Although Family Trusts have become popular recently they have been with us in one form or another for four hundred years and their purpose has been much the same.

To protect Important Assets

Assets can be put at risk in a number of ways. These can include business failure, legal action or a relationship breakdown. We also do not know what the future holds. Will we get a Capital Gains Tax or will the Asset Testing Regime be extended to other Government Benefits?

When someone believes that Assets could be put at risk by owning them themselves they should seek to divest themselves of those Assets. They would normally still like to use or benefit from those Assets so they transfer the Assets to Trustees who hold them on behalf of a family group rather than an individual.

The transfer process usually takes a little time but in the end the Assets are held for a group of people rather than the individual so are not put at risk through the actions or situation of any one individual.

Ask these quetions...

Do you or your Partner operate your own Business?

Do you or your Partner give advice or provide a service on which others rely?

Do you believe that in future you could not be entitled to a Government Benefit because of the $ value of your Assets?

Are you afraid that your Family Assets could be put at risk in the evnet of yuor death or separation from your Partner?

If the answer to any of these is Yes then using a Family Trust may be of benefit to you. To find out more please email Jeff at jeff.royle@nztsl.co.nz and he'll get one of the team to call you back.

Current Views regarding Compliance and IRD

There has been a huge increase in the last decade in Trust formations. The use of a Trust is now an accepted part of Risk Management and most Accounting and Law firms offer Trust formation as part of their service.

Up until now the IRD have taken little interest in Trust Compliance as long as Income Tax returns are properly filed and values used in transferring Assets represent Market Value. This is the case now but in future things may be different. Trust usage has become so popular that is cannot be long before the IRD begins to take an active interest. We understand that a Trust Compliance Unit has been formed by the IRD based on North Island.

When faced with any IRD Audit, information has to be properly recorded and readily available. If you are a Trustee of an existing Trust ask yourself these questions.

Do I have a Trust minute book that holds copies of all Trust documents?

Have all Trustee decisions been properly recorded and signed by all Trustee's

Do I have copies of all Valuations to substantiate the Value used when Asstes were sold to the Trustee's?

Were the Settlor's reasons for creating the Trust properly recorded and held in the Trust minute book?

Does the Trust have a written investment strategy?

These are questions that an IRD Auditor is likely to ask. As a Trustee you are personally responsible for the Trust records so if the answer is No to any of the above, you may wish to re-visit the Trust minute book and put it right.

What to do?

If you have a Trust and want it checked over, let us know and we'll put you in touch with a Specialist Trust Advisor. Email Jeff at jeff.royle@nztsl.co.nz with the details.

If you want to form a Trust and need more information, again email Jeff at jeff.royle@nztsl.co.nz