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Is it worth setting up a Trust

So is a Trust a good idea for you?

Everyone seems to have a family trust nowadays – Have you got one (or if you have) how do you know if it’s still relevant and appropriate for your individual situation?

The answer depends on your circumstances. Trusts are generally set up to protect assets and look after dependent people. They can have a valuable role to play, but they are not suitable for everyone.

The experts say if you’re simply trying to avoid your legitimate obligations for rest-home care, your kids’ university allowances, creditors closing in on you, or taxes, then you shouldn’t use a Trust because the problems can be worse than the solutions.

Advantages of Trusts

But, there remain advantages. Wellington lawyer Chris Kelly: “If you want to set up a business and you’re worried you’ll lose your home, putting the house in trust so it’s safe from creditors is a good reason. And if you really want to cut someone out of your will and make it bulletproof, the best advice is to think about a trust because it’s harder to overturn. But you should do it on the ‘bluebird day’, when there’s nothing on the horizon, no spouse who might object, and no creditors. What doesn’t work is leaving it until it’s too late. But if you have relatively modest assets and don’t want to spend the money to run the trust properly, then you get badly administered trusts.”

Auckland lawyer Lady Deborah Chambers, QC: “If you trotted in and said, ‘I have a couple of hundred million dollars worth of property and I’ve just fallen in love with a hunky spunk who wants to move in’, I’d say you should think seriously about a section 21 agreement [pre-nup] and creating a trust to put your property into, benefiting everyone you like, but not the hunk. If the property goes into a trust before the relationship starts, it’s very hard to get at it under the Property Relationships Act.”

Monteck Carter’s View on Trusts

It is our strong recommendation that you undertake a review of your family trust, specifically its administration and management. As an accountant, and acting as an Independent Trustee for some of our clients, we at Monteck Carter have a duty of care not just to inform you of the recent rulings, but also to assist you to put in place a formal structure for your trust. The more robust the structure and related procedures of your trust, the greater the benefit for you in the event of a challenge by a third party.  Your trust was formed to protect against this sort of challenge, so taking these steps can only be in the further interests of the beneficiaries.  And as Chris Kelly implied badly administered trusts are not good for you or your dependents.

A Trust review will include:

  • Checking that all deeds and minutes are up to date and on file
  • Checking that registers recording trustees, beneficiaries, significant events and gifting programmes are properly maintained
  • Ensuring that the Trustees are undertaking a regular and appropriate review of trust investments and other strategies for the future
  • Checking that your wills, powers of attorney and memorandum of wishes are up to date
  • Ensuring that trust assets are appropriately insured and identified
  • Providing you with a checklist of trustee obligations for your consideration

I have a wealth of experience in the use of family trusts, advising the SME sector, with a focus on property developers and investors, and a holistic approach to assist my clients to achieve their business and private goals. Give me, Glynis Carter, a call on 09 273 3682 to see how Monteck Carter can add value to you and your trust.