New disclosure requirements introduced by the Inland Revenue Department (IRD) for domestic trusts will almost certainly affect all family trusts.
The new disclosure requirements apply to all domestic trusts with assessable income over $200.
There is a silver lining, though. If your trust is considered to be ‘passive’ – one that earns an income of $200 or less in a financial year – it does not have to meet the new disclosure requirements, provided, a non-active declaration is made for the trust. Your accountant will need to fill this in and file it with the IRD.
Trusts can be used to protect assets from being at risk because of debts, business liabilities, relationship breakdowns, and to help arrange the distribution of assets to younger family members in the future. But these days, administering a trust is a complicated business.
The law is constantly changing and eroding the protection that a trust has traditionally afforded, so it’s important to regularly review the purpose of your trust and ask yourself if it is still relevant for today and still carries out the purpose it was intended for.
It’s important to understand that divesting your assets to a trust means those assets are no longer yours, and cannot just be given away under your will. They can only be distributed by the trustees, according to the terms in the trust deed.
To work well, a trust should be backed up by a will. Your will should be written to complement the trust, and a memorandum of wishes should accompany both the trust and the will. That way, the entire package is wrapped up tight so that you get the outcome you want.
Trust Management Services can help you manage your trust. Our online Trustee Management Self-assessment Tool can also help you evaluate how well you’re doing when it comes to administering your trust.