Article on Trusts

Is a Family Trust for me?

TOP 10 REASONS WHY  A  TRUST  MAY  BE  SUITABLE  FOR  YOU:

  • Protect assets from business risk, especially if you are self-employed
  • Protect assets in a second marriage/ relationship or if your relationship comes to an end
  • Prevent claims on your estate when you die
  • Allow you to treat children/ grandchildren unequally after you have passed away
  • Protect your assets against the possible introduction of capital gains tax, death duties or succession taxes
  • Minimise tax liability
  • Protect against income and asset testing for, say, rest home charges
  • Provide funding for children's or grandchildren's education costs
  • Allow family assets, such as holiday homes, to pass to the next generation without exposing inheritances to relationship property or other claims
  • Give to the community through a charitable trust

The proposed changes to the gifting laws DO NOT affect the rights of Government departments to claw back assets if they determine you have deliberately given property away to qualify for government assistance.

As the benefits of a trust are long-term, it is important to create a trust as soon as possible.

CALL KARYN NOW FOR A FREE, NO OBLIGATION 10 minute discussion about the benefits of trusts.

reasons why we like and promote parallel trusts

1. Existing Assets Before a Relationship

Couples entering into a new marriage, defacto relationship or civil union, may have existing assets they wish to protect, especially when one partner brings a larger share of assets to the relationship.

They may also wish to provide for children from previous relationships, whom their current partner does not wish to provide for.

2. Acquisition of Assets

If the couple purchases new property, it can be kept separate.  Each retains half of the new assets under their own Trust.

3. Inheritance

If either person receives an inheritance and wishes to protect it from being divided in half in the event of separation, Parallen Trusts provide structure and can provide that protection.

In most cases it would be inappropriate for inherited property to be paid to a single Trust.

If inheritance is paid to a single Trust and subsequently the Settlor's relationship comes to an end, one half of the inheritance is normally payable to the former partner.

4. Separation

Unlike a single joint Trust, the Parallel Trust structure means that the ownership of most of the available assets is already divided equally between the partner's Trusts.

Each partner can simply be removed from the other's Trust.  The Trust structure would remain unchanged, avoiding possible delays associated with resettling the assets and potential tax consequences related with resettling income producing assets.

5. Future Realtionships

If one partner dies, the surviving partner may have further children or enter into a new relationship.

Parallel Trusts ensure that the assets owned by the deceased's partner's Trust at their death, are protected for the benefit of the deceased's partner's children, or the beneficiaries they wish to benefit, while still giving the surviving partner use of the shared assets.  At least 50% of the assets cannot be diverted to third parties.

The surviving partner can add additional beneficiaries to their Trust in the form of a new partner or children.

6. Estate Duty

At present there is no Estate Duty.  If a future Government reintroduced Estate Duty, (in its previous form a 40% tax on estates worth more than a Government set threshold), the Parallel Trust would be easier to modify and would not involve the resettlement of assets and the tax issues this would create.

Resettlements - tax issues:

  • Depreciation recovered.                                               
  • Taxable gains on revenue account land.
  • Base price adjustments (accrual rules).
  • Loss of tax lossess (continuity issues).
  • Loss of imputation credits.
  • GST.
  • Revocation of elections, ie LAQC.
  • Standing timber.

7. Independent Advice

Where clients are thinking of transferring assets to Trusts, there is always the question as to who needs to receive independent advice.  This can create tensions and potential professional indemnity claims.

Where you have couples who are already in an existing relationship, the use of Parallel Trusts, where the assets are split 50/50, in many cases can reduce the need for either of the partners to receive independent advice from outside the firm.