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. Trustees should early on decide whether the minutes are kept as a bound or loose-leaf file or and whether trustee meetings and approvals can take place by telephone, email, fax etc. The minutes should show to the reader that when the trustees took part in the decision-making, they had full knowledge of all the relevant facts that made that decision possible. It should also show that they have acted according to the Deed of Trust, and legal principles that may apply.
A Minute Book is an historical document, which shows reasons for decisions and actions, which have taken place. It may contain opinions and suggestions by the trustees. Some information may be confidential and should not be held in the minute book as it could cause liability for the trustees at a later stage. The minutes are filed in date order.
The Minute Book goes further than just holding decisions by the trustees. It goes to show the reasons for those decisions. In doing so it provides the historical background, which is important for understanding the decisions of the trustees in the future and also by other trustees. It can also be important to show that the trustees have acted prudently and after taking the necessary advice from others who may be professionals in a specific field or before embarking on a specific action.
Typical minutes are:
- The initial trust set up minutes showing appointment of trustees.
- Acceptance of the trust corpus amount by the trustees.
- The appointment of the trust solicitor.
- The appointment of trust accountant.
- The opening of a bank account and the duties and authorities attached to that.
- The transfer of other assets to the trust.
- The security given by the trustees to allow loans to be taken out, secured by Assets held by the Trust.
- The basis for the values of the assets such as agreements for sale or evaluations and insurance proposals etc.
- Indemnity for Guarantors and others connected to the transactions such as solicitors and banks etc.
- End of year activities connected to the financial statements and the position of the accountant.
- The approval of the investment course and or policy on a yearly basis.
- The approval of funds distributed to beneficiaries.
- The approval of loans made available to beneficiaries and or others at interest rate or on demand and for certain terms or for a non-fixed period.
- All transactions involving the trust such as partnerships, common transactions and investments.
- Accepting loan agreements and making loan repayments with all the necessary terms and conditions attached to that.
- The purchase and sale of assets which should include all Council reports, loan agreements, valuation reports, mortgage documents, lawyers letters and other statements and documents relating to those transactions.
It is important to note for all minutes that the purpose of the actual payment distribution or transaction should be recorded and preferably set out in the minute book itself.
Whenever decisions are made by trustees to distribute monies that are owned by the trust such as income or part of the capital of the trust fund then the trustee should consider the overall interest of all the beneficiaries.
When the trustees are also the beneficiaries they should additionally declare their own interest as beneficiaries and the fact that they are trustees. In a recorded decision they should expressly put aside their personal interests.)
Should Trustees File Tax Returns?
The Trustees must file an IR6 Tax Return each year. It is for the Trust and it shows the entire Trustee income and tax payable. Calculations and accounts for tax of the beneficiaries are also shown unless the income is transferred direct. The beneficiaries can then claim a credit for that.
What is a Beneficiaries Tax Return?
Here we see the beneficiary’s income, which is shown for the new Trust in the tax year, and they pay tax on that on their normal tax rates. If tax has been deducted overseas then your maximum credit is the amount of New Zealand as payable on the share of the overseas income. Non-qualifying trusts are taxed separately at 45c in the dollar.