Trust Law In For A Shake-Up?

[Xav]

David Whitburn has made a post in this thread including a recent case (JFW v KFW) in which a trust was held to be a sham by the Family Court, of which I was previously unaware.

Having now read that case I would soften somewhat from my original position, but in terms of OA v Wilson the circumstances in which a trust will be held to be a sham are still rare. It should also be noted that the case was in the Family Court which as Winston pointed out has traditionally taken a more liberal approach towards the issue in the past (and was criticised for doing so by the Court of Appeal in Wilson).

[ENP]

How essential is the annual meeting for a trust.

The annual meeting for my grand fathers family trust is that we all go out as a family at a restaurant for dinner (about 20+ of us) and claim it as a business expense.

I have no clue what goes on with the family trust. I just like the free dinners!

[Bluekiwi]

The annual meeting for my grand fathers family trust is that we all go out as a family at a restaurant for dinner (about 20+ of us) and claim it as a business expense.

I have no clue what goes on with the family trust. I just like the free dinners!

Sounds pretty essential to me then.

[Perry]

Minute bites or meaningful Minutes?
.

[muppet]

Court opens way to seize trust assets

Court opens way to seize trust assets
By ROB STOCK - Sunday Star Times Last updated 05:00 05/09/2010

Shonky business people can no longer hide their assets in family trusts to protect their wealth from regulators and other claimants.
In a judgement one trust expert said broke new ground, a court decided that two directors still had access to funds in their family trusts, despite being bankrupted in February last year.
The Christchurch District Court last week ordered two directors of Balmoral Homes, which lied to customers about having a Master Build Guarantee, to pay $15,000 each in fines and a total of $107,000 in reparation and "emotional harm" payments to clients, despite all their wealth being held in family trusts.
Perhaps fortunately for the two directors, Master Build Services, the company that offers the guarantee Balmoral pretended to have, made more than $350,000 in ex gratia payments to people who had paid deposits to Balmoral, but whose homes were not built before Balmoral went into liquidation in April 2008.
Lawyer John Brown, the author of The New Zealand Master Trusts Guide, said, as far as he was aware, this is a first case of its kind where people had pleaded guilty to criminal charges, though such trust-busting by the courts is not entirely new.
The Family Courts, when dealing with family break-ups, have been aggressive in making awards to spouses and children that take into account property held in trusts, in some cases ordering assets be removed from trusts.
"Section 182 of the Family Protection Act 1980 does give the court powers over trusts, but that is limited to relationship property matters," Brown said.
That, Brown acknowledged, appeared to result in two sets of rules for property in trust – one pertaining to family disputes and quite another for civil proceedings, and in the Balmoral case, criminal proceedings where reparation can be ordered.
The Balmoral case appears to have eroded some of that dividing line, perhaps giving some hope for creditors in civil proceedings.
The Commerce Commission issued a statement saying it placed before the court information about the two directors' financial positions, leaving it in little doubt the two men had access to money to pay fines and damages awarded by the court.
"The commission is not always able to achieve financial redress for consumers who have been harmed by breaches of the Fair Trading Act," it said. "However, in appropriate cases, the commission does seek reparation orders on behalf of affected consumers.
"The commission's thorough analysis of the defendants' means in this case received praise from the judge."
Balmoral built homes in places like Christchurch, Reefton, Rangiora and Nelson.
The latest liquidator's report shows that secured creditors of the firm, including the IRD, have been paid back just over $1.5 million from the sale of Balmoral showhomes, leaving an estimated shortfall of some $150,000, but there is another $2.67m of claims from unsecured creditors, who look likely to get nothing.

http://www.stuff.co.nz/business/pers...e-trust-assets

[Meehole]

Hi Muppet,
It's been along time since you posted this, just wondered if you have ever had anymore feedback or heard anymore about how this is progressing here.
In particular very keen to bust a trust so any additional info or contacts would be greatly appreciated.

[Xav]

See here Meehole.

[blub]

Best to speak to Gilligan Rowe & Associates they are the best in the business when it comes to structures/trusts etc. http://www.gra.co.nz/

[CJ]

there have been articles like this since 2004 and probably before that as well.

The courts are unlikely to treat a trust as a sham due only to lack of documentation and lax admin.

If they treat the trust as an alter ego (ie. mixed transactions) then it is possible.

[Meehole]

David Whitburn has made a post in this thread including a recent case (JFW v KFW) in which a trust was held to be a sham by the Family Court, of which I was previously unaware.

Having now read that case I would soften somewhat from my original position, but in terms of OA v Wilson the circumstances in which a trust will be held to be a sham are still rare. It should also be noted that the case was in the Family Court which as Winston pointed out has traditionally taken a more liberal approach towards the issue in the past (and was criticised for doing so by the Court of Appeal in Wilson).

I did not know that a family trust could be dealt with in the Family Court, I was under the assumption that it could only be dealt with in the High Court?

