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The evolving world of personal trusts

Tower Trust (formerly Trustees Executors) has been a leader in the Trusts marketplace for many decades but over the past forty years Trusts have undergone fluctuations in both their nature and public acceptability.

Wednesday, December 12th 2001, 2:27PM

Previously Trusts were used by the relatively wealthy and by business people but middle New Zealand had little interest or concern. These Trusts were known as family Trusts or inter-vivos Trusts. They were often extensive documents with wording few people understood and they were expensive to set up.

A big boom in Trusts had occurred around 1960 following the impact of the Nordmeyer Black Budget. That drove many people to set up Trusts to reduce the impact of death duty and taxes. For example, in 1969 even an estate over $12,000 in value paid death duty.

The 1970s saw high inflation increasing asset values and death duty exemption limits progressively raised. By the end of the 1980s governments no longer saw the opportunity or had the desire to raise revenue from death duty.

Tower Trust's solution in 1990 was the development of a new type of Trust and in November of that year we launched a new concept called Personal Trusts. It took trust deeds and reduced them down to a few pages in length - they were written in plain English, and they cost a fraction of the price of the old Trusts to set up. They created interest particularly when making legacies during a person's lifetime, but there was no major factor driving people to use them.

Shortly after that, the then government met an election promise and abolished the superannuation surcharge, but at the same time announced a new means testing arrangement for superannuation. This arrangement was never implemented because of the public outcry but the intent was for a comprehensive assets and income test to qualify people for state funded superannuation. There was a proposed abatement regime that reduced the pension relative to a person's income.

All this resulted in an enormous interest in asset protection and what we now call Personal Trusts. People realised that they could not be assessed on what they did not own - so they set up Trusts which could be used to remove assets from their own name.

Over the next few years we saw more interest in Trusts to help with asset testing. The government was sending a clear signal that people needed to meet rest home fees from their own resources before looking to the government.

Today Personal Trusts are commonplace - they have been with us for centuries and they continue to evolve because the fundamental need to protect assets remains. They are at the very core of modern personal asset management.

Today people in business now face the prospect of legal actions and even bankruptcy if their own debtors can't pay them. There is a lot more litigation in society and we have changes in matrimonial legislation where people are wanting to protect assets for themselves and children.

Tower Trust has been a leader and innovator in this fascinating field. It will continue to lead change in this area.

For more information on Personal and Family Trusts, call Tower Trust toll-free on 0800 Tower Trust (0800 869 378).

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