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ABOUT FAMILY TRUSTS

There are also family and personal reasons for protecting our assets against creditors, in relationship issues (not necessarily yourself, but what about your children?), and advantages such as income tax splitting, keeping matters confidential, setting up trusts for educational and other reasons.

One definition of a family trust is that it is a simple and legal way for you to dispose of your assets by selling them into the family trust but retaining some control over them during your lifetime and eventually passing them on to your family.

People worry about loss of ownership of their assets when they sell them into their family trust, but there are strong control mechanisms. Usually you will be not only a Settlor of your property into the trust, but also a Trustee, managing the assets in the trust for the benefit of the Beneficiaries. These include yourself as well as members of your family. Your children can receive the benefit upon your death through the use of a family trust which you manage during your lifetime. You will be a good Trustee, you have power to put assets into the trust and take them out, you have the power to hire and fire other Trustees who are not Settlors like yourself. You have the power to call up your loan to the trust, which you have given in exchange for the sale of your assets. It is usually repayable upon demand. You have a Memorandum of Wishes which sets out your wishes as to the disposal of your property after your death. It is a powerful, persuasive document which the new Trustees must take into account. You have strong control mechanisms, and although you have sold your assets into the trust, you still retain a large measure of control.

We are often asked when the best time to set up a family trust is. The answer is "Sooner rather than later". By forming a family trust now you fix the value of the asset. If it is increasing in value eg your family home, then you have a longer period to clear the debt by gifting since the free amount for gift duty allowed by the Government is $27,000.00 for each Settlor. Of course, you can pay gift duty to the Government to speed up the process, but why do that? The Government also has the ability to make changes in tax legislation at any time. Generally, it is not retrospective.

The asset and means testing regime to assess whether you are entitled to a residential care subsidy takes into account the value of your assets. You are not entitled to the subsidy until you reduce your assets under these limits:

  • From 1 July 2007, people who do not have a partner, or have a partner who is also in long term residential care, must have assets valued at $170,000 or less to qualify for the Residential Care Subsidy.
  • From 1 July 2007, people who have a partner who is not in care will have a threshold of $75,000 not including the value of their house and car or can choose a threshold of $170,000 which will include their house or car. Both asset thresholds increase by $10,000 on 1 July each year.

Asset protection is about managing your risks. A family trust can be a very useful tool for managing your personal risks and that of your family.

Free 'no obligation" interview

 If you are considering a family trust, I will provide a 'free no obligation" interview by phone or in person at my office in Wellington, to enable you to decide whether you wish to proceed with a family trust.  

Fee structures

The fee structure will be discussed at that time, but generally, there are two levels.

The entry level is for a limited set of documents and you "pay as you go" for the rest if you need them. I can set the trust up for you with a trust deed, memorandum of wishes, a will and powers of attorney as to care, welfare and property. The fee will be $850.00 for a single person and $950.00 for a couple

There will be a separate fee of $250.00 for the first gifting (all sums inclusive of GST). I will then assist you further on a fee paying basis each year for subsequent giftings if you need me to attend to them for you. The same goes for specific documents you may later wish me to prepare. In that way you can if you wish, "build up" the entry level package to the comprehensive asset protection plan by spreading the time and the fees involved. I will provide the documents you need on disk.

If you require a comprehensive asset protection plan from the outset, then the higher fee structure will apply, but you will of course receive more documents and more service for the fee settled on. See below for the documents which are usually included in the comprehensive asset protection plan.

The fee structure here, for a single person is $1,995.00 and for a couple $2,495.00.

The fee structure is for a folder containing the usual documents listed below, plus a back up copy of each document. In addition a year of support for the management of your Asset Protection Plan is included. You will receive a disk setting out a number of important documents and tuition on how to manage your minute book and gifting programme.

Whichever decision you make, I will provide a client input form to be completed and returned to enable me to have sufficient information to prepare your family trust documents.

If you have difficulty filling out the form, do not worry. Do what you can and feel free to phone me. I will to assist you fully with filling out the form.

We provide a comprehensive Asset Protection Plan which usually includes the following documents

A folder which includes

  • An index of documents
  • A Register of Settlors, Trustees, Beneficiaries and Advisors of the Family Trust
  • An outline on your Asset Protection Plan
  • A paper setting out your responsibilities as a Trustee and an explanation as to Trust Deed requirements
Constitutional documents
  • A comprehensive Family Trust deed
  • A deed Appointing the Discretionary Beneficiaries
Those Matters Personal to You –
  • A paper providing information about Enduring Powers of Attorney as to your Personal Care and Welfare and Property
  • The Powers of Attorney for Personal Care and Welfare and for Property (two sets for a couple)
  • Memorandum of Wishes which sets out your wishes as to disposal of your trust property after your death
  • Comprehensive Wills (two for a couple)
Title documents
  • Where a family home is being transferred into the family trust there will be an Agreement for Sale and Purchase from yourselves as vendors/settlors to the purchasers/trustees (often yourselves)
  • A Transfer of Ownership form
  • Quotable Value/Rates Notice
  • Settlement Statement
  • Any other documents required by your bank such as a mortgage to secure new loan documents, and perhaps bank guarantees
Register of Assets and Liabilities

There will be various registers which you can elect to use including a

  • Register of Assets of the trust
  • Register of Loans, Loan Repayments and Gifts
  • Register of Unsecured Loans
  • Register of Secured Loans
  • Register of Distributions to Beneficiaries
  • Register covering the trustees’ income, capital, items and gifts and what equity they have
Minute Book
  • A paper setting out how to operate your minute book
  • A calendar setting out dates which you need to know for tax and gifting purposes
  • The initial minutes of the Trust completed by us
  • Draft minutes for future gifting, the purchase of assets by the Trust from each of the Trustees, the purchase of assets by the Trust from a third party, the sale of assets by the Trust, additional loans from each Trustee, loan repayments from the Trust to each Trustee, interest payments on loans to each Trustee, general minute format for anything not already covered, capital distributions, year end income distributions and end of year minutes
Other legal documents
  • A Deed of Sale and Purchase or Acknowledgement of Debt by the Trustees to each of the Settlors
Gifting
  • Diagram showing various aspects of gifting
  • Deed of Reduction of Debt by way of Gift by each Settlor/Donor to the Trustees/Donees
  • Gift Statements for each Settlor to file with Inland Revenue (IR196 form)
Tax
  • IRD number application (IR596 form)
Other
  • Other documents as required
CONVEYANCING FEES AND DISBURSEMENTS

For the sale of the family home into the Trust (up to Transfer of Ownership stage but not for discharges of mortgage, joint family home application, new mortgages, bank guarantees, etc which will be quoted separately)

Conveyancing fee on above $450.00
Disbursements $130.00
Total $580.00 (including GST)