Trusts Act – Do we still need a Trust?
Most trust clients will have heard that the new Trusts Act 2019 comes into force on 31 January 2021. Together with a much awaited modernising of the laws around trusts the act will create additional obligations on Trustees. All Trustees must read and understand those very long and wordy Trust Deeds. The annual trustee meeting and review of the trust can no longer be ignored. Active steps will need to be taken by Trustees each year and the question of information sharing with beneficiaries will need to be carefully considered.
We see many clients who have simple family trusts which only hold the family home. Sometimes those trusts were set up many years ago and have never been looked at again. With the law changes nearly upon us we are encouraging our clients to consider why they set up their family trust in the first place and whether those reasons are still valid years and sometimes decades later. In the 1990’s and 2000’s it was all the rage to set up a family trust. We often hear from clients tell us that they set up a trust because “everyone was doing it” and it seemed like a good idea at the time to protect their assets.
Trusts still have a place to offer protection in certain situations. If you are self-employed or have business creditors the trust can offer protection from those creditors in some cases. If there are relationship property concerns either for the trustees themselves, from the potential new partner or for those in the next generations. Due to family dynamics or personal circumstances, there may be reason why some people want to leave an unequal division of an estate to their children. For these reasons trusts are still a useful tool.
However, if the key reason for setting up a trust was to create eligibility for rest home subsidies then many trusts will no longer achieve that goal under the current criteria. If you do not have any of the reasons we have mentioned above for having a family trust then it may be timely to consider whether your trust should be wound up.
Contact us here at Beach Law Papamoa to undertake a review of your trust.