial disputes, and shielding income and assets in order to qualify for social assistance.

However, Law Commission president Sir Grant Hammond said the proposals published today focused on "core trust law rather than other areas of law and policy that intersect with trust law, such as insolvency and social assistance".

"The commission has generally taken the position that resolving the problems that may arise in these areas due to the existence of trusts as a particular form of property holding falls beyond the scope of this review."

However, Sir Grant said one area of interaction which the commission had looked at further was relationship property.

"This is because of significant concern about the potential for injustice due to the use of trusts."

The commission raised several options for comment involving the amendment of relationship property legislation in order to alleviate the impact of trusts.

Other proposed reforms the commission is seeking public feedback on include:

# Giving trustees - who manage trusts on behalf of those who benefit from them - a clearer set of duties.

# Giving trustees greater flexibility in how they can invest trust funds

# Relaxing the restriction that requires cases under the Trustee Act to be heard exclusively by the High Court and allowing the District Court to hear them also.

- Adam Bennett, New Zealand Herald