Help

We've tried to cover off a good range of questions relating to trusts in general. If after reading the below you still have further questions, please email us at trust.specialist@trustus.co.nz.

 

Why is the Family Home Trust not right for me if I am trying to gain rest home subsidies? 

 

Section 147A of the Social Security Act 1964 (in part) states that: "If the Chief Executive of the [Ministry of Social Development] is satisfied that a person who has applied for a means assessment, or the spouse or partner of that person, has directly or indirectly deprived himself or herself of any income or property… the Chief Executive may, in his or her discretion, conduct the means assessment as if the deprivation had not occurred."

 

In other words, gaining rest home subsidies should not be a key reason to set up a family trust, given the discretionary powers of the Chief Executive, and likely fail.

 

The purpose of the Family Home Trust service is to protect your family and lifestyle assets from your more immediate day to day risks during your lifetime, rather than trying to gain funding over the last few years of your life. 

 

Why do you have to register on the website?

We created a registry as you may not have the time available, or all answers at hand, to complete all steps in one sitting. For example, you may not have your rates notice or drivers licence details with you.

This way you can register, complete what you can and come back to finish the rest of the process at a later time (without losing the information you have entered).

 

Why have a family trust and a will?

Since everything you own won’t go into your trust, you will likely also need a will to make sure all of your assets and property are accounted for. So if for example you have jewelery and other personal effects that are not owned by your trust, your will would dispose of those items as you intend.

While paying for a will and a trust feels like an additional cost, having both will cause the least pain for family members taking care of your estate after your death.

 

Do I need to transfer the title of the family home straight away? 

 

It is really up to you.  With the family home trust Deed of Nomination you can take the time to wait until your next family home purchase.

In effect: paying later, rather than having to pay now and later. There is nothing stopping you from organising conveyancing straight away if you want the greater peace of mind.

 

What are the steps involved in transferring the title of your family home?

 

  1. Obtaining approval from the bank to transfer the Title, if there is a mortgage.
  2. New loan document and mortgage, if your bank requires this.
  3. Preparing legal documents to transfer the property into the name of the Trustees.
  4. Registering the new mortgage.
  5. Doing all necessary resolutions.
  6. Reporting to your Bank and the Trustees.


What is involved with transferring the title of your family home?

 

A formal registration of the title is required by Land Information New Zealand (LINZ).  If you have a mortgage over your family home you will need to gain consent.  It is likely you will be required to re-document your loan.

This is to put the names of the trustees as owners on behalf of your family home trust, rather than yourselves as individuals. As trustees you are also likely to be required to provide a personal guarantee over the mortgage.

 

Why transfer the title of your family home to yourselves as trustees?

 

Much like the signed deed of nomination, the transfer of title creates a record that reflects what has happened, namely, that the equity of your family home has been transferred from your own names as individuals into the names of yourselves as trustees.

The transfer of title however, is a more formally recognised registration with Land Information New Zealand (LINZ).  


When is the most cost effective time to transfer the title of the family home?

 

Your next purchase of the family home is usually the most cost effective time for you to transfer the title of the family home to you as trustees (i.e. undertake the conveyancing).

After all, you have to pay for the conveyancing costs at this time anyway.

 

Why create a deed of nomination holding your family home on trust?

 

We believe our customers prefer to have the extra $800.00 to $1,600.00 they are likely to spend on conveyancing in their back pockets, for now.

We believe most of our customers are happy to simply add the words “Or Nominee” to the next sale and purchase agreement they enter into, at the time of their next family home purchase.

By doing this we are allowing our customers to pay later, rather than paying now and later.

 

Are the trustees liable for the debts of the trust?

 

Yes, it is common for family trusts to have debts. For example, home loans. 

If these debts are owned by the trust they are taken on the names of the trustees, and if the obligations are not limited to the trust, the trustees are personally liable.

 

Are trusts just a fad?

 

Trusts have been around for centuries and it is estimated that there are over 500,000 family trusts in New Zealand.

Over the years there have been law and rule changes that directly affect trusts but they still remain an effective means of protecting your assets.

 

Can I alter the terms of a trust I have established?

 

Yes, the terms of the trust can be changed, altering the powers of the trustees, adding beneficiaries or changing any of the terms of the trust.

