New Zealand Law Reform Commission Third Issues Paper on Law of Trusts

The Law Reform Commission of New Zealand has published its third issues paper in its review of the law of trusts:

"Part one of the paper examines the rules that limit the duration of a trust: the common law rule against perpetuities and the Perpetuities Act 1964. The Commission explores the underlying rationale for the rule against perpetuities and asks whether the rule continues to meet a relevant policy need or whether either the mechanism for achieving this policy or the policy basis itself should change. The paper canvasses different options, including retaining the statutory perpetuity rule, adjusting or extending the statutory rule and abolishing the rule altogether, as has been done in a number of overseas jurisdictions."

"Part two of the paper looks at the rules that allow trusts to be altered. Trusts may be revoked and varied through various common law, judicial and statutory mechanisms. These rules are examined to ensure that they are clear and workable, and to determine whether reform is needed."

Earlier Library Boy posts on the topic include:

• Law Reform Commission of Nova Scotia Paper on Rule Against Perpetuities (July 22, 2010): "The rule against perpetuities is a legal rule which limits the duration of certain restrictions on the transfer of property. By various means of estate planning - particularly trusts - and other forms of property disposition, a settlor or testator or grantor may postpone the time when property may be possessed and used freely by a beneficiary or grantee. The Rule insists that such inheritances - and indeed, many other sorts of postponed, restricted or contingent transfers of property - can only be postponed for so long. At some definite point the property must be fully transferred to its beneficial owner, free of restrictions."
• New Zealand Law Reform Commission Introductory Issues Paper on Law of Trusts (November 17, 2010): "The first issues paper is primarily a background paper. It traces the development of the trust from its origins in England through to the present day uses of the trust both in New Zealand and internationally."
• Recent Reports by the Law Commission of New Zealand (December 30, 2010): "The second issues paper will cover issues with the use of trusts (especially family trusts) in New Zealand. This paper will look at the purposes for which family trusts are established, including reducing tax obligations, protection of assets from creditors and relationship property claims, and meeting eligibility thresholds for government assistance. The paper examines different legislative and judicial responses to the use of trusts to 'look through' or disregard a trust where a trust has been used to frustrate the underlying policies of particular statutes. The Commission poses options for how the law could address concerns about the use of trusts. The paper seeks comment from as broad an audience as possible on issues such as why trusts are so common in New Zealand, whether limits should be placed on the uses to which trusts are put, whether high levels of settlor control is an issue for concern, how effective existing legislative mechanisms are at addressing the impacts of trusts and whether the law on sham trusts is satisfactory."
• Law Reform Commission of Nova Scotia Final Report on Rule Against Perpetuities (January 8, 2011): "The common complaint is that the Rule is simply too complex and abstract in its application, resulting in a substantial risk that beneficiaries or grantees will be deprived of their interests through inadvertent errors in drafting (...) Given these difficulties, the Rule has been subject to significant reform in most jurisdictions other than Nova Scotia. The most common sort of reform - referred to generally as ‘wait and see’ - maintains the substance of the Rule, but allows the disposition to run its course for the perpetuity period, rather than declaring it to be invalid at the outset (...) A more radical reform, adopted in Manitoba, South Australia, Saskatchewan, Ireland, a number of US states and certain Caribbean nations, is to simply abolish the Rule, relying on other laws to serve the purposes the Rule was designed to fulfill (...) We recommend abolition."