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WINTER 2010

This issue concentrates on practical matters:  “The protection of your trust funds through diligent administration”

BY JACQUES F VANNOORT LLM
 

Issues for Discussion:




  • Prudent trusteeship
  • Different scenarios for trustees
  • Yearly reviews of all trust activities and transactions
  • Why trustees should care about these issues- liability
  • How trustees minimise their risks in particular for investing trust funds
  • The role of insurance in minimising risk
 

In recent times there has been a change in thinking about running Trusts. In earlier times those who set up trusts, the Settlors, would put their Trust documents in a folder and seldom look at it again. From time to time their accountant or lawyer would pass a resolution to show another Forgiveness of Debt and that was the end of it. During the last four years pressure has increased on the trustees to ensure that all trust affairs are properly recorded. This has become necessary because claims against trusts and trustees have succeeded, especially in the field of matrimonial disputes and in some isolated cases where developers and debtors have abused trust funds.

 

Once a trustee has accepted his or her position the trustee is duty-bound to become familiar with terms and conditions of the Trust deed and relevant documents. It also means to manage the trust fund in an efficient and economic manner.

 
A Minute Book for the Trust is held together with the necessary Resolutions, Agreements, Deeds and other financial records and statements. The Minute Book records events and all Trustee decisions in relation to the Trust. It is vital that all the trustees sign each minute. It should also refer to supporting documents, which are held as trust documents.
 

On a yearly basis we trust lawyers prepare the necessary Gift Statements and Deeds of Reduction of Debt to support those transactions. We discuss these with our clients and witness those documents when they come in to sign them.

Part of our yearly activity is also to review and assist in the completion of a Minute Book for the Family Trust.

 

Why should trustees seek the support of a trust expert in the running of a trust?




  1. Forgiveness of debt and certification
  2. Advances and distribution documents
  3. Minute book and resolutions
  4. Financial statements with related queries regarding assets/liabilities
  5. Trustees and their liability for losses, risks and taxation debts
 
  1. Thorough and prudent trusteeship
  2. Indemnities
  3. Insurances (some comments on this matter by Sue Howe)
 

Forgiveness of Debt in 2010




by Jacques Vannoort 

Changes are afoot in this field

Our present government is thinking of putting aside the present Forgiveness of Debt procedure requiring the $27,000 exemption yearly by IRD. The reason for this is the high cost of administering this. All Trusts are now utilizing this method and no doubt it has seen a massive growth in recent years.

HOWEVER

Suggestions have been put forward that in certain cases the Forgiveness of the complete Debt would not apply:

  • When fraud or gross negligence is an issue. A Court of Law could set aside the gift or the forgiven debt.
  • When a gift is made shortly before a marital separation, and without informed knowledge of both spouses.
  • When an Income and Asset Test is started by State Departments which relate to Residential care Subsidy, Widows Benefit or any other Government Subsidies that are Income and Asset tested.
 
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Newsletter Autumn 2012

 Family Trusts and the abolition of Gift Duty.  Is it still worth it having a Trust ?

 

Since October 2011 our Government has abolished the gifting regime for trusts almost completely. In other words you can now put your House or Investments or other valuable assets into your Family Trust in one complete transaction. This is expected to take place by means of a simple Gift.

 This is excellent news as it makes the long procedure of yearly gifting of $ 27,000 per person obsolete in one blow. Added bonus is that you only have to see your solicitor once to make the gift and so save yourselves lots of money.

That is the official line, but is it true ?   Is it in your best interest to gift or forgive the whole debt in one transaction ?:

                                                        - When you want fast and complete protection ? Yes;

                                                        - When you look forward to a Government subsidy?  No; 

                                                        - When your personal or marital relationship is shaky ?  No;

                                                         - When your business partner does not have a Trust ?  Yes.

Does it make a difference whether I forgive a debt of $ 27,000 or I gift $ 500,000. Should I seek independent legal advice for such a transaction before I embark on such a risky undertaking ? What will that cost me ?

You will be getting my drift. It is now more complex that ever before, and anyone who gifts more than the level allowed yearly by Work and Income NZ ( $ 6,000), should take good stock of his or her  : 

- present income and assets;

- projected future earnings and assets;

- health and job prospects;

- relationship and needs of children or other dependents;

- business involvement, arrangements, debts or entitlements such as superannuation payouts;

- and finally Capital Gains Tax and Income and Asset Testing of our Superannuation !

 

 Anyone who maintains that it has become simple and therefore cheaper lives in another world.

In the real world people want safety and security for their income and assets for themselves and their families.

That is to be applauded. They are the people who carry the financial burdens of this country, and have usually done so for most of their lives. They are the ones who seek protection and legal advice for this new legal environment.

At Sanctuary TrustLaw we do not shrink back from informing our clients about all aspects of  the steps possible in the field of Trust, including other taxation issues.

Yet amidst all this turmoil about gifting I AM CONVINCED THAT ASSET PROTECTION BY MEANS OF TRUSTS IS  BETTER AND MORE FLEXIBLE THAN EVER BEFORE. The enhancement of present or future assets can in my view only be done effectively  (tax and protection-wise) through Trusts.

 Shortly I will give you some more practical steps which you can take to safeguard finances and assets.

 Greetings

 JACQUES F VANNOORT (LLM)