Whereas at one time, people settled property on a family trust to ensure protection against creditors, to automatically qualify for residential care subsidies or to enjoy some tax benefits, now a lot of those benefits are not guaranteed. However, settling property on a family trust can still be worthwhile for some clients.
A trust can run for 80 years so the trust can often become a useful tool in estate planning. It is important to also prepare a memorandum of wishes. In this document the person who settles property on a trust can express his or her wishes with regard to the trust. Since there is now no gift duty in New Zealand, it is possible to immediately forgive the debt owed by the trust. Formerly it had to be forgiven at the rate of $27,000 per annum. Although, for purposes of asset testing for a residential care subsidy it may be advisable to continue to forgive any debt owned by you, by your family trust, by annual gifting of lesser amounts. Additional information can be found at the law society website here.
If you are considering establishing a family trust, we suggest you arrange an appointment to discuss whether or not a trust is worthwhile, having regard to your particular circumstances.