Estate Planning : Pro Forma Settlors for Family Trusts

There is a misconception among New Zealand estate planners that there are tax advantages from constituting a trust with a pro forma settlor. The scheme involves having a third party to settle a trust for a nominal sum, so that the ‘true' settlor can avoid certain tax provisions when property is later settled on the same trust. Other than in life assurance trusts (see John Prebble 'Estate Planning: Pro Forma Settlements in Life Assurance Trusts' [1977] Recent Law 340), such schemes offer no tax advantages. Instead, each new settlement creates a new trust, leaving the pro forma settlor redundant