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David Wynne
Chartered Accountant
6A Vinery Lane
PO Box 10164
Whangarei

Phone: (09) 430-2599
Fax: (09) 430-2598
E-mail: david@davidwynne.co.nz

 



I have a large number of clients who operate family trusts and because of economies of scale and my low overhead structure I am able to offer very competitive rates for the preparation of Trust Financial Statements and the associated Tax Returns.

Here are some indicative prices.

 
Summarised Information
Non-Summarised
Family Trust - Fixed Interest & Dividend Income
$400 Incl GST
$600 Incl GST *
Family Trust - Investment & Rental Income
$600 Incl GST
$800 Incl GST *

* These prices assume a reasonable level of bookkeeping.

A Trust is a legal entity that is created by a legal document called a Trust Deed. There are several broad categories of trusts including Charitable Trusts, Trading Trusts, and Family Trusts. As the names suggest Charitable Trusts are set up for charitable purposes and Trading Trusts are established for the purpose of running a business. Family Trusts are the most common type of trust and are generally set-up to protect family assets for future generations from rouge relations, government, creditors, or anyone else that might be in a position to make a claim on them.

The following is written with the family trust in mind.

Family Trusts are often created by people who want to protect their assets. These assets can then be enjoyed by, or passed onto future generations, or others, who are named as the beneficiaries of the trust.

There are three sets of people involved in the establishment and maintenance of a trust. The settlor, who gives the assets to the trust, the trustees who administer the trust and the beneficiaries who receive the proceeds of the trust. Often the settlor is also a trustee and a beneficiary of a family trust.

The following example demonstrates how assets are protected by use of a family trust. Tom and Mary are 60 years old, have a house worth $150,000, and savings of $50,000. Tom and Mary establish a family trust and transfer the above assets into the trust. At this point the Trust has assets of $200,000 and a debt owing to Tom and Mary of $100,000 each. Tom and Mary then gift $27,000 (the maximum amount allowed before gift duty becomes payable) each per year to the trust. This reduces the amount owing to them by $54,000 per year so that after 4 years the trust owns all of their assets and owes them nothing.

Mary dies at the age of 67 and Tom has a bad stroke at 69 and has to be placed in a home with around the clock care. If the $200,000 of assets were still owned by Tom rather than the Trust then these assets would be used to cover the cost of Tom's care. If Tom then lived on for another 10 years all of the assets are likely to be used in covering the cost of his care. Because the trust owns the assets the government pays for Tom's care and the assets remain available for distribution to the beneficiaries without attracting any gift duties.

It is also possible to use the family trust to reduce tax payable but for this to be effective the amounts of income in question need to be substantial.

The biggest downside to creating a family trust is the cost of establishment and maintenance. The legal costs of establishment can run into several thousand dollars and the additional cost of annual Financial Statements and minute book maintenance can cost several hundred dollars per year or more depending on the assets of the trust and the accountant you use.

It is important that the decisions of the trustees are well documented. Most lawyers agree that improper or incomplete record keeping leaves a trust open to attack as a sham thereby eliminating its main purpose of asset protection. If you have settled a trust you should ensure that the minute book is maintained and, if the trust is deriving taxable income, that Financial Statements and Tax Returns are prepared annually.

 


Please feel free to contact us via the following information with any queries, comments or requests for further information.
   
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David Wynne, Chartered Accountant
6A Vinery Lane
PO Box 10164
Whangarei

Phone: (09) 430-2599
Fax: (09) 430-2598
E-mail: david@davidwynne.co.nz

 
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