We’ll help you navigate the ins and outs of family trusts
If you’re thinking about protecting your assets by setting up or reviewing a family trust, you’ve come to the right place.
A trust is a legal way to hold and protect your assets for you and your family’s future.
It's often used to keep property within the family, for debt protection, to put aside money for a certain purpose and to possibly avoid future relationship property claims. Family trusts can hold assets, invest and borrow money, operate businesses and they also pay tax. A document called the trust deed details the beneficiaries, the trustees and how the trust will be administered.
There are strict regulations around the administration of family trusts, and failing to follow them can result in penalties. You’ll typically need both legal and accounting expertise to ensure your trust is compliant and delivers all the benefits you want. ClearSky Accounting can maintain your trust accounts and file tax returns, plan for taxes and help you with the paper work.
Parliament is currently working towards introducing a new Act, which will update the very outdated legislation which has controlled trusts for more than 60 years. We will keep updated with latest rules and legislation, and ensure you’re aware of the requirements to maintain a legitimate trust and receive the maximum benefits from it.
What does the new bill mean for my family trust?
There are as many as 500,000 trusts operating in New Zealand and they’re an essential part of our legal system. Current legislation is narrow in scope, expensive and too complicated, so for the first time in more than 60 years the Trustee Act is getting a makeover. The intention of the proposed bill is to be more efficient and in line with current asset management. It will give better guidance for trustees and beneficiaries and make it easier to resolve disputes.
There are still a few steps to work through in the parliamentary process, but it’s a good time to get your head around what the new bill will mean for your family’s assets.
Extending the life of a trust
Currently, a family trust has a time limit of 80 years. When that time has elapsed, you have to wind up the trust and distribute the assets. The new legislation suggests extending it to 125 years, which may involve significant succession planning adjustments.
More information access for beneficiaries
The Trusts Bill proposes to give most trust beneficiaries the legal right to more detailed information on the state of the family trust, meaning they'll be able to find out who's getting what. This is a change from the outdated law, which often allowed trustees to keep beneficiaries in the dark about the position of the trust. Because this proposal has attracted a lot of feedback from trust advisers, we will have to wait until later in the year to see what changes, if any, are made to this proposed section of the new law.
Changes to the trustee’s role
Currently the trustee's job description is very vague, which has caused many trustees and their families to get into strife because of a lack of knowledge. It’s proposed that a trustee’s role will be much more clearly defined. The new bill as currently proposed will define a trustee's role and the responsibilities clearly. These include:
- Knowing the terms of the trust deed
- Acting according to the terms of the trust deed
- Acting honestly and in good faith
- Exercising trustee powers for a proper purpose
- Acting for the benefit of the beneficiaries or the permitted purpose of the trust
If you already have a family trust, you need to:
Get your paperwork in order
Make sure your records are accurate and that you document everything correctly.
Think carefully about your succession planning
If you already have succession plans, check that they will still be viable if this legislation goes through. If you don’t have any yet, it is time to put your mind to it and talk to us.
Review your trust
Take the opportunity to improve your tax structure, reduce your risk profile and better your family's financial situation.
Know your CRS obligations
New Zealand uses the Common Reporting Standard for the automatic exchange of information (AEOI) to help tackle global tax evasion. This means Reporting New Zealand Financial Institutions (NZFIs) have new IRD obligations, so you'll need to know if your trust falls into this category.
Talk to us so we can ensure you comply with any new legislation.