Chapter 16
Interaction of trusts with other policy areas


16.1In the Second Issues Paper the Commission acknowledged the wider public perception that trusts are being used in certain situations in ways that are considered by some to be inappropriate and potentially unfair.345  This includes settlors or beneficiaries of trusts avoiding obligations to creditors and the government, and individuals being able to access government benefits or subsidies, by artificially minimising personal assets or income. The policy and legislative mechanisms outlined in the Second Issues Paper were considered in this context.

16.2The Second Issues Paper discussed a range of legislative responses to the use of trusts, which allow trust assets to continue to be treated as the settlor’s assets or to continue to be subject to the claims of third parties. It considered the adequacy of current legislative provisions and noted that each of the statutory regimes takes a different approach to how trust property and income is treated. The paper outlined several options to address the inconsistency in approaches to trusts across the different legislative provisions.

16.3This chapter discusses submitters’ views on whether the current legislative provisions are adequate, and if they are considered inadequate, whether the solution is to strengthen the current provisions or whether a stronger, more uniform solution is called for. We conclude that it is more appropriate that the approach to trusts is addressed separately in the individual regimes rather than as a part of these reforms.

P57 It is proposed that trusts should continue to be addressed in individual legislative schemes, rather than in a uniform “look-through” provision in trusts legislation.

Please give us your views on this proposal.
345Law Commission Some Issues with the Use of Trusts in New Zealand: Review of the Law of Trusts – Second Issues Paper (NZLC IP20, 2010) at ch 2.