Simplified Rules for Selling Property Held in Family Trust

Legal Framework Changes for Trust Property Sales

The amendments to New Zealand’s AML legislation introduce a risk-based approach to due diligence requirements. Previously, all trust property sales triggered comprehensive documentation obligations regardless of the transaction’s actual risk profile. Under the new framework, “low risk” sales of property held in a family trust will qualify for simplified customer due diligence procedures.

This simplified process requires only three key steps: confirming property ownership and trustee details against the certificate of title, verifying trustees’ identity documents and roles, and retaining a copy of the trust deed. This represents a substantial reduction from current requirements, which demand extensive personal documentation, beneficiary details (including children’s information), and comprehensive proof of funding sources.

Who Benefits and How

Trustees and Beneficiaries: Family trust trustees will experience significantly reduced administrative burden when selling trust property. The elimination of requirements to provide detailed beneficiary information and extensive financial documentation will streamline transactions whilst maintaining appropriate oversight.

Real Estate Professionals: Agents will benefit from clearer, more proportionate due diligence requirements. However, this comes with increased responsibility for risk assessment—a concern raised by industry experts who question whether agents possess adequate training to evaluate transaction risk levels.

Legal Practitioners: Lawyers involved in trust property transactions will see reduced documentation requirements, though they retain important roles in ensuring compliance with the new risk-based framework.

Implementation Challenges and Considerations

The legislation’s effectiveness hinges on clear guidance defining “low risk” transactions. Without precise criteria, practitioners face uncertainty about compliance requirements, potentially exposing them to regulatory penalties. The Government has directed the AML supervisor to provide comprehensive guidance addressing these concerns.

Additionally, questions remain about training requirements for real estate agents who must now assess transaction risk—a responsibility traditionally handled by legal and accounting professionals with specialised AML training.

Broader Regulatory Context

These changes form part of New Zealand’s commitment to maintaining Financial Action Task Force (FATF) compliance whilst creating a “smarter, more proportionate” AML regime. The reforms acknowledge that blanket high-level due diligence for all trust transactions was disproportionate to actual money laundering risks in typical family property sales.

However, the timing has drawn scrutiny given New Zealand’s current challenges with methamphetamine importation and associated money laundering activities. Balancing streamlined processes with effective criminal finance detection remains crucial.

Practical Implications Moving Forward

Trust holders should prepare for the transition by ensuring their trust documentation is current and accessible. While simplified procedures will reduce administrative burden, maintaining proper records remains essential for smooth property transactions.

The changes also highlight the importance of proper trust structure and documentation. Well-drafted trust deeds and clear beneficiary arrangements will facilitate compliance with both simplified and enhanced due diligence requirements when applicable.