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					WHY YOU NEED A TRUST
o Asset Protection
o Estate & Succession Planning
o Tax Management
o Social Benefits
o Confidentiality
           Asset Protection
o Business Creditors

o Liability Claims

o Relationship Property Claims
         Business Creditors
o Business Failure
o Company – Limited liability
o Directors – Personal Guarantees
            - Trading while Insolvent
o Insolvency Act 2006
o Property Law Act 2007
            Liability Claims
o Clients

o Employees

o Public

o Liability Insurance
  Relationship Property Claims
o Property (Relationships) Act 1976
o Wide Reaching
o Pre Marital Property
o Children’s Inheritances
o Section 44C
Estate and Succession Planning
o Wealth Protection
o Certainty
o Flexibility
o Business Continuity
o Tax Liabilities
          Tax Management
o Taxation of Trusts

o Income Splitting

o Tax Avoidance

o Beneficiary Allocations
           Taxation of Trusts
o Beneficiary Income

o Trustee Income

o Losses
           Income Splitting
o Sliding Tax Scale
o Aligning Top Personal Tax Rate with Trust
  Rate
o Minor Beneficiary Rule
o Structures
           Tax Avoidance
o Penny & Hooper
o IRD Revenue Alert
o IRD Compliance Focus
o Appropriate Remuneration for Personal
  Skill and Effort
o Commercial Reasons
      Beneficiary Allocations


o Vests Absolutely
           Social Benefits
o Working for Families Tax Credits

o Student Allowances

o Residential Care Subsidies
     Working for Families

o Family Scheme Income

o New Rules
        Student Allowances

o Parental Income Test

o New Rules
     Residential Care Subsidy


o Excess Gifting

o Abolition of Gift Duty
           Confidentiality
o No Public Register
o Assets held in Trustees names
                Summary
o Imperative for asset protection
o The sooner the better
o Useful tools for future planning
o Still some tax benefits
o Limited use for social benefits
HOW TO SET UP A TRUST
         &
HOW A TRUST OPERATES
Certainty of Intention

Certainty of Subject
       Matter



Certainty of Objects
   SETTLORS - MEMORANDUM OF WISHES

                 Settlor
             (Single or Joint)


Trustee(s)                       Beneficiaries
  TRANSFER OF ASSETS TO
       THE TRUST
Settlement
• Essentially a gift
Transfer at Fair Market Value
• Acknowledgement of Debt & Gifting
                   THE RULES

o Trust Period / Perpetuity Period
   80 years / beneficiaries Coming of age 18-25


o Treatment of Income & Capital of the Trust
   Classes of Income & Capital Beneficiaries
   Distribution or Retention of Income & Capital Gains
    generated from Investments
      To what end should income or capital gains be used…
                     THE RULES
o Final Distribution of Trust Funds
   What Happens on the Vesting Date (final distribution date)
   Who will be the final beneficiaries
   Who decides who gets what
   (will the Trustees be given that responsibility or will it remain with
    the settlor(s) & be fixed upon their death)
               THE RULES
o Management & Administration Powers
   Trustee Act 1956
   Unanimous Decisions v Decisions by Majority

o Resettlement and Amendment of Trust Deed
   Allowing for changes in personal circumstances or
    changes in law
               THE RULES
o Appointment/Removal of Trustees
   What if the settlor(s) die?
   What rights should the final beneficiaries have?
                    THE RULES
o Power to Appoint or Add/Remove Beneficiaries
   Ability to appoint a beneficiary as a final (capital) beneficiary


o General Clauses
   Conflict of Interest – Independent Trustee
   Indemnity – Trustee liability & Trust Assets
   Remuneration – Compensation for Professional Services
          TRUST OPERATION
o IT’S IN THE HANDS OF THE TRUSTEES
        Advisors advise - TRUSTEES decide


o Minimum Requirements for Active Management
   Annual Trustee Meetings
   Keeping of Trust Accounts
   A Trust Management Plan
                   TRUST OPERATION
o Best Practice Fundamentals
  Providing a secure & accessible place for key trust documents

  Maintaining a separate trust bank account

  Meeting at least annually

  Retaining all records that pertain to the making of a decision

  Maintaining a schedule of key beneficiary information
        DOB / Address / Living Situation / Educational Needs / Dependants
               TRUST OPERATION
o Trustee Meetings & Resolutions
     Seek out Professional Advise in Advance

