I think I might wind up my trust - what do I need to do?

If you have a trust, it’s helpful to review the reasons why you set up a trust to start with and whether your trust is still relevant to your circumstances.

The reasons people set up trusts are generally:

            • Creditor protection for people in business;

            • Protection for children who may not be able to manage money;

            • Estate planning reasons;

            • Relationship reasons; and

            • Historically, for rest home subsidy reasons.

Over the years, the laws around rest home subsidies and relationship property have changed dramatically. Many people may find the benefits they thought their trust would give them are no longer relevant. 

Equally for many people who used to own a business but are now retired, a trust is probably no longer needed for them and will instead add a layer of complexity to their estate planning.

As part of winding up your trust your lawyer will consider the requirements under your trust deed and will need to transfer any assets held by the trust into the names of those who are beneficiaries of the trust.  This will likely be done as a ‘distribution’ to those beneficiaries.

When transferring trust-owned property as part of a wind up/distribution process, there can be some tax consequences if the property is not the main home of the settlors (those who set up the trust).

There may be other tax considerations to take advice about, as your trust may also give you some tax benefits if you currently obtain income from it.

You will need to ensure all the trustees of the trust agree to the wind-up and sign the required documentation.

It is important when winding up your trust to take both legal and tax advice, depending on the assets that your trust owns, before proceeding.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Claire Tyler

Partner
Wellington