Is a Family Trust Right for Me?
Family trusts are a popular way to protect and manage your assets, such as the family home, for you and your family, now and in the future. They can have a valuable role to play, but they’re not suitable for everyone. Here are the pros and cons of family trusts to help you decide if it’s worth investigating further.
Five Good Reasons for setting up a trust
- 1. Protect your assets against claims and creditors in the event of business failure or a lawsuit.
- 2. Set aside money for special reasons, such as a child or grandchild’s education.
- 3. Ensure your children, not their partners, keep their inheritances.
- 4. Protect your children from squandering assets or falling prey to financial scams before they’ve gained sufficient life experience to make sound decisions.
- 5. They have a life of up to 80 years (or 125 years under the new bill) unless it’s wound up and distributed earlier.
Three Disadvantages of setting up a trust
- 1. Transferring your personal assets to a trust means you lose complete ownership and it will be the trustees’ responsibility to control them.
- 2. The time and cost involved in setting up a trust and meeting its annual accounting and administrative requirements.
- 3. Disgruntled beneficiaries have the power to sue trustees where trustees have acted in breach of trust. While it’s not common, it is happening more often.
Get professional advice from the start. We can answer any questions you have about trusts, being a trustee, administering a trust deed, and the proposed new Act. Contact us today to book an appointment to meet with us.
What are my responsibilities as a trustee?
Whether you’re thinking of becoming a trustee for your own family trust or someone else’s, it’s important to know your obligations under the current law before accepting the role.
8 things to know before becoming a trustee
- 1. It’s a legal responsibility with a lot of work involved (most often voluntary) and you could end up being liable for losses made by the trust if you don’t do the job properly.
- 2. You’re in it for the long haul - some trusts have a set end-point, ie: when a child turns 18, but others can go on for over a century.
- 3. You must know and understand the trust deed, all associated documentation and the trust’s property, assets and liabilities.
- 4. You’ve got to stay impartial when managing or distributing trust property to beneficiaries - no favourites!
- 5. You have to ensure all relevant documentation with regard to the trust’s assets are signed by all trustees, not just the ‘Mum and Dad’ of the trust (check the trust deed, though, in case it says otherwise).
- 6. When making trust decisions, you have to agree with the other trustees (unless the trust deed says otherwise). So you need to be sure that you can work well with the other trustees before taking on the job.
- 7. You must actively participate and make all the decisions - no delegating or relying on others to do your job
- 8. Paperwork will be your friend - keeping accurate accounts and recording all trustee decisions as requested by beneficiaries will keep you out of deep water.