The Benefits of Having a Trust

Monday 11 March 2013, 8:11AM

By Andersen Accountants Limited


What are the benefits of having a trust?

• Preventing relationship property or matrimonial property claims – possibly even in circumstances where there is no relationship property agreement. The extent of the protection may depend on when the trust was entered into, by whom, and when property was transferred to it. Unlike a relationship property agreement, you can usually set up a trust without any else’s consent or knowledge. Please note that you should seek legal advice if you have any questions about relationship property issues.
• Protecting your assets from being used unwisely by your children after your death. As a result of putting your assets into a trust you can provide appropriate help and support to your children after your death, however, the trust is a strong mechanism to prevent your children losing their family inheritance every time they have a long term relationship, or, if they have habits or issues that might otherwise cause an unwise use of family money. If you don’t put your assets into a trust and the assets pass to your children in their own name, then every time your child has a 3 year de facto relationship half of that money may have to be paid out to the partner. For many people having multiple medium term relationships is common. It won’t take long before the money, you spent a lifetime building up, is completely gone.  If you have a child who is involved with drugs, alcohol, with mental illness issues, or with other lifestyle concerns, not only may any inheritance be quickly blown, but giving them money which is then used to fuel a drug or drinking habit may send them to an early grave. By using a trust your children can still be financially cared for, while reducing the risk of the money being abused.
• If you are in business, or otherwise at risk of financial loss or of being sued, placing your assets in a trust will give you protection in the event of a financial disaster. Knowing that you own nothing much in your name may even stop you being sued in the first place. After all, what would be the point if there is nothing to collect?
• Confidentiality: if a trust owns property it is usually the trustees who will have their names registered as the owners. Beneficiaries can often stay secret. A greater level of confidentiality can be obtained by having a company as the trustee, creating an extra layer of confidentiality and enabling easy changes to the trustees without necessarily having to change the asset ownership records.
• Tax advantages: trading trusts are trusts that are actively involved with some kind of income earning. Tax planning opportunities arise because income can be retained in the trust or paid out to beneficiaries who are at lower tax rates. If a capital gains tax is enacted, a trust is likely to be a useful tool in delaying or preventing this being imposed, as it enables an asset to be held for longer than a person’s lifetime, and, if your trustee is a company, you can change the ultimate trustees (the company directors) relatively easily. Please note that the actual provisions of any capital gains tax will determine the usefulness of a trust in that situation.
• The maximisation of rest home subsidies.
• Preventing claims against your estate.
• New Zealand has an overseas trust regime that provides taxation and secrecy benefits similar to that provided by tax havens.

For more information please visit our Trusts webpage or contact Andersen Accountants Limited.

Kristina Andersen
Andersen Accountants Limited
Telephone: 09 3695198