Deals with practical issues
The long-awaited Trusts Bill was introduced to Parliament on 1 August 2017. The Bill is largely an update and restatement of the Trustee Act 1956 and the common law. However, it also deals with practical issues that have faced lawyers and trustees for some years. We outline some of the most important parts of the Bill.
‘Express trust’ defined
An ‘express trust’ is defined in the Bill. The definition makes it clear that trust property is separate from a trustee’s personal property, it must be administered in accordance with the trustee’s obligations in the trust deed, and that trustees will be accountable to beneficiaries for their compliance with the duties imposed on them by the trust deed and by law.
Many New Zealand businesses and trusts must complete registration and understand their reporting obligations.
With the United States Foreign Account Tax Compliance Act (FATCA) regime now in effect, it’s important that all New Zealand entities ensure they are aware of their obligations.
FATCA came into effect in New Zealand on 1 July 2014 – with little fanfare at the time. From 1 April 2017, however, the compliance obligations of the FATCA regime are now live. The FATCA regime classifies all entities (companies, trusts, associations and partnerships) as either a ‘financial institution’, an ‘active non-financial foreign entity’ (active NFFE) or a ‘passive non-financial foreign entity’ (passive NFFE).
The reason for FATCA
The ultimate goal of the FATCA regime is to find US offshore persons or entities who have been avoiding their US tax obligations. This is done by gathering information on any US persons or entities controlled by US persons holding accounts outside of the US.
Have I made one?
The law around trusts is ever-changing particularly with relationship property and matrimonial issues. The courts continue to chip away at the trust as an appropriate vehicle to protect assets against a relationship breakup.
The Clayton case
One area of this changing environment that will be of interest to the rural community is a consequence of some judicial reasoning in the Clayton v Clayton case. There will be particular interest in the comments made in relation to ‘nuptial settlements’ and s182 of the Family Proceedings Act 1980.
Some key proposals
In late 2013, the Law Commission completed a report recommending that a new Trusts Act replace the Trustee Act 1956. The public consultation phase began last December with the release of the exposure draft Bill. It is intended that the new legislation will be the primary source of trust law in New Zealand. We outline below some key proposals.
Most trusts in New Zealand are established with a written trust deed or other document such as a Will. These are known as ‘express trusts.’ The Bill only applies to express trusts. Characteristics of express trusts are defined in the Bill as:
With the growth of multiple relationships and blended families many couples are having to consider ways to ringfence assets and protect inheritances. One option is to establish parallel trusts – so you each have your own trust for your share of the assets.
Many trusts may require registration with the United States’ IRS under the FATCA regime
The US Foreign Account Tax Compliance Act (FATCA) has been in force in New Zealand since June 2014. FATCA is a complex piece of legislation established to prevent tax evasion by requiring foreign financial institutions to register and report to the IRS in relation to any accounts held on behalf of US citizens.
All New Zealand entities considered to be ‘foreign financial institutions’ under the FATCA regime should have been registered on the IRS website by 31 December 2014. Continue reading
There are a number of common assumptions made about access to a person’s Will and what happens after the Will-maker has died.
‘Reading of the Will’ Continue reading
Following the abolition of gift duty on 1 October, we publish a special edition of Fineprint here.
You may be considering whether to complete your gifting programme in one fell swoop – or perhaps not.
Everyone has their own reasons for establishing a trust, and your own individual situation will be unique to you and your family. Completing your gifting programme in its entirety may not be the best step for you.
Do get in touch with us so we can talk about the best path forward for you and your particular circumstances.
We publish the latest edition of Trust eSpeaking here.
In this edition:
- Let’s give it all way – It’s not that straightforward
With the abolition of gift duty from 1 October 2011 the first thought for most people who have a family trust would be “Let’s give it all away”
- Rest home care – Don’t expect government hand-outs
After gift duty comes to an end from 1 October, one thing will still be clear: you can’t give everything away to a trust and then expect to rely on state assistance because you don’t own any assets…
- Trustee Liability – As vendor under an Agreement for Sale & Purchase Trustees are the legal owners of trust property and are personally liable for warranties given under an Agreement for Sale & Purchase. Trustees should be very careful about giving warranties
- Trusts and tax – The Supreme Court has spoken Using a trust – or any other structure such as a company – to reduce your income is
not straightforward. If you push the boundaries too hard you may end up having to pay a lot more. The latest Supreme Court decision provides a useful warning
The latest EJ update is available here.
In this issue:
- Trust review
- A commercial property opportunity in Te Awamutu
- New debt recovery service
- Update on gift duty changes
- Stay informed with email alerts from the Edmonds Judd website
If you wish to discuss anything in the EJ update please don’t hesitate to contact us.
Edmonds Judd will be closed for the holiday period from 12:00 pm on Thursday, 23rd December 2010. The office will reopen on Monday 10th January 2011 with a skeleton staff between the hours of 9:00am and 3:00pm. A full complement of staff will be available from 8.30am Wednesday, 19th January 2011.
Have a merry and safe holiday!