However there are limits and restrictions which are stated in the trust deed.

 

There are a number of ways trusts can be changed:

 

Any assets of a trust can be resettled into another trust.


There may be an existing clause that allows the settlor to vary the trust.


If all the parties (settlors, trustees and beneficiaries) agree to an amendment.

 

The High Court can also be approached to amend a trust.

 

Can I be a settlor and a beneficiary?

 

Yes, you can and you are also able to be a trustee. It is important however to make sure that, if you are a single person setting up a family home trust, you have an independent trustee.

 

This will reduce the risk of your trust being viewed as being established for inappropriate use.

 

Can I change the beneficiaries of my trust?

 

There is a clause written into the Family Home Trust deed that gives the settlor the right to add further beneficiaries.


This clause caters for the addition of family members. For example, the birth of a child.

 

Can I close down my trust early?

 

Yes, our trust deed has a clause that allows the trustees to wind up the trust and distribute the assets whenever they want.


Please note, the trust can not continue beyond the perpetuity period which is usually 80 years.

 

Can I get rid of a trustee and appoint a new one?

 

The family home trust deed gives the settlor the power to fire existing trustees and to appoint new ones. The Trustee Act also allows the removal of a trustee who:

  • Is incapable of acting,
  • Has committed a crime or breach of trust,
  • Has stayed out of New Zealand for 12 months or more, or
  • Refuses to act.


Can I use my latest rates valuation as a fair value to transfer my family home to the trust?

 

Yes you can.

There may be a small additional cost to you if you have misplaced your latest rates notice, as you need to obtain a current value of your family home.

You may need to order an e-Valuer Report from www.qv.co.nz if you are unable to access your existing Government Valuation from your local council website.

 

Can I add other assets to the trust after it is set up?

 

The family home trust has been designed to predominantly hold the family home.

We would suggest that you do not transfer other assets to the family home trust.

 

Does my trust need a bank account?

 

No, not if the trust has no income and makes no payment for expenses.

TrustUs however do suggest setting up a bank account for your trust to establish the transfer of the $10 to create an audit trail showing the establishment of the family trust.

 

How long can a family home trust last for?

 

Our trust deed states that the trust can last for up to 80 years from the day it is set up.

This is the maximum number of years a trust is allowed to last under the Perpetuities Act.

The trustees may have the power to end the trust earlier if the trust deed allows it.


I am a builder, when I sell the property do I have to pay any tax?

 

When is the sale of a property taxable?

 

Under current law, income tax may apply to profits made on property sales in a range of circumstances:

  • When land was bought with the intent to resell.
  • When land has been developed or subdivided.
  • When the seller is a dealer in land, or a builder, or is associated with a builder, dealer or developer.

In these circumstances, tax should be paid on the profits, just as it should on income from other kinds of investment.

 

How many houses can I buy and sell before I must consider tax?

 

There is no set figure. When any property is purchased for the purposes of resale, the profit may be taxable, depending on individual circumstances.


How does Inland Revenue determine my intent?

 

While your stated intent is considered, the evidence and patterns of sales will also be a determining factor as intent is often verified by action.

To determine intent, we may look at statements you made to a bank manager or advisor when you bought the property including any plans which may have been made or discussed.


What if I lived in the property?

 

The sale of a family home is not normally subject to income tax.

However profits may be taxable if the homeowner has established a pattern of buying and selling the properties in which they reside or the main intent when buying was for profit.


What is the 10-year rule?

 

There are special rules for people involved in either the business of developing or subdividing land, or people involved in the building industry.

These rules also apply when the property is held by an associated person of a builder or developer.

Intent when a property is purchased is usually the determining factor in whether profits from property sales are taxable.

However in the case of builders and developers, if the property is sold within 10 years the profit may be taxable regardless of the original intention when it was purchased.


What are the penalties for not declaring profits made from property sales?

 

The penalties range from 20% to 150% of the tax that should have been paid depending on the circumstances leading to any omission.

However they can be significantly reduced by coming forward voluntarily.

 

Am I supposed to pay tax on the property I have just sold?

 

That largely depends on your intention when you purchased the property.

If you bought the property with the main intention of making a profit then the answer is probably yes.

If you purchased with the intent of residing in the property as your home then the answer is probably no.

