Trusts

How a Trust Operates

A trust is a different entity to you and accordingly you need to sell assets to the trust. Usually this will include your family home. Some independent means must be used to establish a value for the assets sold and recorded in an Agreement for Sale and Purchase. Before you can transfer your home to your family trust you will need a registered valuation or a valuation from Quotable Value (New Zealand) Limited which is no more than 6 months old.

If the trust earns income you will need to apply for an IRD number, and may need to register for GST. You will need to attend to this yourself or with the assistance of an accountant.

Creditor Protection

If you own your own business, you will appreciate that there are a number of risks involved. Even if you are a director of a company it is likely that you will have signed personal guarantees in favour of landlords and banks. Also, the new companies legislation gives greater scope for creditors to bring personal claims against directors.

Even if you do not own a business, there may be a creditor risk if the nature of your employment is such that your actions could cause claims to be made against you under legislation such as the Fair Trading Act 1986 (e.g. if you are a real estate agent).

There is obvious benefit in protecting your assets, and your lifestyle, from creditors by using a family trust structure. While creditors may be able to attack trust assets if a trust has been formed solely for the purpose of avoiding imminent liabilities, you will be protected in most other circumstances.

For more information contact Glaister Ennor.

The information on this web site is of a general nature only. Readers are advised to establish the applicability of information in relation to specific circumstances and not to rely solely on the information provided here.