Charities in New Zealand

Charities play an important role in our society to help the disadvantaged, support specific causes or to advance knowledge. In New Zealand we have more than 27,000 registered
charities, with 230,000+ volunteers and 180,000 paid staff [1]. Many of these charities are
structured as trusts which can be incorporated and run as a trust board by the trustees.
Others are structured as incorporated societies or companies, or as unincorporated bodies. These types of charities are run by a board with specific obligations and responsibilities.

The Charities Act 2005 (which is currently under review) regulates the Charities Register and sets out the statutory rules relating to registered charities. Those rules include a re-quirement for registered charities to report, on an annual basis, to Charities Services (a di-vision of the Department of Internal Affairs).

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Trusts Act 2019

Comes into force early 2021

The Trusts Act 2019 will come into effect on 30 January 2021. Much of the Act updates or restates existing law.  However, there are a number of changes about which trustees and people with trusts should be aware.

Trustees’ duties

The Act contains ‘mandatory’ and ‘default’ duties for trustees. Mandatory duties cannot be modified or excluded by the trust deed so all trustees will have to observe them. Mandatory duties are: Continue reading “Trusts Act 2019”

Accessing the assets of a trust

What the future may hold for separating couples with a trust

When a marriage, civil union or de facto relationship breaks down, the couple will usually divide their property according to the Property (Relationships) Act 1976 (the PRA). However, these two people often hold property in a trust rather than personally.

The PRA has limited remedies to access property which has been put in a trust, and this can result in unfairness when a couple separates if there are no assets that they own personally.

The Law Commission has undertaken a review of the PRA and proposed that the legislation be changed to make it easier to access trust property when a couple separates.

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Trusts Bill

Deals with practical issues

The long-awaited Trusts Bill was introduced to Parliament on 1 August 2017. The Bill is largely an update and restatement of the Trustee Act 1956 and the common law. However, it also deals with practical issues that have faced lawyers and trustees for some years. We outline some of the most important parts of the Bill.

‘Express trust’ defined

An ‘express trust’ is defined in the Bill. The definition makes it clear that trust property is separate from a trustee’s personal property, it must be administered in accordance with the trustee’s obligations in the trust deed, and that trustees will be accountable to beneficiaries for their compliance with the duties imposed on them by the trust deed and by law.

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FATCA and New Zealand Trusts

North American Bald Eagle on American flag

Many trusts may require registration with the United States’ IRS under the FATCA regime

The US Foreign Account Tax Compliance Act (FATCA) has been in force in New Zealand since June 2014. FATCA is a complex piece of legislation established to prevent tax evasion by requiring foreign financial institutions to register and report to the IRS in relation to any accounts held on behalf of US citizens.

All New Zealand entities considered to be ‘foreign financial institutions’ under the FATCA regime should have been registered on the IRS website by 31 December 2014. Continue reading “FATCA and New Zealand Trusts”

Latest Trust eSpeaking

Today we’ve published the Autumn 2013 edition of Trust eSpeaking; we hope you enjoy reading this, and also find its contents both interesting and useful.

In this issue we have articles on:

  • Trust and Avoidance of Rest Home Fees: all quite tricky
  • Right to Decide About Funeral and Burial: still some uncertainties
  • Law Commission’s Key Proposals for New Trust Legislation

If you’d like to talk further about anything in Trust eSpeaking, please be in touch.

‘Tis the season to be giving…or is it?

ConfusedFollowing the abolition of gift duty on 1 October, we publish a special edition of Fineprint here.

You may be considering whether to complete your gifting programme in one fell swoop – or perhaps not.

Everyone has their own reasons for establishing a trust, and your own individual situation will be unique to you and your family. Completing your gifting programme in its entirety may not be the best step for you.

Do get in touch with us so we can talk about the best path forward for you and your particular circumstances.

Latest Trust eSpeaking

We publish the latest edition of Trust eSpeaking here.

In this edition:

  • Let’s give it all way – It’s not that straightforward
    With the abolition of gift duty from 1 October 2011 the first thought for most people who have a family trust would be “Let’s give it all away”
  • Rest home care – Don’t expect government hand-outs
    After gift duty comes to an end from 1 October, one thing will still be clear: you can’t give everything away to a trust and then expect to rely on state assistance because you don’t own any assets…
  • Trustee Liability – As vendor under an Agreement for Sale & Purchase Trustees are the legal owners of trust property and are personally liable for warranties given under an Agreement for Sale & Purchase. Trustees should be very careful about giving warranties
  • Trusts and tax – The Supreme Court has spoken Using a trust – or any other structure such as a company – to reduce your income is
    not straightforward. If you push the boundaries too hard you may end up having to pay a lot more. The latest Supreme Court decision provides a useful warning

The taxing issue of family trusts and companies

The Supreme Court has just released its judgment in the ‘Penny Hooper’ case. This case involved two doctors that worked in their own private practices. They then formed companies for which their family trusts were shareholders. Rather than the doctors receiving the full income they generated – they were paid a salary. The IRD said the salary was significantly below market value (i.e. one doctor went from $650,000 income one year to a salary of around $100,000).

The Supreme Court has said that having a salary set at a low rate to avoid paying tax is tax avoidance. However, if the salary is at a low rate for a legitimate reason (e.g. saving income for the purchase of a capital item) then this is not tax avoidance.

A more detailed summary of the decision follows and you can read the full decision here.

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