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THE EVOLUTION OF THE CONTEMPORARY NEW ZEALAND PRIVATE WEALTH ADVISOR
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In the past three decades the number of trusts in New Zealand has grown exponentially for reasons I have never been able to understand. I have written and spoken extensively about this issue and remain of the view that many people in New Zealand have been advised into setting up trusts in circumstances where they get little (if any) benefit from the arrangements. Where there have been good reasons for the trusts being set up they are often governed and administered in such a way that they may not withstand scrutiny.

I do not propose to labour the point in this post but with the vast number of legacy trusts existing in New Zealand there is an increasing need for and recognition of contemporary New Zealand trusts practitioners who are genuine experts in the law, governance and administration of trusts.

Thousands of trusts in New Zealand have been set up by Baby Boomers. Increasingly, well advised children are scrutinising the decisions of the trustees and finding defects in governance which could lead to legal challenges and, ultimately, transactions being invalidated and trustees being found personally liable. Furthermore, age-related issues are surfacing as wealth is transferred between generations and children are engaging with trustees appointed by their parents. Historical errors are coming to light and causing real and expensive problems for all concerned.

A consequence of this is an increasing number of contentious and “semi-contentious” trust related issues that need to be resolved either by negotiated settlement or, ultimately, the High Court.

Contemporary New Zealand trusts practitioners are now dealing with issues such as trusts holding highly valued, sophisticated and complex assets, defective trust documents, a lack of independent governance, poor record keeping/administration and family conflicts. The ever changing and increasingly onerous regulatory and fiscal environment (e.g. FATCA, CRS, AML/CFT and the Brightline Test) adds further challenges.

As a consequence it is becoming increasingly necessary for contemporary New Zealand trust practitioners to bridge the non-contentious and contentious specialisms in a manner that was hitherto inconceivable, except in the rarest of circumstances in New Zealand. 

Applying to the High Court for directions or orders relevant to the governance and administration of the trust is becoming more common in New Zealand. An application of this nature may be routine and simply seek to rectify an obvious defect in drafting or regularise some administrative or procedural anomaly. Alternatively, the application may seek approval to a course of action that is not approved by the beneficiaries or attempt to deal with a situation where a trustee has breached fiduciary obligations. 

Dealing with these types of situations requires the contemporary New Zealand trust practitioner to apply specialist technical knowledge and expertise - but also take a commercial approach to resolve the dispute in a manner that best serves the interest of the client. In many cases a general litigator and longstanding family advisors would still have important roles in this process but almost certainly a trusts law expert should be involved to achieve the most effective combination of expertise.

Trusts are created and governed by the law of equity, which is a system based on principles rather than rules. This is actually a very different environment to that of the general law which is based on rules. Nuances such as the difference between formal validity and essential validity in the context of fiduciary powers are frequently lost on general practitioners (including some of the most senior and experienced civil litigators) and lay trustees. With the growth and increasing complexity of the private wealth sector the need for genuine expertise has never been greater. 

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