Contents

Chapter 1
The trusts context in New Zealand

Why do people settle trusts?

1.20In the Second Issues Paper we outlined several historical reasons why New Zealanders have been so partial to trusts, including the estate duty rules that applied before estate duty was abolished in 1993, the relationship property statutes, and the misalignment of the trust tax rate and personal tax rates. We also raised the possibility that trusts were being established for the purposes of qualifying under social assistance policies and avoiding creditors and because there had been active promotion of trusts.43
1.21From the submissions received on the Second Issues Paper and consultation undertaken, it appears that trusts are being established for the following main reasons:44

1.22There is also some evidence that trusts have been used for purposes that may be considered less acceptable, including:

43Law Commission Some Issues with the Use of Trusts in New Zealand: Review of the Law of Trusts – Second Issues Paper (NZLC IP20, 2010) at [2.8]−[2.22].
44Key submissions in providing information on why people settle trusts were received from the New Zealand Law Society, Ayers Legal, Chapman Tripp, the Trustee Corporations Association, WHK, Harris Tate, Taylor Grant Tesiram, John Tripe, Martin Riley, KPMG, Gary Thomas, Peter Kellaway and Jennifer Dalziel.
45Penny v Commissioner of Inland Revenue [2011] NZSC 95, [2012] 1 NZLR 433.