Trusts - Background
Family Trusts have been around since the middle ages and are used more extensively today than ever. The original trusts formed in
were used for the same types of reasons many trusts are used today, holding land and minimising tax. England
Until the late 1980's trusts were used primarily by the wealthy to avoid estate or death duty and high personal tax rates. The use of plain English, the revolution caused by the personal computer and modern office practice led to a revolution in trust use during the 1990's. The growth was further fueled by the Property Relationships Act and there is a seperate section on this topic.
If a trust is going to receive income it must register with the IRD, but for family trusts that have as their only asset the family home there has not been any requirement to have a bank account or an IRD number.
However that will change with the New Property Conveyancing Rules and amendments to the Land Transfer Act. It is proposed that the main home exemption rules will not apply to a family home owned in a trust meaning that every trust will need an IRD number and a bank account.
The rules are going to be.
No NZ Bank Account - No IRD Number
No IRD Number - No conveyance of title
No one really knows the exact number of trusts in NZ as there is no register or requirement to disclose to any government entity the formation of a trust. There are many numbers bandied about and the reality is that no one really knows but it is likely that there are several hundred thousand.
In our society, with the current tax laws, means testing regimes for many benefits, the dangers of relationship issues impacting on family wealth and the traditional asset protection benefits there are complelling reasons why almost everyone regardless of age or circumstances need to give serious consideration to the trust option.
It may not be for you or your family but you should get advice before deciding not to have a trust.