WHY DO I NEED MY TRUST REVIEWED?

The correct question should be…Why shouldn╩╝t you?
Your worst risk in asking for a Trust Review is receiving a report to say “all is in order”. Past experience would indicate that this scenario would be unlikely. The risk in not having your Trust reviewed may be losing your house – the cost of the review may be well worth it for peace of mind.

It is estimated that currently there are over 200,000 Trusts in New Zealand.

Experts believe over 75% of these could be successfully challenged.

In general people settle Trusts to protect important family assets against loss through matters such as Business Risk, Legal Actions or Property Relationship Claims. If any of these risks were to eventuate they would most probably do so through a court action which may involve your Trust.

Equally if you apply for a Rest Home Subsidy your Trust records could be open to scrutiny by a Government body.

In circumstances such as this where your records came under close scrutiny it would be too late to fix any mistakes or lapses made by the Trustees. The last thing you would want is for your Trust to be overturned because you had left everything to your advisors, or you simply didn’t know what to do.

If a Trust is to be overturned it generally has nothing to do with the original Trust documents you signed and everything to do with what you did or didn’t do as a Trustee.

As a Trustee you have to know what is going on in your Trust and be seen to do so through keeping proper records.

Law Commission recommendations

     
 

Inclusions

Trustee duties:
  • To manage the trust with reasonable
  • care and skill.
  • Invest prudently
  • Maintain comprehensive accounts
Retention of:
  • Trust deed and variations
  • List of assets and liabilities
  • Any trustee resolutions
  • Any written contracts
  • All accounting records and financial
  • statements
  • Deeds of appointment and retirement
  • of trustees
  • Any expression of intention or wishes
  • of settlor
  • Plus, retention of any of the above by
  • former trustees
  • Documents to made available to
  • other trustees
  • Documents to be made available to
  • continuing trustees and beneficiaries

Inland Revenue

     
  “The lesson for trustees
– professional or
otherwise is that they
can no longer take a
passive role. You can’t
leave management to
other trustees – you
need to ask for
documentation, you
need to be involved in
major decisions and you
need copies of GST and
tax returns or at least
have direct involvement

with those matters”

 

Campbell Rose –
Deloitte NZ Tax Partner