Trust numbers predicted to shrink

The government estimates there are somewhere between 300,000 and 500,000 trusts operating in New Zealand. Photo/File

A personal trust expert believes the number of trusts will shrink under a re-write of the law which will spell out the exact responsibilities of trustees.

The Trusts Bill was introduced to parliament this month, four years after the Law Society made recommendations on updating New Zealand's Trustee Act 1956.

The government estimates there are somewhere between 300,000 and 500,000 trusts operating in New Zealand and New Zealand has one of the highest levels of trusts per head of population globally.

Richard Broad, head of legal personal client service at Perpetual Guardian, said the bill would spell out the exact responsibilities of trustees for the first time which may put a lot of people off becoming a trustee.

"I don't think many people understand what it is to become a trustee. The bill will make that clear."

Broad said trustees should know the terms of the trust and its purpose and act in accordance with it.

"If you are looking after someone else's property you would think you would do that as a matter of course."

But many people who put their family home in a trust still treated it as their own by borrowing money against it or taking a rental income and putting the money straight into their personal account.

Broad believed some trusts would get wound up because trustees decided they didn't like the new rules or trustees may choose to retire because they weren't happy with the responsibilities.

Broad said trusts became fashionable to have around 10 to 15 years ago.

One reason people set them up was to protect their assets by gifting the value of their property over time so they would not be means tested by WINZ for rest home subsidies.

But a clamp down by WINZ stopped people from using trusts to do this.

Broad said there were still good reasons to have them such as protecting assets for those who owned a business or for setting up ways to support children who did not have the capacity to take care of themselves.

Broad said it could be two years before the changes came into force as the bill still needed to go through the select committee process.