Pearse Trust Blog

Trustees must take appropriate care in the exercise of their functions.  Failure to do so may result in a charge of breach of trust, for which the trustee may be liable.

Testators in many jurisdictions worldwide are granted complete ‘freedom of testation’ and may, without any legislative restriction, decide how and to whom their estate is to be distributed on their death. However, this testamentary freedom is far from universal and many jurisdictions have incorporated ‘forced heirship’ provisions into their succession laws.

Traditionally, the main parties to a trust were the settlor, the trustee and the beneficiaries.  However, in recent years, the appointment of Trust Protectors has become increasingly prevalent, particularly in offshore trust structures. Indeed, some jurisdictions, including BVI, the Cook Islands and several US states, have now made legislative provision for the office of Protector.  

New Zealand introduced their disclosure and record-keeping rules in 2006 to comply with the minimum standards as developed by the OECD in order to improve greater transparency and exchange of information between foreign tax authorities, and to encourage international cooperation on tax matters. The legislation outlining the obligations is the Tax Administration Act 1994 and sections HH 4(3BB) and HH 4(3BC) of the Income Tax Act 2004

We recently learnt that a settlor creates a trust by transferring assets to one or more trustees, to be held on trust for one or more beneficiaries. We also learnt the steps necessary to ensure that a trust is validly constituted. 

Although New Zealand comprises of two islands, it is very much a part of the ‘onshore’ world. It is in the unique position of being a reputable onshore jurisdiction, while also offering various tax efficient vehicles, which are increasingly utilised for international tax planning.

A Settlor creates a Trust by transferring property, to one or more Trustees, to be held on trust for one or more Beneficiaries. Typically, a Trust is created by way of a trust instrument called a “Deed of Settlement” or a “Declaration of Trust”.

Fundy Settlement v Canada [2012 SCC 14] is a landmark case which used a test in order to put to rest any doubts which Trust Administrators might have in connection to the residence of a Trust for Tax purposes. 

23 March 2012 saw the enactment in Cyprus of the International Trust (Amendment) Law 2012 (“the Amendment Law”). 

Trusts and Foundations are used for very similar purposes and there are various aspects of these structures which are alike. However, there are crucial differences between the two and each is very unique in its own right.