Trusts

A trust can protect the ownership of your assets while you are alive. You transfer the legal ownership of the assets to the trust while continuing to use and enjoy them. For example, if the family home is in a trust, you no longer personally own the house - but you could still live in it if that's what the trust deed states.

The ownership of these assets will then be transferred to the trust and the trust then owes a debt back to you, the settlor. This debt can then be ‘forgiven’ through a process called gifting.

A legal document called a ‘trust deed’ will formally set up the trust. It will appoint the trustees, list the beneficiaries, and state various rules for the administration and management of the trust. The trust deed needs to be very carefully written, preferably by a lawyer.

 Advantages of a Trust

People usually set up a family trust to get some benefit from no longer personally owning an asset. A family trust may be useful to:

Disadvantages

A Trust can be expensive to set up initially, and also to administer. The Trustees must prepare and sign formal resolutions when they are making a significant purchases or investments on behalf of the beneficiaries.

The assets of the Trust are no longer owned by you as an individual but are owned by the Trust. If the Trust is operating without it’s own bank account, and the assets are being used in the same way as before they were transferred into the Trust then the Trust can be regarded as a sham.

Accounting Tasman Ltd are able to advise you whether a Trust is a good option for you, and is able to deal with all the accounting work in relation to this.

 

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CHARTERED ACCOUNTANTS
Richmond, Nelson.