However everyone's circumstances are different and all the facts need to be considered on a case by case basis.

You should look at the facts surrounding your purchase and apply these to the question "What was my main reason for buying the property?".

If you are still in any doubt after you have done that you should seek professional advice.


I am a property developer, when I sell the property do I have to pay any tax?

 

When is the sale of a property taxable?

 

Under current law, income tax may apply to profits made on property sales in a range of circumstances:

  • When land was bought with the intent to resell.
  • When land has been developed or subdivided.
  • When the seller is a dealer in land, or a builder, or is associated with a builder, dealer or developer.

In these circumstances, tax should be paid on the profits, just as it should on income from other kinds of investment.


How many houses can I buy and sell before I must consider tax?

 

There is no set figure. When any property is purchased for the purposes of resale, the profit may be taxable, depending on individual circumstances.


How does Inland Revenue determine my intent?

 

While your stated intent is considered, the evidence and patterns of sales will also be a determining factor as intent is often verified by action.

To determine intent, we may look at statements you made to a bank manager or advisor when you bought the property including any plans which may have been made or discussed.

 

What if I lived in the property?

 

The sale of a family home is not normally subject to income tax.

However profits may be taxable if the homeowner has established a pattern of buying and selling the properties in which they reside or the main intent when buying was for profit.

 

What is the 10-year rule?

 

There are special rules for people involved in either the business of developing or subdividing land, or people involved in the building industry.

These rules also apply when the property is held by an associated person of a builder or developer.

Intent when a property is purchased is usually the determining factor in whether profits from property sales are taxable.

However in the case of builders and developers, if the property is sold within 10 years the profit may be taxable regardless of the original intention when it was purchased.


What are the penalties for not declaring profits made from property sales?

 

The penalties range from 20% to 150% of the tax that should have been paid depending on the circumstances leading to any omission.

However they can be significantly reduced by coming forward voluntarily.


Am I supposed to pay tax on the property I have just sold?

 

That largely depends on your intention when you purchased the property.

If you bought the property with the main intention of making a profit then the answer is probably yes.

If you purchased with the intent of residing in the property as your home then the answer is probably no.

However everyone's circumstances are different and all the facts need to be considered on a case by case basis.

You should look at the facts surrounding your purchase and apply these to the question "What was my main reason for buying the property?".


If you are still in any doubt after you have done that you should seek professional advice.

 

Why do I need to know the difference between Tenancy in Common and Joint Tenancy?

 

If you are buying a property with another person or entity you will need to choose between the two. The most important differentiator is what happens when one of the owners dies. Tenancy in common: This is the most common form of tenancy and allows assets to be transferred as per the instructions in each owner’s will. Whereas a Joint tenancy: In the case of one of the owners passing away, a joint tenancy allows the property to transfer to the surviving owner(s).

The below are some of the most common scenarios we see and how many deal with them. However, you should discuss your situation with an expert to ensure you make the right 

 

You want to protect your children’s rights to the property from a future spouse

 

To make sure that if the unfortunate happens, your share of the property goes to your children (or other specified beneficiaries) instead of your spouse’s hypothetical new partner, tenancy in common is the right choice for you. Just make sure your wishes regarding your assets are clear in your Will.

Tenancy in common gives your children

The right to sell and buy an alternative property or properties,

The right to build an alternate property, and

The right to use the proceeds of sale and enjoy the income during their lifetime.

This means that a future spouse or partner cannot benefit from at least half of the house.

 

Both parties have family trusts already

 

Family trusts are commonly used to protect assets either received by way of inheritance or the person’s share of a relationship property settlement. Where both parties to a new relationship or marriage have existing family trusts and subsequently buy assets together, each of the trusts will own their share under a tenancy in common.

 

You want your children to eventually own the property, but your spouse can keep using it

 

Tenancy in common will enable your children to own the asset. Each party, under their Will, can provide for the surviving spouse or partner to have the use and enjoyment of their half of the house during the surviving spouse or partner’s lifetime.

 

You want to deal with the house and its contents differently

 

It is possible to have the house held as tenants in common, and the other assets (e.g. furniture, car, bank account) as held in joint tenancy. This means that children/those specified in the Will retain the right to the property, and the other assets pass on to the surviving partner.