1.29There is great variation in the structure and nature of trusts in New Zealand. The Trustee Corporations Association notes that “[e]ven within the context of personal and family trusts, no two trusts are the same”.
1.30Another major feature of the New Zealand trust context is that many private express trusts are discretionary trusts. This means that the trust deed provides either the trustee or another person with the discretion to decide how trust assets are to be distributed. This power of appointment may limit the prospective beneficiaries to specified persons or a particular class, or it may leave it open. The appointor may also have the discretion to decide when, if at all, to distribute assets and in what shares. In a discretionary trust, some or all of the beneficiaries will only have a hope or expectation of receiving from the trust. In some trusts, despite the apparently wide discretion of the trustees to distribute trust property to a broad group of beneficiaries, the settlor’s intentions will be made clear to the trustees through a letter or memorandum of wishes or some other means.
1.31A large number of New Zealand’s trusts appear to be family trusts with limited trust property. Many of these family trusts have a single asset – a family home. While historically trusts have primarily been utilised by wealthy families, it appears that in New Zealand trusts are commonly settled by families with more modest means.
1.32Trusts are used by Māori for a variety of purposes, including Treaty of Waitangi settlements and for managing Māori land. Trusts are a useful vehicle for managing land which has a large number of interest holders as is common in relation to Māori land.
1.33The large number of trusts in New Zealand and the variety of professional trust advisers offering trust services and, in some cases, actively promoting the settlement of trusts, has been described as representing a “trusts industry”.
1.34The comment was made in Chapman Tripp’s submission that because some trusts were settled without the settlors having a clear purpose or a solid understanding of what the trust relationship fully involves, there are trusts that have been “sent out to graze without continuing external legal or accounting advice”. It appears that a proportion of trusts are not well-administered in that annual accounts may not be prepared and records of trustee decisions may not have been kept. Some trustees do not fully understand the obligations that their role entails.