Trust Establishments, Management, Reviews & Foreign Trusts
Firstly we sit down with those that have Trusts and determine why the Trusts were created. Then we see if the requirements and end result are going to be realised under present regulations and court rulings. We also need to establish if the personal needs of the client have changed since the establishment of their Trust – and if their thinking around asset protection has also changed.
An example here would be around the Property Relationship Act. Many couples want to ensure that should one partner pass, then no future partner of the survivor can look to strip assets away from the family.
Many people we speak to are now refocusing their Trust Structure to take into account the Succession Planning perspective – safeguarding against individual inheritors selling off assets to the detriment of the long term intentions of the Trust entity. Under the various recommendations by the Law Commission, one is that the Perpetuity Period be extended from the represent 80 years to 150 years. So now we have the ability to provide intergenerational transference of wealth, whereby the parents Trust will be distributed to the children via an individual Inheritance Trust, thus ensuring that the protection remains in place for the entire family.
When Trusts receive a gift from another Trust, there is no gifting requirement and everything is therefore still protected as the assets have never actually touched the hands of the children. Hence many of our clients now create Inheritance Trusts for their children when creating their own Trust. In this situation its vital to ensure the Perpetuity Periods for the Family Trust and Inheritance Trust are identical as we do not want to be in a position where we transgress the rule of perpetuity.
Single people or those leaving a relationship with assets should also consider the establishment of a Trust, however this must be created prior to any relationship being formed, otherwise it may be argued that the Trust was established to prejudice this new partner. Asset Protection to ensure that potential future Creditors cannot make a claim over the family assets is also very popular. Like all Trusts, this type of Trust must be created well and truly in advance of any potential issue.
Remember – the best time to create a Trust is when you do not need it!
Your Trust requires diligent management to remain legally compliant.
In the past, many Trusts were established without due attention to administrative requirements. Given recent Preferred Approach issued by the Law Commission we see that this will most certainly change how trusts are both perceived and administered. Adherence to correct administration is a must if the Trust is to remain compliant and effective. As such, New Zealand Trustee Services works closely with clients to make sure they feel informed about, and in control of, the administration of their Trust. Our Trust management process includes the following stages;
- Every Trust is reviewed annually
- Review form completed by Trust Managers and clients
- Holistic review of assets in Trust, assets not in Trust, whether these assets outside should be introduced
- Wills and Memorandum of Wishes reviewed
- Trust Minutes and any supporting Deeds executed to record meeting
- This is part of our process to maintain compliance for Trusts
- This means meeting each year, reviewing the assets held and ensuring that all documents are recorded correctly – again specific to the requirements of the Trust
- Ensure we hold sets of Financial Accounts etc. on file