He says many trusts like that were set up by couples in long-term marriages, working in low-risk jobs, expecting their estate to be passed on to their children.
“All of that can be achieved by putting a will in place,” he says. Even if the couple did separate, “they would each clearly be entitled to half of that family home in any event”.
“There are quite a few out there where this situation is quite simple and can be addressed by other cheaper options.”
Stokes suggests the reason New Zealanders became so fond of trusts was more about keeping up appearances than efficiently managing assets.
“You were seen as being successful if you had a trust… It was very much the thing that lawyers, accountants, everybody was recommending trusts, right, left and centre.”
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There have been a number of changes to the rules that govern how trusts must be managed, including an increase to the trust tax rate to align with the top tax rate of 39%.
“If you have a family trust and you’re not clear on whether it’s achieving anything … take the opportunity of actually asking yourself – why did I set it up? If you can recall what the reason was, is that still a valid reason now?” Stokes says.
Otherwise, he says, it just adds cost and complexity without providing a benefit.
Even Stokes has rethought the need to have one.
“The same needs just weren’t there anymore as what they had been previously, so we dealt with it, got it wound up, and that’s a bit more spare time that I have up my sleeve instead of having to manage my own trust.”
Winding down a trust can be trickier than setting one up, but either way, be prepared to keep a lot of records.
“One thing that does come with a trust, most definitely, is paperwork.”
- Correction: This article has been amended to correct a statement that said new rules required trusts to have an independent trustee. While recommended, there is no legal requirement.
Listen to the full episode of The Prosperity Project for more on the ins and outs of Trusts, and if they are right for you.
The podcast is hosted by Nadine Higgins, an experienced broadcaster and a financial adviser at Enable Me.
You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts. New episodes are released every Monday.
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