NEW ZEALAND Law and Practice Contributed by: Brent Wicks, Violet Yu, Jonathon Russell and Sandy Chen, Cone Marshall Limited
4.3 Transfer of Partial Interest As there is no gift duty, estate duty or tax payable on capital distributions, no planning is therefore required to adjust values for the purposes of reflecting a lack of marketability or control.
Some advantages and considerations of the dual trust structure include the following. • Tax efficiency – Company profits are taxed at 28%, lower than the 39% trustee rate, reducing business income tax. • Flexible dividend distribution – The business trust can funnel company dividends via the family trust to its beneficiaries, where they can be taxed at the recipient beneficiary’s marginal rates (10.5%–39%, based on personal income), saving tax if that rate is below 39% (subject to the minor beneficiary rule: see 3.3 Tax Considerations: Fiduciary or Benefi - ciary Designation ). • Capital distributions – Capital distributions are tax- free. • Planning across blended families – In the context of “blended families”, separate family trusts can be formed to cater to different “branches” of the fam - ily tree, with the ability for distributions to flow from the business trust, equally or disproportionately (if that is desired, to reflect differing levels of entitle - ment) to the family trust(s). • Succession planning – The business trust ring- fences personal/family assets from business risk and third-party creditors. The structuring of the family trusts, combined with clear guidance from the settlor (in the form of a memorandum of wishes), ensures benefits ultimately filter through to the intended recipients. If multiple shareholders are involved with the operat - ing company and business, a shareholder agreement with buy/sell provisions and reciprocal life insurance policies can help ensure business continuity upon the settlor’s death, ensuring there is funding available to facilitate the surviving shareholder purchasing the deceased’s shares, and ultimately providing funding for the value of the business interests to the family trust. A further layer of protection to the structure might involve a relationship property agreement (under Section 21 of the Property (Relationships) Act 1976), to safeguard the trusts and business interests from claims under relationship property legislation.
5. Wealth Disputes 5.1 Trends Driving Disputes
In New Zealand, cases disputed in the highest court in relation to both trusts and estates have been much discussed amongst legal practitioners in relation to their implications and contribution to the development of the law of private wealth. A recent notable case in the Supreme Court is the case of Cooper v Pinney [2024] NZSC 181. This case discussed the controversial case of Clayton v Clayton [2016] NZSC 29, where the same court viewed that Mr Clayton’s vast powers in his trust, including the ability to remove all other beneficiaries, were tantamount to ownership, and held that Mr Clayton’s powers were personal interest subject to relationship property divi - sion under the Property (Relationships) Act 1976. This line of argument failed for Ms Cooper in the Supreme Court in Cooper v Pinney because Mr Pinney’s powers in his trust were more restricted. This is an important development as the court has set a boundary to the application of Clayton v Clayton . A recent notable estate and trust dispute is the case of A, B and C v D and E Limited as Trustees of the Z Trust [2024] NZSC 161. The adult children of the deceased challenged the transfer the deceased made into the trust prior to his death for the purpose of not leaving inheritance to his children. While the children suc - ceeded in the High Court, they failed in the Court of Appeal: it ruled that, given the children are now adults, any fiduciary duties a parent had for their children would have ceased. The Supreme Court confirmed the Court of Appeal’s findings. If the assets were not in a trust, but under the father’s personal estate, the chil - dren may have a chance of a successful claim under the Family Protection Act 1955. The Supreme Court expressed that, without anti-avoidance provisions in legislation, the courts would not have the jurisdiction to revoke the transfer made into the trust.
423 CHAMBERS.COM
Powered by FlippingBook