Trusts, their use & operation in estate planning

Abstract

Trusts were first created in England many centuries ago by settling property upon protective Trusts whereby the income was paid to successive generations whilst the corpus was maintained intact thereby avoiding death duty.

To prevent this, rules were formulated some 250 years ago to prevent the indefinite "tying-up" of property and these still apply today and are generally referred to as the Rules Against Perpetuity. In New Zealand these Rules have recently been amended but briefly they are to the effect that property may be placed in Trust for the period of a life in being plus 21 years thereafter or for 80 years. Similarly until the Perpetuities Act, 1964, it was permissible to accumulate income only for a very restricted period and as a result the compilers of Trust Deeds had to be wary that they did not infringe this law which became known as the rule against accumulations. This, however, was abolished with the Perpetuities Act, 1964, and it is now permissible to accumulate income for the full period of the Trust.

Many notable authorities have upheld the right of the individual to order his affairs in such a way as to preserve as much as possible of his funds intact for transmission to his beneficiaries. The classical dictum which has been quoted in many subsequent cases was that of Lord Tomlin in the Duke of Westminister v Inland Revenue Commissioners #1936# when he said, "every man is entitled if he can to order his affairs so that the Tax attaching under the appropriate Acts is less than it otherwise would be".

Planning an Estate and the introduction of a Trust into that plan requires a careful consideration of many varied, and often conflicting objectives. It also involves assessing existing problems and visualising those that may develop in future.