The January 2021 Trust Law changes are daunting - and additionally, from 1 April 2021 the IRD is now asking for more disclosure for trusts.
Should you be concerned?
Are you a trustee or the beneficiary of a trust?
If you think that the new Trusts Act that came into effect on 30 January 2021 has nothing to do with you, think again.
You may well be the beneficiary of a trust without knowing it. Or, you could be eligible to inherit a small (or large) fortune without realising it.
From now on, anybody who is a beneficiary to a trust needs to be told - and it is up to trustees to ensure that that is done. Previously, it wasn't clear what trust information should be disclosed to beneficiaries. Now extensive disclosure requirements are set out in law and must be complied with.
The new law clarifies that and means that it is more important than ever for trustees and beneficiaries to know their obligations and responsibilities under trust law.
The Trust Law changes, along with the changes to Tax laws, are daunting - and now additionally, the IRD is now asking for more disclosure for trusts.
From 1 April 2021 onwards, certain information must be provided to the Inland Revenue Department for certain trusts.
The information that trustees of some trusts (more information below about who is impacted) must provide to the IRD is:
Financial statements.
All “settlements” that occurred during that tax year.
The name and tax information of each person who made a settlement on the Trust.
Every distribution that was made from the Trust in that year and to who.
Each person who during that tax year had the power to appoint and remove any Trustee and any other information that Inland Revenue requires.
Fortunately, not all trusts are captured under the new rule.
If you have a Trust which just has a family home in it and it is “non-active” you do not need to file the above information.
It is not clear what form the disclosure will take but we will have to prepare and provide this on your behalf.
There is a fair amount of resistance to new disclosure requirements, and is fairly widely considered that the information now demanded of trustees goes beyond what is necessary for the IRD, but there’s no escaping it.
On top of the new requirements in the Trusts Act, these new rules present additional challenges for Trustees, and people with active Trusts may wish to consider whether it is worth keeping their Trusts going.
Certainly, there are benefits to a Trust and that decision should not be taken lightly. And, with all the complexities these changes bring, you will want to ensure you get advice that is tailored for you and takes your wider circumstances into account.
Your OneTeam advisor can help with a personalised review of what the new Trust Act changes mean to you, what you need to be thinking about, and advise of any changes you might want to consider.
Along with your advisor, we recommend that you right now:
1. Review your trust deeds to identify what variations might be required (remember that not all trust deeds will contain powers of amendment).
2. Identify the beneficiaries and consider removing those who are not intended to benefit from the trust (if there is a power of removal).
3. Consider how and who will hold the core trust documents.
4.Communicate with the trustees about their disclosure obligations and the implications of the mandatory and default duties.
5. If you don’t actively use your trust you may wish to consider whether the trust is still required.
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