Family Trust - Yearly Administrations Costs

[Emblaze Pete]

I’m trying to ascertain if my yearly trust administration costs are being charged at a fair price. I have only had one property in this trust up until recently and I have been charged somewhere between 2.1K-2.5K per annum for the last 4 years. Not much going on inside the trust and all is very straight forward.

The break down is as follows
Accountant costs = 1K – standard yearly tax returns and accounts preparation
Lawyer costs = 1K to 1.5K – standard yearly gifting programme.
Total yearly trust administration = somewhere between 2.1 & 2.5K per year

I appreciate that the administration of these trusts is very important to get right etc but just wondered if I have room to move on cutting these costs, or are they a reflection of average trust admin costs.

Cheers

[CJ]

Accountant is probably about right, Lawyer seems like daylight robbery. Ask your accountant if he can do the same work. Most of it is just standard documents so they should be able to do for you at little extra cost.

[Emblaze Pete]

Thanks CJ. I will look into it. That could effectively half my costs

cheers

[xris]

Hello EP,

Sounds like you're being taken to the cleaners. Why are you doubling up on professional services anyway? Why can't your accountant do it all?

xris

[cube]

A non-trading trust doesn't need to file a tax return - there is provision for this on the form. You simply ring IRD and tell them that you don't need to.

Gifting is important to get right, but only involves

Filling out an IRD form, stating the amount gifted and from who.

Writing a Trust Minute acknowledging the gift (copy the one from last year, and change the date).

If you are still gifting the full amount, it shouldn't be hard. If not, then you'll need to work out how much to gift.

cube

[drelly]

You're getting ripped. Gifting should easily be less than $500 per year. It's no more than signing a single piece of paper.

[Lynda]

Hi there, Pete,

Just out of interest, is the Lawyer also named as an independent trustee for the trust? If so, then they need to be involved in the paperwork, unfortunately.

Cheers,
Lynda.

[simoncoles]

Emblazen Pete

You could refer to http://www.trustsonline.co.nz/

They provide the ability to administer your trust by yourself including templates for minutes etc to enable gifting each year.

You can transfer your trust from another entity (Depending on the way the trust is structered)

It may be worth investigating.

Simon

[Perry]

Wounded Buffalo Charge

I agree that you're being screwed. If the lawyer is an
independent trustee, it's still the same, unless there's
only two trustees, you and the law shark. I also think
you're being let down by your accountant. S/he could
do it for a fraction of that cost.

Mine said, "this year, I'll show you how it's done; after
that I'll tell you the amount and you do it." And so it
has been, since.

The IRD form can be done partly on the Internet. Then
it's a covering letter with the Deed of Gift and the gift
tax return statement (2, see below), an envelope and
a stamp.

None of this is necessary if the gift is $12 or less, by
the way. The Trust's Minute book needs the confirmation
as described, but that can be at the fiscal year end,
when combined with the matters considered at the
trustees annual meeting.

Here's a sample text for you:
------------------------------------------------------
<Your Address Details>

The Duties Unit
Inland Revenue Department
P O Box 2871
Christchurch

<Date>

Bells & Whistles Trust, <gifters name[s]>

With this letter is a copy of a Deed of Gift and
two copies of a gift statement.

In due course, would you please acknowledge
receipt of this letter and its attachments by returning
a suitably endorsed gift statement to me.

<signatory>
------------------------------------------------------

Be aware that timing is important. Do one per year,
at about the same time. Gifting assessments can't
be back-dated, if you forget.

Please send half of what you save, next year, to
the following address . . . .

[Kay]

I see that Cube says that there is no need to put in a Tax return unless the Trust is a Trading Trust. However, it says in today's Herald that all income-producing Trusts need to send in a Tax return, so any rental income would also need to be declared.

[Emblaze Pete]

My lawyer is an independent trustee of my trust unfortunately ........but!! i have decided to give him a good size 11 & sack him ....The accountant did say he could do it all, but hasn't given me an estimate of cost yet. However he did state that, for what he is currently doing on the admin, which is the accounts preparation and tax returns, they normally would charge $1200 but i am getting a bargain at $1000 ..... yeah right ( considering the trust only has 1 property in it)

Am i right in saying that a fair cost for all of the trust admin would be $1,000 to $1,200?

I do like the 'do it yourself' option though, and i will have a look at this when i get back to NZ. If my portfolio grows though, i doubt this will be viable. Last thing i want, is to cross swords with the numpties at the IRD.

Thanks for all your comments everyone ..as usual very helpful

[Perry]

If you have 3 trustees and the Trust Deed provides for
majority decisions, you would not need the law shark's
involvement. It would only need you and t'other Trustee
to sign the documents.

The D-I-Y Trust / gifting process is not in any way
complicated or compounded by the portfolio size.

The figure you mention seems appropriate for accountancy
fees. The burden of the Financial Repoprting Act weighs
heavier on Trusts than a sole trader.

[NotionZ]

Howdy,
The above mentionned trustsonline.co.nz can be used for all your Trust documentation. Annual costs are about $65-$100, this includes all minutes, deeds, gifting (including reminders when yours is due), and balance sheets. You can set up a new Trust from about $495, or register an existing Trust (so you can administer it from the website) from about $195 (including first year's admin).
There's lots of online help too, plus a Super maintenance package so you can get advice re. your particular circumstances.
You can set up as a member for free, there's lots of Trust info in the members area.

[ChiefWigum]

Mine cost $375 to do gift statements etc. I use Taylor Grant Tesiram. I could probably do them myself but am overseas at the moment. Maybe when I repatriate?
Cheers.

[MJU]

There is one other way to approach the issue - work with your professionals!

In all lines of business there are the good customres, and the others. How can you help your professionals do a better job, or an easier job?

The banks used to talk about the 80-20 rule, 20 % of their customers making them 80% of thier profits.
At one stage one bank realised that the rule was probably understating the drag some customers had on their profitability.

Most professionals will be able to work with their clients to drag them up a grade from their intial A B C or D rating to a better one.

Usually this gives better results for both, and not necessarily measured in dollars for the professional!