Parallel Trusts
Parallel Trusts are effective for families whose assets are owned in disproportionate values.
They are also effective in equitable treatment of “blended families “when couples have come together bringing children from previous relationships.
Parallel Trusts are actually two trusts, one used for each partner.
For parents looking to protect their assets and ensure his/her children inherit, are these current issues? :-
- Would my partner’s children receive all my assets?
- Should my current relationship fail, would I be happy for my partner’s new partner to receive my assets?
- Do I want my partner to have the use of my assets after my death, if so for how long?
- Would I want my son’s/ daughter’s partner to receive my assets if their relationship should fail?
In blended families, your own children are taken care of
The blended family is becoming more of a common situation as unfortunately the statistics tell us many relationships fail and new ones are formed. The blended family occurs when couples enter a relationship and each partner brings to the live-in relationship children from their previous relationships.
Such couples who are looking to protect their assets and where each partner wants to ensure his or her own children will receive an inheritance, will look to establish a Parallel Trust structure. Each partner will establish their own Trust and move their assets into their Trust providing for their partner’s interests to be protected but also ensuring inheritances will pass to the children of the deceased.
A surviving partner can have use of the shared assets
In the event of the death of one partner, pursuant to the terms of the Will and Memorandum of Wishes of the deceased, the surviving partner can have access to the assets held in the deceased’s Trust. If that asset was say a share in the house, the survivor will have the right to continue living in the house, as stipulated in the deceased’s Will.
Both partners make this provision and they will stipulate when it is to cease, say when the survivor dies, forms another relationship in the nature of a marriage, moves out of the house or on the deceased’s children reaching a certain age. The survivor may also be entitled to take income from the deceased’s Trust subject to limitations i.e. termination on any of the above events happening.
Unwanted beneficiaries (‘gold diggers”) are prevented from receiving your hard earned assets
One of the pet fears of both couples and parents is the gold digger appearing on the scene and eventually walking away with the “loot”. The laws of New Zealand allow for the splitting of relationship property equally if the relationship has lasted for more than 3 years. If going into a relationship or in fact leaving a relationship, the Parallel Trust will provide protection from assets passing to a partner and as a consequence being lost to your children.
One partner with a large asset base can protect it....
Should one partner own a larger share of the assets of a couple, a Parallel Trust is an ideal vehicle to protect those assets for the benefit of his/her children.
For example, if one partner brings $300,000 to the relationship and the other $450,000, both amounts are used to buy a house and the relationship fails later, the value may be split equally thus disadvantaging the partner contributing the larger amount.
However, if the funds are advanced from their respective Parallel Trusts, one partner will have contributed $300,000 (40%) and the other $450,000 ( 60% ) of the cost. One Trust will therefore own 40% of the house and the other 60%. These proportionate amounts will be protected under the Trust’s terms for the benefit of each Trust’s beneficiaries.