Article: Law & Finance
Family Trusts. Will One Benefit You? with Ian Reeves
Why all this talk about family trusts? Will one be of benefit to you?
Most people will benefit from having a trust. The benefits may change as life progresses. For example, someone with a trust to protect assets from a relationship property claim, may benefit later by obtaining a resthome subsidy.
Who may benefit from the trust?
Risk-takers before they get into financial difficulties or are sued. Examples: builders, developers, new business owners, financial advisers, accountants, lawyers etc. They are better to have their home in a trust to protect it from losses and claims arising from their business activity.
Single persons who want to protect assets from a relationship property claim. Example: John owns a home and expects to have a relationship in the future. The home is put in a trust to avoid losing half of it to a partner, if a relationship fails. Example: Janice has a house from a previous marriage. She wants to ensure it remains for the benefit of her children if she forms a new relationship.
Over 50 year olds. About 25% of us will need resthome care. A resthome subsidy is available for people with limited assets. Moving assets into a trust early enough can assist obtaining a resthome subsidy. Example: John and Janice have a house and investments of $300,000. They will not qualify for a resthome subsidy. Their assets will be depleted by payment of the resthome fees - less for their children. If they had a trust they would likely be eligible for a subsidy.
High income earners have benefited from trusts because of different tax rates between personal and trust income. That has recently changed but may be available again in the future.
Estate duty reintroduction is a worry for people with high value assets. England and many Australian states retain that form of taxation. Although it has been abolished in NZ, there is the possibility of reintroduction by a new government.Example: estate duty was 40% of the value of an estate, after some exemptions (e.g. family home).
Excluding a family member from an estate. The Family Protection Act makes it difficult to exclude a wayward child from an estate. However, if assets are moved into a trust, the child can be excluded from benefiting from them. Example: John and Janice have four children. Jack has no contact with them; has been in prison, and is a constant source of sorrow to them. They wish to exclude Jack from their estates. They move assets into a trust for their lives and then to pass to the other three children on their deaths.
Special needs of a family member can often be best catered for by a trust.Example: John and Janice have a daughter, Jo, with intellectual disabilities. They set up a trust to look after Jo. The remainder of the assets will pass to the rest of their children on Jo’s death.
Trusts are very useful to many people. If you see a possible benefit for you then I recommend you investigate further.
