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FREQUENTLY ASKED QUESTIONS

 

Do I lose control?

Generally we would recommend that the person setting up the Trust is also a Trustee and, depending on the circumstances, also a discretionary beneficiary.  That person would retain the power to “hire and fire” the Trustees.  In addition, the Currie Lawyers trust deed contains provisions where possible to vary the terms of the Trust and vary the beneficiaries.  Accordingly, control is retained as much as possible.

What happens if the law changes?

Although there can be no guarantees, the Currie Lawyers trust deed contains the power to “resettle” the Trust assets on another Trust, should the need arise.  The new Trust would be prepared with any new laws in mind.  It must be noted that we work within current laws and cannot advise on what laws may or may not be enacted in the future and the impact of any future law on a current Trust situation.

Can a Trust protect my assets from existing creditors?

No!  A Trust may be set aside if it purpose is to avoid or defeat existing creditors and also if its purpose is to evade income tax.

What property or assets can a Trust own?

Basically, a Trust can own any assets – real estate, shares, stock, plant, racehorses, insurance policies, boats, caravans, investment portfolios and the list goes on.  It is however important to consider which assets should be transferred into the Trust.  Generally, we would not recommend that a depreciating asset be transferred to a Trust as tax losses can not be transferred to beneficiaries.  Special consideration should be given to “negatively geared” assets such as rental properties as there are income tax issues to consider.

Can the Trust property be transferred back to me?

If you are a discretionary beneficiary, and generally you would be, any Trust property can be distributed directly to you pursuant to the terms of the trust deed.  Such a distribution is made without the necessity of having to go through the gifting process.

What, if any, are the disadvantages?

There is an initial lump sum cost of setting up a Trust and transferring assets, such as the family home, into the Trust.  After that there is a charge for the ongoing annual gifting program until the debt is forgiven and gifting completed. In any Trust transaction such as the sale of Trust property, all Trustees’ signatures are required.  It is possible that future law changes may affect Trusts, but such changes are unlikely to be retrospective and would be unlikely also to make you worse off than if you had never established a Trust.

What does it cost?

The typical cost for formation of the Trust, transfer of the family home to the Trust, Acknowledgment of Debt, Deed of Forgiveness of Debt, filing Gift Statements with the IRD and all other associated documentation required in year one is usually in the region of $2,500 to $3,000, plus GST and disbursements.  It is however difficult to give an indicative cost as every situation is different and needs to be looked at on its own merits.  In subsequent years there are ongoing costs for forgiveness of debt and filing of gift statements with the IRD of approximately $200 to $250 plus GST per annum.  There may also be some additional costs for annual Trust maintenance.

 



 
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