A young businessman bought a business and decided to set up a trust and transfer his house to that trust, to protect it from creditors of the business.

A few years later, creditors of the business sought to claim against his personal assets as the business owed significant money.  Once he had set up the trust he had done nothing further about maintaining to it.

He was shocked to find that because he hadn’t kept proper paperwork in relation to the trust there was a higher risk that claims by creditors would be successful.  A big problem for him was that it would be seen that he had treated the trust’s property as if it was his own property.

Here are some of key things those who have trusts should be doing to maintain them:

1. Ensure you carry out any gifting (either by a lump sum gift or gifting programme) and record any further money lent to the trust.
2. Hold annual meetings of trustees and keep minutes of those meetings.
3. Ensure that all trustees are included in every decision regarding trust property and sign all documents in relation to the trust.
4. Record all major decisions in writing, executing proper trustee resolutions for major transactions like borrowing money or buying property.
5. Prepare annual accounts and complete an annual tax return for the trust if it has its own income stream.  If it does not have an income stream, obtain an exemption from the IRD from this requirement.
6. Open a separate bank account. This is particularly important if the trust has an income. You should ensure that all trust related banking is done through that separate account.
7. Always remember your trust is a separate vehicle from you personally and the trust property is no longer your personal property.
8. Recognise when it is appropriate to obtain legal and other professional advice throughout the lifetime of the trust.