I have a Family Trust – what are my obligations?

During the 1980s and 1990s, Kiwi’s in their tens of thousands set up family trusts to hold their family home and avoid estate duties. More were set up in the 2000s by those wanting to avoid asset testing for residential care and the effects of the Property (Relationships) Act.
Typically these trusts were set up with Mum and/or Dad as the Trustees, however, with very little understanding of the duties and obligations placed on them by legislation.
A classic example is as follows: Marge and Andrew set up a family trust in 2005 and transferred their family home to it. They had been gifting $27,000 each per year to reduce the loan from them to the trust that arose from the transfer of the property to the trust. After the abolition of gift duty in 2011, they gifted the whole amount remaining in one lump sum. Once this occurred they completed all their responsibilities in relation to the trust and could “rest easy” until they sold the property.
However, this is not the case. Marge and Andrew need to be aware that are required to administer their trust after making a final gift. There are continuing obligations in relation to trusts to ensure it is clear that the property is owned by a trust and not Marge and Andrew personally. Those include:
• Decision-making – Ensure that all trustees are included in every decision regarding trust property and all major decisions are recorded in writing and signed by all trustees.
• Finances – If the trust has its own income stream, annual accounts need to be prepared and an annual tax return prepared for the trust. A separate bank account for the trust should be used.
• Trustee meetings – Hold annual meetings of trustees and ensure minutes are taken.
If the trust is not administered correctly within the law, it could easily be judged to be a sham if challenged and the family house or other trust assets could be sold to pay creditors. Are you covered?
GECA offers a professional trusteeship service that includes a trust administration platform that ensures the trustees are meeting their obligation, protecting both the trust and themselves.
To find out more about GECA’s Trustee services, call Giles now on 0800 758 766.