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Under the Spotlight: Reviewing Trusts

9838 NZ Trustee Services
9838 NZ Trustee Services

10 years ago no one seemed very interested in whether Trusts were compliant or not as long as people where signing their annual gifts and filing them with the IRD. Since then a number of things have happened which put Trusts very much under the spotlight.

Some of these things are:

  • The Penney Taxation Case
  • The Bundle of Rights Regime
  • The Changes in WINZ rules on Residential Care
  • The Abolition of Gift Duty
  • The Law Commission report of Trusts

Each of these topics warrant a separate article in themselves and it is not our intention to give an explanation of each here. What these collectively show is that Trusts can be actively challenged and so they need to be actively and regularly reviewed in light of the changes that have occurred.

If you settled a Trust ten years or so ago and have done nothing else apart from the annual gifting then perhaps now would be a good time to have your Trust reviewed even if it is just to give you peace of mind.

Some of the things that should be reviewed are:

1. Is there an Independent Trustee

2. Are the classes of Beneficiaries still suitable

3. Who exercises the powers of Appointment

4. Is the Level of Gifting still appropriate given the changes in Gift Duty/ WINZ rules

5. Have any additions or removals to the Trust been properly recorded

6. Who keeps the Trust Minute Book

7. Is a Register of Trust Assets being properly maintained

At the moment there is no regulatory body that supervises Trusts. The only time that you do get to see if your Trust is compliant or not is if it ends up before the IRD, WINZ, the Official Assignee or the Courts. In those cases it would be far too late to try and fix any problems. If we take WINZ as an example, when applying for a residential care subsidy, they require the original documentation together with supporting valuations for the original settlement of an asset into the Trust. If the Settlement occurred 20 or 30 years ago (as is often the case) those records can be hard to come by unless at least one of the Trustees has been focused on properly maintaining the Trust Minute Book.

It is far better to have your Trust reviewed from a compliance point of view so that you do get a chance to put things right if you need to.

I appreciate that this article has probably raised more questions than it has answered. No two Trusts are exactly alike and each Trust should be looked at on its own merits when deciding on things like gifting programmes, provisions of the Trust Deed etc.

My two main recommendations would be to:

1. Have your Trust reviewed by someone who has active day to day involvement with Trusts

2. Choose your independent Trustee with care. It should be someone who is focused on properly updating and maintaining the Trust records as things occur.

Enquire here for more information about all Trusts.

New Zealand Trustees Services