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Most parents, at some stage in their lives need to consider what provisions they would like to make for their children on their death. They would normally wish their children to have the use and enjoyment of the funds but also they would recognise that most children only inherit funds once, and so some thought should be given in order to establish that there is some protection around the funds to ensure that they are not lost.
Inherited Funds can be put at risk through a number of different ways:
• Relationship Property Claims - Inherited funds are separate property until they are used within a relationship. At that point they become relationship property your child could potentially lose half through separation.
• Business Risk - At the time of your death your child may be going through some business or creditor issues. If that were the case your assets could go to satisfy creditors rather than your child.
• Asset Testing - Most people now live well into their 80’s.
When you die your children may well be approaching retirement themselves and possibly seeking to divest themselves of assets due to whatever asset testing regime is current at the time. An inheritance at this time may well compound their problems. Are you better therefore to leave the Estate to your child directly or create a trust to hold the inheritance?
For many people the formation of an inheritance trust represents a safer option than a direct inheritance.
Prepare a separate Inheritance Trust Deed for each child, prepare a new Will leaving your residuary estate to the Inheritance Trusts rather than to your children directly.
If you have an existing Family Trust you need to check your Trust Deed to ensure that it allows for distributions to other Trusts. If this is the case you need to prepare a new Will and Memorandum of Wishes that instructs your Trustees to distribute your Trust to the Inheritance Trusts rather than to your children directly.
A Family Trust is the foundation of almost every asset protection and succession planning structure. The Trust Deed will be used as the foundation document to protect your family’s lifestyle and retirement assets and to allow for any changes that may occur in your life.
• Asset Protection
• Protection from Creditors
• Retirement Planning Advantages
• Protection of Assets for Future Generations
• Tax Planning Benefits
Without a properly established and managed Family Trust you may be exposed to:
• Having your hard earned assets, (including your home) lost due to a failed relationship
• Having those same assets lost to a Creditor
• Having your retirement plans derailed
• Protecting against potential new taxes ( capital gains, estate duty etc )
• Losing control of the disposition of your assets after your demise
• Personal Asset Protection
• Business Asset Protection
• Business Succession Planning
• Tax Efficiency
For people who own a Business(es) and do not have a Business Trust, are these concerns?
• Are my personal assets at risk if my business has creditor issues?
• If my business fails, are all my personal assets, (including my house) in danger of being attacked?
• Is the growth of my business likely to create estate planning concerns?
• Is my current business structure fully utilising available tax efficiencies?
• Are my personal assets and business assets intermingled that they are placed at risk?
• Can my present structure allow the efficient passing of my business assets when I die?
The Cost of Establishment for a standard Business Trust covers the following:
• Trust Deed
• Deeds of Acknowledgement of Debt
• Deeds of Gift
• Trust Minutes
It has become apparent recently that the purpose for Annual Trustees meetings has become blurred and their worth questioned. This has arisen because of the recent Abolition of Gift Duty and the perception amongst some commentators that this will remove the need to have an Annual Meeting with the Trustees of your Trust.
Nothing could be further from the truth as the regime post the Abolition coupled with the current Law Commission Review of the Law of Trusts has in our view increased the need for a disciplined, ordered and structured management process for Trusts. Additionally, good record keeping will be essential if Trusts are to be compliant and all this can only be achieved if Annual Trustee meetings are held.
Matters for review will include:-
• What activity has been undertaken by the Trustees over the previous year?
• Has it been documented and approved?
• Does the Trust Deed give authority for the transactions?
• Is all this recorded by Trustees Minutes?
• Are the Trust’s borrowings, if any, still appropriate? Should they be reviewed?
• Are all the Trust’s assets insured? Are there other assets that should be bought into the Trust?
• Are life policies held in the Trust?
• Are Wills and Memo of Wishes up to date?
• Are inheritances expected in the future? Should Inheritance Trusts for children be considered?
• What activities, if any, are proposed over the next year? Is there authority in the Trust Deed for this?
This list is by no means exhaustive and nowhere does it mention gifting. An Annual meeting with the Trustees for an Annual Review of the Trust is not an option, it is a necessity.
New Zealand Trustee Services are proudly privately owned – we offer Trustee Services only. We value our independence and what it means to you and your valued clients. We are not aligned to any financial institution and don’t accept commissions or brokerages for the placement of funds. We are impartial, and this leaves us free to work purely for the benefit of you & your clients. Our mission is simple – we aim to educate individuals about how to protect and preserve their assets.
How do we work?
Trust preparation and administration is the core of what we do. The first thing that we do is meet with your clients to discuss their reasons for wanting a Trust. We will discuss their current situation and plans for the future. With this in mind, we will then tailor a solution that best fits the client. We will make sure we explain the Trust Structure and how it all works simply because we believe an educated client is a happy client.
So what makes up a Trust?
To start with - Trust Deeds, Deeds of Acknowledgement of Debt, Deeds of Forgiveness of Debt, Trust Minutes, Wills, Memorandum of Wishes, Living Wills and Licence to Occupy. It’s our job to make sure your assets are protected and we take this very seriously. From initial creation of the Trust, transferring of the property, gifting programmes, minute book administration, and even the final distribution to beneficiaries, we take care of it all.
Managing existing relationships
As we are a Professional Independent Trustee only, and are not aligned to any particular organisation this leaves us free to work with either the client’s existing relationships or your relationship as the advisor. For most, if not all Trusts that are established, services of other professionals will be a necessity. If the Trust has come from an Accountant we will always check with you first as to your preference prior to referring your client to any other advisor.