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"The Secrets Of Running A Family Trust" By Jacques F. Vannoort (LLM)

Below follow some excerpts from my latest book on  Family Trusts. They are some issues that I deal with on a daily basis in my law practice in Auckland. It is based on my experience as trust lawyer over many years. It is full of practical examples and a must for Trustees and those who advise Settlors about  their Trusts. Finally it has a great number of useful tips for asset owners who use their trusts for all kinds of transactions, both personal and for business matters..

"...............We all like to think that we are most able to look after our own Affairs and Assets.  Most of us don't like being told what to do with our growing business or hard-earned money. We dislike being told how to protect our property  or how to invest. We are interested though, to know what taxation advantages are available in our specific situation. We should however also get to know what duties exist for us as Trustees  of our Family Trusts. Especially when those Trustees deal with financial matters concerning those Trusts"

"........................Many centuries ago Trusts were called "Uses" and they were run by trusted friends called "Trustees". The intention was to safeguard certain  Assets for the family of the person who had put (settled) his assets in a Trust. He was called the Settlor. Those who benefited from the Trust were called Beneficiaries. Those exact terms and their meanings still exist today. Already in those early days our ancestors knew that there was a need for trusted Advisors. They would look after the Assets and take decisive steps for the benefit of the Beneficiaries.  It was not dictated by the incapacity of the Settlor, but because it was for the  benefit of the Settlor's family. It was a  new and unique way to protect  Assets in the Middle Age of mankind................................."

".........................Trustees should give support to Beneficiaries and meet their needs in various ways. They should get to know the circumstances of the Beneficiaries in their Family Trust.  In New Zealand it is also expected that Trustees will respect the private sphere of the Beneficiaries. That is  probably why we have seen a unique development in this country, where people can set up a  Family Trust, then proceed to run it themselves and even benefit from the trust assets of that Trust during their lifetime ! (provided certain requirements are met)................................"

".............The need for independent Trustees still exists, and may be necessary when a Trust is complex to run. It may also be indicated when the Settlor of a particular Trust is financially vulnerable in his or her field of practice or business endeavor. Often Politicians or Religious leaders will find it helpful to put some distance between themselves and their finances through formation of a Trust, and  by placing their personal assets in it. Those who are weak or incapacitated or incarcerated in safe custody for a longer term, or in the field far away overseas, where different threats such as kidnapping and blackmail may exist, will also find assistance in the formation of a Trust.  Each person's own particular circumstances, and how clients and their families assess those risks, will guide us as to what options should be chosen. Situations will change from time to time  which may also require a change in Trusteeship !.....................".

"...............Settlors of their Family Trust should provide for all kinds of situations which may arise in the future for themselves and their children. They can even provide for the education and health etc of their grand-children. We must not forget other matters, however. We should discuss what the trustees should do when one of the beneficiaries is overly influenced by their spouse or partner, in the spending of trust monies. We should think about ways to avoid the possible loss of major Trust Assets in this regard. ...........".

."......Have you ever thought about what happens to your Assets when there is a relationship or marriage breakdown ?  During your trust formation we have a unique chance to discuss this and even regulate on what will happen, when such an unfortunate situation occurs between you and your partner. As a standard clause in our Memorandum of Wishes we state that ......."

"...............Mrs M knew that Palatal, her male companion on the cruise ship, was a smooth talker and a ladies man. He was so elegant and friendly to her though, and she  just loved his company and the attention he gave her.  She also remembered how lonely she had been, and how she had craved for the company of a man in her life ever since her husband Fred had passed away, so many years ago.  She felt uneasy however, about an investment that her companion had proposed to her yesterday. They were strolling on the promenade of the upper deck of the ship and had enjoyed a glorious sunset in each other's company. He had recited poetry, that he said he could remember from his university days. It was so romantic. He was an accountant he told her, and he was obviously a man of great talents. He thoughtfully wrapped her stole tightly round her shoulders, to keep away a slight chill from the evening breeze, which had started soon after that glorious sunset. He then explained, that it dealt with making available a huge sum of money to upgrade State of the Art racing stables belonging to his son in Melbourne.  A guaranteed investment and a no-brainer as he had called it..................."

'..............Dexter and his wife had set up their Family Trust years ago with a prestigious law firm in the city of Auckland. During their initial interview the lawyer had intimated, that he was an expert in the field of Trusts. They had transferred all their Assets into the Trust and had finished their Gifting programme some years ago. Apart from receiving a yearly Gift statement and Deed of Gift from the same law office where the independent trustee of his Trust still worked, he had not seen or heard anything from them over all those years. In fact he had not seen the Deed of his Trust ever since they had originally signed it, and he could not recollect ever signing a minute book for his Trust.  He had  made a claim for an Accommodation Supplement and a Widower's Benefit, soon after his wife passed away. He was rudely told by a manager of Work and Income that he would not receive a penny from them. He should first of all use up all his Trust Assets. They believed that he had deprived himself of his assets by putting them in a Trust. He despaired and believed that it made little sense to ask for a Review of that decision.  He now wished that he had lived a more prosperous life, and that they had spent more on their family instead of saving all those years. They had saved to pay off the mortgage on their house, and then their little bach on Manukau harbor, and then the savings in his Super fund. He remembered foregoing holidays with his wife, to save money for their old age together. She had died at the beginning of her retirement. He had now become a sad figure and despaired, that he would lose it all and face old age in poverty, as he had seen his own Grand-parents suffer. What to do  ?........."