Are you sure you have a Trust?

Many of us have established Trusts on the advice of lawyers or other professionals with the intention of protecting and maintaining control over the use of our assets. However, time and time again I find those who have established Trusts and since undertaken a gifting process do not fully understand their responsibilities as a trustee (most are in relation to their own trust) nor how the Trust should be properly administered to ensure it can withstand any future legitimacy challenge.

As a result, many Trusts in New Zealand are unlikely to serve the very purposes for which they were created should they be challenged at a future point, leaving Trustees potentially liable should beneficiaries be able to demonstrate they have not understood and executed their Trustee responsibilities.
With currently no regulatory body in existence to supervise Trusts, the only time that you do get to see if your Trust is compliant or not is if it ends up before the IRD, WINZ, the Official Assignee or the Courts. In those cases it would be far too late to try and fix any problems.

If you have a Trust, then consider whether you would benefit from a review in respect of the following:
1. Is there an Independent Trustee
2. Are the classes of Beneficiaries still suitable
3. Who exercises the powers of Appointment
4. Is your Gifting still appropriate given changes in Gift Duty/WINZ rules
5. Have any additions or removals to the Trust been properly recorded
6. Who keeps the Trust Minute Book
7. Is a Register of Trust Assets being properly maintained

If we take WINZ as an example, when applying for a residential care subsidy, they require the original documentation together with supporting valuations for the original settlement of an asset into the Trust. If the Settlement occurred 20 or 30 years ago (as is often the case) those records can be hard to come by unless at least one of the Trustees has been focused on properly maintaining the Trust Minute Book.

Effective Trust administration does come at a cost, so be aware of what these costs are in your decision to establish and maintain a Trust. Don’t simply assume that setting up a Trust is a good idea should you not be prepared to understand what is actually required on-going.

If you are unsure of whether a Trust would be beneficial to your circumstances or if you think your existing Trust would benefit from a review, I am happy to put you in touch with the right professionals to discuss further.

Jon
jonc@apexgroup.co.nz
027 524 7970