What is a Trust?

In legal terms ‘a Trust is an obligation that binds a person (known as the Trustee) to deal with and manage property for the benefit of others (known as the beneficiaries) in accordance with the requirements of the Trust Deed’.

It is possible for one person to be both a Trustee and a beneficiary of a Trust.

Family and Business Trusts

Family and Business Trusts come in various sizes from modest to considerable; some just hold the family home while others manage various assets while providing income for beneficiaries of the Trust.

Goldridge can assist the smooth management of the Trust by way of the Trust Investment Process and by working with you through a complete wealth protection planning process will ensure that your wishes and family needs are met.

Some people will hope that their Trust holds up in the event of an audit, unfortunately the cost of not being fully prepared can be severe.  Trusts could be classed as a sham by the IRD if all elements are not properly administered. 

With comprehensive planning of all elements within the Trust and the professional advisers working together in legal, accounting, taxation, estate planning, and investment strategies, all associated will feel confident that you can have peace of mind.

Please contact us to find out how Goldridge can assist with your family trust.

Family Trusts Business Trusts

Trust Investment Process

Goldridge can assist with the smooth management of your Trust by way of the Trust Investment Process and by working through a complete wealth protection planning process that will ensure that your wishes and family needs are met.

Planning to protect your assets for the future involves working through a process.  This process includes gathering information, exploring your goals & objectives, analysing the information collected, exploring all options, consulting with trustees and finally making recommendations.

Any recommendations will need discussions and input from the other professional advisers to co-ordinate the strategy.  After this thorough process we can implement the recommendations and put a review system in place with reporting to Trustees plus your other professional advisers who are working with your Trust.  By having one point of co-ordination Trust members can be confident that actions get completed timely and within budget.

Depending on the size and complexity of your Trust there may be a need to develop a full Statement of Investment Policy and Objectives, this process can be discussed with your Goldridge Adviser.

Discretionary Investment Management Services

Why form a Family Trust?

The main reasons Goldridge advisers would recommend forming a Family Trust include:

• Protecting assets and ownership structures for current and future generations
• Isolation of assets from future relationship claims for current and future generations
• Asset testing  for government subsidies or benefits
• Income splitting and tax saving
• Creditor protection
• Education – parental income testing for student allowances
• Child support
• Claims against deceased estates
• Secure income for certain beneficiaries, either for life or a specified period.

Setting up a Trust

This process involves careful planning and some time. The success of your Trust will depend on how well it has been designed to meet your needs. At Goldridge, the planning process will take into account factors such as the ages and health of the settlor(s) and the beneficiaries, as well as the type and value of the assets involved.

Setting up a Trust, step by step

1. The Settlor decides on the terms of the Trust and the Trust Deed is prepared.
2. The Settlor and Trustee(s) sign the Trust Deed.
3. The Settlor selects the assets that are to be transferred to the Trust.
4. A Deed records the sale of assets from the Settlor to the Trust.
5. The assets are transferred to the Trust and the Trustee acknowledges (by a Deed of Acknowledgement of the Debt) that it owes the settlor an amount equal to the purchase price of the assets.
6. Depending on circumstances, the Settlor can begin a programme of reducing the amount owed. This is done by annual gifts (by Deed of Forgiveness) of up to $27,000 if they are to be free of gift duty or more if needed to reduce the debt quickly.

Gift duty rates per person per year

How do I transfer assets to a Trust?

Usually, the Trustee purchases specified assets from you to hold in terms of the Trust Deed. The Trustee will generally owe you the value of the assets since it has no money to pay you for them.

The resulting debt, owed to you by the Trustee, is then repaid from income earned on the transferred assets and /or repaid by you forgiving part or all of the amount owed. Once the sale is complete, you can reduce the amount the Trust owes you by forgiving part of the loan at any time.

This is usually done by annual gifts of up to $27,000. Gifts of more than $27,000 are liable for gift duty. This gifting process may not involve payment of any money. In most cases it is simply achieved by a series of legal documents, which record the reduction of the debt over a period of time.

What are the duties of a Trustee?

The prime duty of a Trustee is to carry out the terms of the Trust and preserve theTrust assets.

Trustees should regularly review Trust investments, ensure proper diversification of risk and make beneficial changes to the Trusts investment portfolio whenever necessary.

A Trustee must also:

• Administer the Trust under the terms specified by the Trust Deed
• Not delegate duties
• Not profit personally from the trust except for properly charged fees
• Act impartially
• Keep proper records
• Be accountable to the beneficiaries
• File tax returns for the Trust.

A Trust with wide discretionary powers allows the Trustee to adapt to changing circumstances and protect the Trust’s assets from adverse circumstances, such as matrimonial claims or spendthrift beneficiaries.