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New Zealand Trusts

Presented by: Marcus Diprose

Amicorp New Zealand

September 2012

Stand out from the crowd

• New Zealand Trust Overview

• New Zealand Law Commission Trust Law Review

• Short Form Succession Trust

• Other Products

Topics

• Regime in place since 1988

• Requirement that Settlor, beneficiaries and assets of the trust are not resident of domiciled in New Zealand

• Trustee – should be a New Zealand resident

• Substantial body of case law relating to trusts

New Zealand Foreign Trust (NZFT)

• No income tax, capital gains or inheritance tax

• New Zealand is an onshore jurisdiction

• Extensive range of tax treaties

• ‘Control’ issues addressed in a number of ways:

– ss49 and 50 of Trustee Act 1956;

– Private Trust Companies;

– appointment of investment managers

Advantages of NZFT

• S49 provides for appointment of advisory trustee– Advisory trustee can issue directions to

responsible trustee and responsible trustee cannot be held liable to follow directions

• S50 provide for appointment of custodian trustee– Custodian trustee required to legally own the

assets and invest or administer them under the direction of the management trustee

• Who can act?

s49 and s50 Trustee Act 1956

• Standard New Zealand company

• No licencing requirements

• Can have foreign or New Zealand resident directors – but new requirements

• No corporate directors

• Biggest risk is residency issues where foreign director are based

Private Trust Companies (PTC)

• Appoint and investment manager to the trust or the underlying entity

• Powers in respect of managing the investments for the structure within agreed parameters

• Acceptance that wealth has been built up by the client and there should be involvement in investments going forward

Appointment of Investment Manager

• Last twelve months the New Zealand Law Commission has released five papers on various aspects of New Zealand trust law

• Broad review of trust law in New Zealand, the first since the introduction of the Trustee Act 1956

• Aim is to modernise and update New Zealand trust law

• Law Commissioners will make recommendations and are assisted by a panel of practitioners

Law Commission Trust Law Review

• Five papers released to date

• Next stage: Preferred Approach Paper

• Release in late 2012

• Will be specific in recommendations and submission will be invited

• Law Commission will then make recommendations to New Zealand Government

• Belief is: the core rules are working well but changes required in some areas

Law Commission Review (cont.)

Possible Changes:

• Perpetuity Period – currently 80 years

• Trustee Powers and Duties

• Trustee exemption clauses

• Court jurisdiction/dispute resolution

• Sham Trusts and finding a trust is not a trust

• Interaction of trusts with insolvency law and relationship property

• Regulatory requirements

Law Commission Review (cont.)

• Appointment of NZ resident agents of NZ companies

• Currently in ‘Bill’ format

• Will introduce the requirement to have a NZ resident agent and that must be a natural person

• Resident agent will be legally responsible for company’s administrative affairs and will have obligations and liabilities under the Companies Act

• Tax Filing Requirements for NZ entities

Other NZ Law Issues

• Short Form Succession Trust (SFST) is a low cost, non-complex succession trust structure

• Designed to provide a simple structure to avoid probate rules on the death of a shareholder

• It is not an alternative for those clients that require complex planning, i.e. tax planning, creditor protection etc.

New Zealand Short Form Succession Trust

• The shareholder (i.e. Settlor) settles the shares of an existing BVIBC into the SFST

• To date, we have only seen a need for the SFST relating to shares in a BVIBC

• Can be used with other property as well, e.g. shares in other companies, insurance wraps etc.

• BVIBC must be set up before the SFST

SFST – How does it work?

• The shareholder (i.e. Settlor) settles the shares of an existing BVIBC into the SFST

• To date, we have only seen a need for the SFST relating to shares in a BVIBC

• Can be used with other property as well, e.g. shares in other companies, insurance wraps etc.

• BVIBC must be set up before the SFST

SFST – Administration

• Primary beneficiary = settlor

• Secondary beneficiaries are set out in the schedule and will usually be family members

• Primary beneficiary holds a general power of appointment over the assets

• Upon termination the secondary beneficiaries receive the trust property

• Amicorp as trustee must still monitor the trust property by receiving sufficient financial information, i.e. financial statements

SFST – Administration

• Primary beneficiary exercising the general power of appointment over the trust property

• Distribution of trust property by Trustee to primary beneficiary at his or her request

• Declaration of early Vesting Day for trust property by the trustee

• Death of primary beneficiary when trust property will be transferred to secondary beneficiaries

SFST – Termination

• Created for venture capital investment in NZ as fiscally transparent

• Flexible hybrid between a company and special partnership

• General partner, i.e. manager, can be located anywhere in the world

• Limited partner normally the trustee of a trust

• Passive investment vehicle or used for trading purposes

NZ Limited Partnerships

• LTC is a standard NZ company

• Elections are made to make it fiscally transparent entity for NZ tax purposes

• Shareholders are taxed on their proportionate share in the LTC profit

• Directors must be natural persons

• Specific rules for shareholders – must be five of fewer

• If LTC is found to be resident elsewhere it will fall out of the regime

NZ Look Through Companies (LTC)

September 2012

Amicorp New Zealand LimitedLevel 3, West Side, The Ferry Building99 Quay StreetAuckland 1010, New ZealandTel.: + 64 9 304 2646Fax.: + 64 9 368 5452

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