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Published: 16 September 2013
Pages: 24

Introduction

With the proliferation of trusts, increased scrutiny is being placed on the contents of empowering documents such as trust deeds and wills. Many lawyers use precedents or templates that go back many years and which, in many cases, are not understood by the users and are not reviewed regularly.

The tendency is to use precedents without really being familiar with them and often there is a reluctance to review them critically and make changes. Often, if changes are made, they are simply additions to an already long document without careful thought as to how the additional clauses fit in with the existing documents. Young lawyers are often presented with the firm precedent or precedents and feel obliged to use them, even though they may not be familiar with the document and may not really understand some of the convoluted and archaic clauses.

Against this background, it is not surprising that a number of problems arise. When a difficulty arises, the terms of the powering documents are scrutinised and, in some cases, they are ill-suited to the circumstances and rather than resolve difficulties, they may add to the problems.

The purpose of this paper is to highlight some of the common drafting errors that arise, discuss the legal principles behind some of the more common clauses and discuss how these problems can be resolved.
 

Course outline

• Drafting Mistakes and Issues and How to Fix Them
  • Omitting A Charging Clause
  • Majority Rule Provisions
  • Placing A Trustee in A Position of Conflict of Interest
  • Accepting Appointment as A “Passive” Trustee
  • Lawyers Inserting Their Own Names as Settlors of Trusts
  • Choice of Trustees
  • Life Interest Clauses
  • Perpetuity Period/Vesting Date
  • Lumping Together Clauses from Various Precedents
  • The List of Beneficiaries That Includes Half the Population of New Zealand
  • What Is a Primary Beneficiary?
  • Settlors, Appointers and Protectors
  • Power to Vary
  • Compulsory Resettlement When the Settlors Separate
  • Partial Modification of Statutory Investment Powers
  • Inadequate Range of Powers
  • Requiring Disputes to Be Settled by Arbitration or Mediation
  • Treating the Letter of Wishes as Part of The Trust Deed
  • Absolute Confidentiality Clause
  • Excluding All Liability of Trustees
  • Defined Terms That Are Not Defined
  • Not Reading the Document Before it is Signed

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