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Congrats on having set up your family trust! Your next job is to ensure that it is administered properly. If it isn’t, there’s a chance that your trust could be considered a “sham” and your trust could be wound up by the IRD or a creditor, which may put the trust assets at risk. That’s why it is really important that you make sure that your trustees are able to fulfill the duties of their role properly.
You’ve Got Your Family Trust Done. So What’s Next?
The job of your trust is to keep your family trust assets separate from your personal assets, to ensure that they are safe for the generations to come. This is the responsibility of the trustees of your family trust. Your trustees will need to:
Trustees also need to make sure that they are responsible when it comes to making decisions for the trust, following the guidelines given by the Trustee Act 1956 which says they need to “exercise the care, diligence and skill that a prudent person of business would exercise in managing the affairs of others.”
Things Family Trust Trustees Need to Know
Each of your family trust trustees are personally responsible for any debts (except tax), that the trust gets while they are a trustee, unless otherwise agreed. Their liability is usually limited to the assets of the trust, unless their actions as a trustee are negligent. They will also need to actively make decisions for the trust independently, not letting others make the decisions for them, or they run the risk of the beneficiaries suing them if things go wrong.
A trustee also needs to meet all tax obligations for the trust. This means that, if the trust is receiving an income from any of the assets that it holds, it needs to either give that income to the beneficiaries, treat it as trust income or do a mixture of both. All of these options require a tax return to make sure that the right amount of tax is paid to the IRD. This needs to be done in a written resolution by the trustees.
More Family Trust Administration Requirements
In order to stay on the right side of the law, a family trust must have:
For the first few years after your trust has been created, it can be confusing as to what needs to be done, by who and when. So make sure you talk to your lawyer to get some advice on this.
To find out more about the benefits of setting up a family trust read our blog post Protect Your Assets with a Family Trust.
Need to make some changes to your family trust? You can manage your family trust with our easy and affordable trust legal documents.
Disclaimer: The information on this page is general information only and must not be relied on as legal advice. Legal Beagle is not a law firm or a substitute for a law firm. We are unable to provide any kind of advice, explanation, opinion, or recommendation about possible legal rights, remedies, defences, options, selection of legal documents or strategies.
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