Trusts have been around now for centuries and essentially their usage has remained the same. That is: To protect YOUR Important Assets.

You need to ask yourself the following questions:

1. Do you or your partner operate your own business?

2. Do you or your partner give advice or provide a service on which others rely.

3. Do you believe that in the future you could not be entitled to a Government benefit because of the level of assets that you own?

4. Are you afraid that your family assets could be put at risk in the event of your death or separation from your partner?

If the answer to any of them is 'Yes' then using a Family Trust may be of benefit to you.

When someone perceives that Assets could be put at risk through that person owning them then they seek to divest themselves of those assets. They would usually still like to obtain the use or take a benefit from the assets so they will transfer the Assets to Trustees who would hold them on behalf of a family group rather than an individual.

The transfer process usually takes a little time but in the end the Assets are held for a group of people rather than an individual so are not put at risk through the actions or situation of any one individual.

Some of the ways assets could be put at risk are as follows:

Legal Actions

As a society we are becoming more likely to take a legal action against someone we believe has wronged us. Therefore if you are involved in a business where clients act on your advise or are reliant on a service you provide then you are more likely to face a legal action if something goes wrong.

We appreciate that there is Professional Indemnity Insurance but we believe that the best course of action is a 'Belt & Braces' approach. By all means have insurance but also protect your house and savings within a trust to cover the worst-case scenario of the claim being declined.

Who is this Creditor Protection: New Zealand has a large number of small businesses. Business is always subject to change and businesses come and go. You will have observed that these changes are not always immediate and that often businesses will trade unprofitably for a period before going into liquidation.

If you are in business for yourself the failure of the business itself would be bad enough without losing your house and retirement savings to creditors. Use of a company structure can help but remember that since 1993 Directors can become liable so we believe that it is best to be cautious and hold your house and savings within a trust.

Relationships

The introduction of the Property Relationships Act signaled a general change in society that has been occurring for some time.

We are now more likely to have a number of relationships during our lifetime but this does not mean that we want to go through a property division each time a relationship breaks up. The act defines what is 'Relationship' property and what is 'Separate' property.

When you see an incidence of Separate property then this is a perfect time to keep that property separate within a trust and thus avoid a future property division .

Capital Gains Tax or Estate Duty

We have not had Estate Duty or a direct Capital Gains Tax in New Zealand for some time now. As a country we are unusual in this but that is not to say that it will always be the case. The issue has been debated over recent years and so we will be lucky indeed if we do not end up with a Capital Tax in the future.

Estate Duty ended up as a flat tax of 40% on the value of your assets over a certain limit. That limit changed from $12,000 in 1975 and ended up being at $450,000 when it was removed in 1992. We have no real idea about what form any future Capital Tax would take.

In this environment it is prudent to take a caution view on inherited wealth and using a Trust structure may well result in a significant tax saving.

Asset Testing

In New Zealand we currently have an asset testing regime for old age care. In recent time we had income testing on National Superannuation. The proportion of retired people in our population is growing. We do not know what the future holds but it is not beyond the realms of possibility that some of the benefits we have taken for granted may become assets tested in the future.

If you would like to know more call Quadrant Today on 03-348-0745 or contact us online.