TRUST LAW CHANGES NEW ZEALAND
Trust law changes: New Zealand. What are they, and how will they affect you and your trust?
The main changes are:
- Trustees will now have some mandatory duties to fulfill
- Trustees must disclose certain information to all the beneficiaries – no more opacity!
- Trustees are being given more flexible powers
- It should become cheaper to setup and run a trust
- You might be able to remove and appoint a trustee and not have to get the courts involved
- Trust lifespan will be up to 125 years
- Some beneficiaries could become settlors!
Now, you might already be doing this, but here are some more changes; the new law lists core documents that all trustees need to retain:
- deed of trust and any variations
- property owned by the trust
- records of decisions made
- accounting records and financial statements,
- records about appointments, removals and discharges of trustees.
If you are a client of EpsomTax.com Limited, you (hopefully) already do this.* But if you don’t have up-to-date financial statements for your trust, you will have a lot of work (and expense possibly) ahead of you (contact us for a quote on 099730706). That might be this lady’s problem…?
Anyway, another big big change for trustees is that you will need to tell the beneficiaries info such as:
- “Oh, by the way: You’re a beneficiary of our trust.” (Could be awkward)
- Who the trustees are and how to contact them
- Info about changes of trustees etc etc
- The beneficiary has a right to see the deed of trust and info about the trust!
BENEFICIARIES BECOME SETTLORS – HOW?
Here is the jargon: Section 67 of the Taxation (Annual Rates for 2019-20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 enacts an amendment to section HC 27 of the Income Tax Act 2007.
That amendment provides that when a beneficiary of a trust is owed an amount by the trust, the beneficiary does not become a settlor of the trust if –
- a. the trustee pays to the beneficiary in the income year interest on the amount owing at a rate equal to or greater than the prescribed rate of interest:
- b. the amount owing at the end of the income year is not more than $25,000.
This amendment comes into force on 1 April 2020, and does not have retrospective effect.
How do you know if one of your beneficiaries is owed more than $25,000 by the trust? The trust will need a balance sheet, at the very least, to track this.
What should you do if this is the case?
- Pay out the beneficiary (check with your lawyer first), or
- Pay interest to the beneficiary for the use of their money, as described above
* See a link to our blog articles on this subject here
^ This link does not constitute an endorsement of EpsomTax.com Limited by Weston Ward & Lascelles. Please contact them or your own lawyer for more information on what this means for your trust. EpsomTax.com Limited cannot provide legal advice; for accounting and taxation advice, please contact us.