     Prepare an Agenda

     Meetings are Essential for the Review Of:
        Annual Accounts & Tax / Investment Strategy / Gifting Programme /
         Income & Capital Distributions or Advances

     Resolutions are essential for:
        Borrowing Money, Buying/Selling Property or Investments


(meetings via email can be useful & provide an appropriate paper trail for decisions)
  Trustees
    and
Beneficiaries
NATURE OF A TRUST
  What it means to be a Trustee



  The status of a beneficiary in a Trust
NATURE OF A TRUST


  A relationship established by a settlor but it is
  essentially between the trustees appointed to care
  and manage property and entrusted for them to hold


   and the beneficiaries for whom the property is
   ultimately held.
Making a Will or settling a Trust
   Provide for your children and grandchildren

   Protect the equity /wealth accumulated over a
   lifetime

    Retain significant assets
      such as a business or farm
Trust Advantages:-
   Put in place now while you have a clear plan for your
   family
   Protect you and a surviving spouse in old age
   May help protect your children’s inheritance

   Give confidence that only your beneficiaries will
   inherit
   Trustees must act in the best interests of the
   beneficiaries
The Nature of a Trust

   A relationship between the trustees appointed to care
   and manage property and entrusted for them to hold

   And the beneficiaries for whom the property is
   ultimately held.
Who can be a Trustee
   A trusted friend – familiar with your financial circumstances &
   the family

   Your lawyer, accountant other professional adviser ( if they are
   prepared to do so)

   A trustee company operated by your professional advisers

   A separate trustee company specifically for your trust

   A trustee company such as Guardian Trust, Trustees Executors,
   Public Trust & Prudential
Trustees need to be pro-active
   Familiar with the Trust Deed and who the beneficiaries are


   Ensure ownership of the Trust assets is under their care


   Contribute to and review all investments – act prudently

   Aware of family circumstances
Trustees need to be pro-active
   For a trust that operates a business – be very aware


   Ensure that all trustees are unanimous and act in the best
   interests of the beneficiaries.

   Record decisions and be aware of the financial state of the
   Trust.
What it means to be a
    beneficiary
The Rights of a Beneficiary


   A controversial matter



   Fixed interest / Discretionary interest
The rights of a beneficiary
   To always be considered in the deliberations of the trustees


   To be treated impartially (unless the deed permits otherwise).

   To be informed – to know they are beneficiaries

   Entitled to
       Financial statements
       Copies of the Trust deed and any variations,
       including the names of the trustees
       Details of distributions
Balance Perspective
   The fiduciary obligation to inform must be balanced against the
   need to know. Matters of confidentiality


   The effect of knowledge on a beneficiary.
GIFTING
BACKGROUND
  Applied since 1885

  Protection of Estate Duty base

  Expensive to Administer

  Minimal Revenue

  Antiquated System
SITUATION NOW
  Repealed from 1 October 2011

  Documentation still required


  Solvency Statement
REASONS

  Matrimonial


  Creditor Protection


  Rest Home subsidy eligibility
MATRIMONIAL

  Covered in later presentation


  Power of Section 44


  Courts view
CREDITOR PROTECTION
  Unscrupulous disposition of property

  Remedies for Creditors

  Legitimate dispositions

      Donor                     Trust
                  Property


                   Debt
REST HOME SUBSIDYS

  Gifts within 5 years   $6,000 per application


  Gifts beyond 5 years   $27,000 per application
Examples
    May 2004: Trust initially owed $500,000 (Deed of acknowledgement of debt)
    May 2004: Trust received gifts of $54,000      Balance of Debt $446,000
    May 2005: Trust received gifts of $54,000      Balance of Debt $392,000
    May 2006: No gifting that year
    May 2007: Trust received gifts of $54,000      Balance of Debt $338,000
    May 2008: Trust received gifts of $54,000      Balance of Debt $284,000
    May 2009: Trust received gifts of $54,000      Balance of Debt $230,000
    May 2010: Trust received gifts of $54,000      Balance of Debt $176,000
    May 2011: Trust received gifts of $54,000      Balance of Debt $122,000
    May 2012: Trust received gifts of $122,000 Balance of Debt $0
Take a moment to
stretch your legs

				
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posted:5/22/2013
language:Latin
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