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Thread ID: 135126	2013-09-28 20:36:00	Family trusts	FoxyMX (5)	PC World Chat

Post ID	Timestamp	Content	User
1354531	2013-09-30 00:48:00	I don't get the bit about paying thousands of dollars to set up a trust, unless you are talking about the annual gifting process, whereby ownership of assets is transferred to the trust. Prior to the abolishing of gift duty last year, settlors of a trust were limited to a gifting to that trust, of $27000 per annum ($54000 for a couple.) Gifting to the trust can now be done in one hit, but that doesn't negate all other responsibilities settlors and trustees have under trust law. So you can't just make the gift, create a Family trust, and then forget about it and carry on regardless. Gifting in this case is only a paper transaction, and no cash actually changes hands, as the Trust then 'forgives' the debt. I think! Perhaps Winston, you could make all this a bit clearer.	Richard (739)
1354532	2013-09-30 02:27:00	Trusts cost quite a bit of money to operate, accountants fees, lawyers fees...honestly, if the wife didnt already have one setup, I would never start 1 now!	SolMiester (139)
1354533	2013-09-30 07:56:00	Well with all due respect to Greg and SolMeister, establishing a family trust and then administration from year to year should cost a modest sum. Especially when we consider that rest home fees run at $700/wk and a family trust established in earlier years can avoid that liability. Trusts are seldom created without owning something. The actual drawing of a deed of trust and related advice is not complicated: where the complexity arises is when the trust buys the family home or whatever asset is intended to be protected. That may require the bank's approval plus their fee and a valuation. Furthermore the bank will require personal guarantees from the Settlors. As a guide the overall cost is about $3000. Ongoing administration per year $250-500 which involves gifting and trustee minutes. However if the trust owns a business then a new set of accounts will be required, new GST registration, bank mortgage docs yadda yadda. That can get expensive but only people who can afford it proceed down this path. If a trust is costing a lot of money that indicates there is a lot of property to protect including income producing assets. 80% of trusts just own a house - no income, no accountants, no bother.	Winston001 (3612)
1354534	2013-10-01 23:19:00	The consequences could be failure to comply with all legal requirements of Trust and Trustee Law . This failure could render the trust invalid, and treated as non-complying by any future court action . Do it all properly, or not at all . Well said Richard . When you sell your home at market value to the Trustees, they owe you the price = debt . The procedure is that you reduce the debt by turning it into a gift which is recorded in a deed . The process used to be $27,000/year but it is now possible to gift the entire debt and write it off . However WINZ will ignore that if you subsequently go into a rest home within 6 years and they will refuse to pay for your care . They may even look back further than 6 years . Get advice . The problem with a trust is the settlors forget it exists and understandably still refer to "our home" . There is a risk the trust may be judged to be a sham . So to avoid that the trustees should at least meet annually and record their overview of the trust . If any serious decisions need to be made such as a new roof or maybe selling/buying another home, the trustees must record that . This is not an onerous task but easily forgotten .	Winston001 (3612)
1354535	2013-10-03 08:04:00	Thanks Winston and others for the advice and comments. The person setting up the trust has been to their lawyer so it will all be set up properly and, with me being a stickler for "doing things properly", all the eyes will be dotted and the tees crossed. Winston, I get that the IRD might judge a trust to be a sham if created close to retirement age but are there any other circumstances when a judge might deem a trust to be a sham? Just curious as to how people have been caught out.	FoxyMX (5)
1354536	2013-10-05 01:37:00	Its not a matter of being close to retirement age, you can still establish a valid trust. The "sham" situation arises when the settlors continue to control the trust property as if nothing had changed - as if it continued to be their own personal property. A trust means the property has new owners who now make the decisions albeit only in the interests of the beneficiaries. It is a fine line and human nature means it is difficult to change our thinking, particularly in the case of a family home. The best protection is annual records of trust meetings and decisions. Some trusts will have a set of accounts if there is income and that is more evidence supporting the existence of the trust. Leaving aside the sham argument, the government and the courts can and do develop new rules for looking through trusts in certain circumstances. Relationship property and rest home assessments are the two big interventions.	Winston001 (3612)
1354537	2013-10-05 03:47:00	Thanks Winston, that makes things a lot clearer.	FoxyMX (5)
1354538	2013-10-06 20:14:00	I don't know enough about the to comment. Other than that they were all the rage a few years ago - seminars etc etc. Probably Lawyers and accountants made a mint. I don't like the way people (and Mp's esp and finance company directors) use them to get around paying their fair share of tax.	Digby (677)
1354539	2013-10-08 01:59:00	Digby, I am curious. How do these people use a trust to avoid (or evade) their fair share of tax?	Richard (739)
1354540	2013-10-08 02:07:00	By running at a loss I assume?	Cato (6936)
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