Most parents, at some stage in their lives consider what provisions they would like to make for their children on their death. They would normally wish their children to have the use and enjoyment of funds but also recognise that most children only inherit funds once, therefore some thought should be given in order to establish that there is some protection around those funds to ensure that they are not lost.
Relationship Property Claims
Inherited funds are separate property until they are used within a relationship. At that point they become relationship property and your child could potentially lose half of them through a separation.
At the time of your death your child may be going through some business or creditor issues. If that were the case your assets could go to satisfy creditors rather than to support your child or grandchildren.
Most people now live well into their 80’s. When you die your children may well be approaching retirement themselves and possibly seeking to divest themselves of assets due to whatever asset testing regime is current at the time. An inheritance at that time may well compound their problems. The question is; are you better to leave the Estate to your child directly or create a trust to hold the asset for your child’s benefit? For many people the formation of an Inheritance Trust represents a safer option than a direct inheritance.
If you believe that an Inheritance Trust would best protect your family then you need to:
- Prepare a separate Inheritance Trust Deed for each child.
- Prepare a new will leaving your residuary estate to the Inheritance Trusts rather than to your child directly.
- If you have an existing Family Trust you need to check your Trust Deed to ensure that it allows for distributions to other Trusts.
If this is the case you need to prepare a new will and memorandum of wishes that instructs your trustees to distribute your Trust to the Inheritance Trusts rather than to your child directly.
We are happy to help if you are unsure what the best trust option is for you and your family. Give us a call and we will gladly assist. Contact details.
Contributed by NZ Trustee Services Limited