What is a Family Trust – and Why Might I Want One?A Family Trust is a form of legal entity derived from ancient English law. Other types of legal entity are individuals, companies and partnerships. Each of these entities has various rights and obligations attached to them as well as advantages and disadvantages. A Trust is said to be an equitable obligation binding one or more persons (called the Trustees) to deal with property over which they have control (the Trust Property) for the benefit of other persons (called the Beneficiaries). The person who sets up the Trust is known as the Settlor. It is he or she who decides what the Trust will consist of, and who the Trustees will be. They also nominate the Beneficiaries or classes of Beneficiaries and decide how they are to benefit, as well as the length of time the Trust has to run. No Trust can exist for an indefinite period of time and most Trusts (excluding charitable Trusts) can run for a period of up to 80 years or for the term of the nominated life or lives of a person who must be alive at the time in which the Trust is set up. Most modern Trusts are Discretionary Trusts and the Trustees have the right to choose who gets what from the Trust and when. The people who may receive property of the Trust (either income or capital) are a class called Discretionary Beneficiaries. A Discretionary Beneficiary who misses out on benefiting under a Trust generally has no claim against the Trust, nor can they normally take any legal action against the Trustee’s decision.
Protect your family from creditors, tax, and gambling addicted siblings. No, not a gun you idiot, a trust. In most family Trusts the settlor may also be a Trustee and Beneficiary. The Settlor will also normally have the power to appoint and remove Trustees and Beneficiaries, as well the ability to vary the Trust or bring forward the distribution date. There are various reasons why people may wish to establish a Trust. Whilst creditor protection is one of the most common objectives it should not be used as the only reason for establishing a Trust. A Trust is frequently used to assist an individual or their family to carry out an estate plan or as part of the general asset planning. A Trust can be particularly useful to provide for the desired succession of property from one generation to another. Other good reasons for establishing a family Trust are as follows: 1. Potential taxation benefits. Whilst these are presently not great there are some possible advantages in the form of income splitting. It is essential to ensure that taxation advantages are not the only reason why a Trust is established. 2. Protection of family assets and property. This includes ensuring that they are left to members of the family selected by the settler and Trustees and reduces the risk in the case of an unsatisfactory marriage or a de facto relationship. A classic example is when a parent “re-partners” potentially jeopardising the family property from the perspective of the children. 3. Means testing. It is possible that a Trust could help in relation to means testing by Work and Income New Zealand for the purposed of government funded care (particularly rest home care). 4. Protection for future generations. A Trust may allow an amount of control to be exerted over a persons assets after their death and to protect them from creditors in other interested parties as well as family members who may not have the necessary financial skill to look after or manage the assets (for example a sibling with a gambling addiction). 5. Creditor protection. It is becoming increasingly important for people in all aspects of business or trade to attempt to protect their property from possible creditors. A Trust is one method of doing this. This reason is becoming even more relevant in this age of increased litigation and where directors or offices of companies are now beginning to face the prospect of personal liability in some circumstances. A classic example is the case “leaky homes” claims where builders, developers and tradesman are being pursued in their personal capacity by owners of defective houses. The main disadvantage of a Trust is the surrender of total control over the property being transferred into the Trust. The settlor no longer owns the property. There are also significant taxation and other difficulties may arise particularly if the settlor or Trustees relocate overseas. Every individuals or families circumstances are different. Trust law is a complex area of practice. As such it is essential to obtain competent and experienced legal advice when considering the establishment of a family Trust. In most cases the cost of establishing a simple Trust should be in the vicinity of $2000 plus GST and disbursements as well as the costs of transferring the Trust property as required in associated expenses. Please contact Mike Robinson or John Stirling if you need more detailed information. The information contained in this article is to the best of the Author’s knowledge true and accurate. No liability is, however, assumed by the Authors or Publishers for any loss suffered by any person relying directly or indirectly on this article. It is strongly recommended that a person considering establishing a Trust consult a competent specialist for comprehensive advice relevant to their own circumstances.
Surrounded by nothing but tranquil water, SpringBreak Fiji brings together the best of everything
The Fijian Cup
The Pacific Touch Rugby festival (Fijian Cup and Kava Cup) is underway on November 2, 2017 and with support from Touch Fiji and...
Rock Island VANUATU
Rock Island is an all inclusive fully immersive travel experience which was brought into the music festival scene by The Rock and...
With seven years and growing under their belt; TourismHQ has established and continues to deliver on their extensive wealth of...
- SPRING BREAK FIJI