Whether you have a family trust or are thinking about setting one up, it is important to consider how to best manage that trust long-term. Gone are the days where you establish a trust and then forget it exists, as the Courts, the Government and Inland Revenue are cracking down on poor trust management.
There have been several cases and regulatory changes over recent years that are bringing the issue into focus. This includes the Clayton cases, the Pugachev case, land transfer tax statements, residential land withholding tax forms, and the Trusts Bill.
With all of this going on, it has become essential to take an active interest in your trust, even if all it owns is your family home. So how do you manage this?
Here’s a simple checklist to keep track of what’s happened with your trust:
- Keep all of your trust documents in one place. This could be in a folder, or an electronic file (speak with us for more information on our electronic trust-management system). If you don’t have everything, check with your lawyer or accountant – they may have what you need.
- Make a list of what your trust owns, even if it is just your house.
- Make sure everything on your list is legally owned by the trustees. This might include things like insurance policies and bank accounts.
- Check whether your trust needs an IRD number. If the trust gains income or owns a property, the answer is probably yes. If you are unsure, speak with your accountant.
- Check whether your trust details are up to date. For instance, consider:
- Who are the current trustees? Have all of the trust ownership papers been updated?
- Are the listed beneficiaries still relevant? Do you want to add (or remove) anyone?
- Did the trustees buy or sell anything recently? Was it properly recorded in your trust records? Did all the trustees participate in the decision?
- Does your trust complete accounts and file a tax return? Have all the trustees signed off on the accounts?
- Does your trust have an investment strategy? If not, should it? If yes, is it still relevant?
- Has anything else changed with the trust that should be recorded? Once you have a list of these changes, approval from all of the trustees should be sought and recorded.
A review like this should be completed at least once a year until the trustees decide to wind up the trust.
We know that this can sound like hard work, so we have developed something to make trust management easier for you. By utilising an electronic, cloud-based trust management system, we can keep all of your trust records in one place. These can be accessible by you, the trustees, your accountant, financial adviser, and even some of the beneficiaries if you choose. This system allows us to have meaningful conversations and record all decisions involving relevant stakeholders without it becoming a tedious and drawn out process.
If you think this trust management system could work for you, or you have any other questions about the management of your trust, contact our Wellington-based trust lawyer Andrew Stewart: email firstname.lastname@example.org or phone (04) 495 8921.