Why a new Trusts Act?
Trust law as a core part of legal infrastructure
2.2The trust is unquestionably one of the great inventions of the common law mind, and is a central piece of the legal infrastructure of New Zealand and other jurisdictions that share a common law heritage. Trusts provide an effective way to separate the ownership of property from those who are to benefit from that ownership, and enable assets to be held collectively rather than individually.
2.3Trusts form an important part of New Zealand’s economic and social life. While the exact number of trusts is unknown, and probably unknowable, we have heard throughout this review that there may be anything between 300,000 to 500,000 trusts currently in New Zealand. The uses of trusts reach from holding the family home to high finance. Trusts are an important mechanism for the holding of Māori land, and have been extensively used by iwi as way to hold, and provide governance, for assets from the Treaty settlement process. The trust is the mechanism which the Government prefers iwi to use as “post settlement governance entities”. This makes New Zealand heavily dependent on the trust mechanism for the holding and governing of a large amount of its wealth, and consequently trusts are an important component of the economy.
2.4Similar to the Companies Act 1993, which aimed to get company law right, and the Personal Property Securities Act 1998, which aimed to get personal securities law right, getting the underlying infrastructure behind such an important institution in the New Zealand economy as the trust correct is a critical goal for New Zealand law. Unlike those two statutes, we do not recommend a wholesale revision of the underlying law, and in the case of the Personal Property Securities Act, the abandonment of a long legal heritage. Nonetheless, this review is as important as those were. Its aim is to ensure the law that supports trusts is as fit for purpose in 21st century New Zealand as it can be.