Contents

Chapter 1
The trusts context in New Zealand

Introduction

1.1This chapter outlines the context of trust use in New Zealand including types of trusts, reasons for which people establish trusts and for the popularity of trusts, key features that make trust use in New Zealand distinctive and the reasons trusts are necessary. While the reform proposals in this paper primarily focus on core trust law and private express trusts, it is useful to explore the nature and variety of trusts and trust use in New Zealand.

1.2Trusts are with us as a part of New Zealand’s legal, social and business context and they are undoubtedly here to stay. They are here as a result of hundreds of years of legal development in England, and later, other countries of the Commonwealth. They are primarily governed by the judge-made law of equity, which was brought to New Zealand with British settlers. Legislation, like the Trustee Act 1956, provides an overlay to the concepts and rules that already exist in our law. In order for trusts to function efficiently and sensibly, it is necessary to have some rules on the administration and management of trusts and processes for decision-making and resolution of trust problems and disputes.

1.3New Zealanders have keenly utilised trusts. There are a large number of trusts being used for a range of purposes. The use of trusts in New Zealand appears to be more widespread than in comparable countries.8  Through consultation and submissions on our Issues Papers we have sought to find out more about the trusts context in New Zealand. We have asked why people settle trusts and why there are so many in New Zealand. While it is impossible to determine a comprehensive answer to these questions as there are no official records of trusts, we have learned what are believed to be the common reasons people settle trusts and key features of how trusts are used. This chapter first looks at the basic trust concept.
8The number of tax returns filed by trusts in the 2009−2010 tax year was 253,800 (Inland Revenue “Returns Filed 2001 to 2010” <http://www.ird.govt.nz/aboutir/external-stats/tax-returns/filed/tax-returns-filed.html>). This number includes charitable trusts that are income earning. This means that in 2010 there was at least one trust for every 17 people in New Zealand. See Law Commission Some Issues with the Use of Trusts in New Zealand: Review of the Law of Trusts – Second Issues Paper (NZLC IP20, 2010) at [2.1]−[2.4] for comparisons with other countries.