[Meehole]

2 queries, if a trustee resigns in 2003 and then signs a memorandum of transfer on the family home that is held in the trust (no gifting done) in 2005, would this stand up as a valid transaction?
If as the settlor/appointor (husband) of the family trust, you resign as a trustee in 2003, then in 2006 the other appointor/settlor (wife) has themselves made the sole appointor/settlor by using another law firm to draw up the deed of variation, would this stand up in Court? I thought that an appointor/settlor had to either resign or die before the other could become a sole appointor/settlor?

[Xav]

You really need an opinion from someone who has seen all the documents Meehole, but my understanding is as follows.

2 queries, if a trustee resigns in 2003 and then signs a memorandum of transfer on the family home that is held in the trust (no gifting done) in 2005, would this stand up as a valid transaction?

I assume that you are talking about a transfer of real estate.

The answer to your question really depends on what you mean by valid. Things can get a bit confusing because the land register does not recognise trusts.

If everyone on the title signs the transfer and the transfer is to an innocent third party (ie. the family home was sold) then the transaction will be valid. The property has been legally transferred and that transaction would not be reversed.

If the transfer was in breach of the terms of the trust, then the transfer will still be valid but the trustees will be liable to the beneficiaries. This also applies to the retired trustee because he or she has chosen to deal with the trust assets as if he or she was still a trustee. This is known as being a trustee de son tort.

If the transfer was not to a third party (for example, the house was transferred to one of the trustees) then it may be possible to have the transfer reversed, but you would need to take detailed legal advice.

If as the settlor/appointor (husband) of the family trust, you resign as a trustee in 2003, then in 2006 the other appointor/settlor (wife) has themselves made the sole appointor/settlor by using another law firm to draw up the deed of variation, would this stand up in Court? I thought that an appointor/settlor had to either resign or die before the other could become a sole appointor/settlor?

Firstly, you can't resign from being a settlor. Anyone who has settled any funds on the trust is a settlor whether they referred to as such in the deed or not (and even if they are not referred to in it at all).

Whether the amendment of the trust is valid or not depends on the terms of the original deed. If, for example, variation of the trust requires only the consent of the trustees for the time being then it would be valid (although I believe there can be difficulties with some changes such as removing beneficiaires). If however it requires the consent of particular persons (appointers, to use your terminology) then the consent of those people would be required.

[Meehole]

Thanks Xav.
The MOT was signed by the ex trustee who at the time of signing was unaware that it was in fact a MOT! Yes duped by the ex and didn't even read the doc, just believed what she told him. It was signed in the kitchen of the home with only the 2 of them present, the witnesses signature was added sometime later. The ex's parents now have a half share in the former family home along with the family trust that the husband had set up. At the time of establishing the trust both of them were settlors and they were trustees along with the accountant, both the children were benficiaries. Since the deed of variation has been done, the ex has made herself a discretionary beneficiary along with the children. She is now the sole appointor, the original deed states "The statutory power of appointment of new trustees hereof shall be vested in (husband) and (wife) jointly during their lifetime and after the death of one then in the survivor provided however that they may during their lifetime nominate by deed any person to exercise the statutory power of appointment. Such nomination may be made either revocably or irrevocably and on such terms and conditions as they shall, by the deed determine" "So long as the statutory power of appointment is vested in more than one person then all appointments and dismissals shall be by unanimous decision"
The deed of variation states "The statutory power of appointment of new trustees is hereby vested solely in (wife) and the Statutory Power of Appointment contained in Clause 13 is hereby amended with present clauses 13.1, 13.2 and 13.3 being deleted and the following substituted;
13.1 The Statutory Power of Appointment of new trustees shall be vested in (wife) solely during her lifetime provided however that she may during her lifetime nominate by Deed any person to exercise the Statutory Power of Appointment. Such nomination may be made either by revocably or irrevocably and on such terms and conditions as she shall by the Deed determine.
There has never been any gifting done, there has never been a separate bank account set up in relation to the Trust and there has been income derived from renting the house out over numerous Xmas/New Year periods. The (wife) still makes reference in written docs to owning a half share in the house along with her parents.
Having spent a fortune with a lawyer trying to settle relationship property (unsuccessfully) the (husband) needs to very confident of an outcome in his favour before making the commitment to pursue this.
Having just spent a large amount setting up various trusts myself, I would hope that there is someway this one can be busted, otherwise why did I spend all that money making sure that mine are watertight and administered properly?
I realise of course it hard to comment without all the facts, which is why it would be great to know who would be the person to bust a trust successfully.

[Property Man]

I have a family trust with dust, but only in the sense of it being empty. This will change in due course as my status changes.

Regards
Aaron

[Winston001]

I did not know that a family trust could be dealt with in the Family Court, I was under the assumption that it could only be dealt with in the High Court?

Nope. Family Court judges regularly tear apart family trusts and usually quite rightly. The circumstances tend to be where one party has sequestered assets, being fruit of the joint matrimonial effort, into a trust which the other party has no access to.