Forming a trust to protect property...advice needed please.

[crackennz]

Hi all,

So I am about to purchase a house and want to put it into a trust to protect from any unscrupulous future potential partners....(for want of a better defining term).

For this purpose can I be the sole trustee/signatory (if that's the correct term) or do I need another person as part of the trust as a signatory only.
My accountant who is setting it up for me and has set up numerous others has told me I need one although I think she is coming from the view of there is someone else who needs to sign things off in case I go mad or insane.

I was going to ask something else but forgotten already so will add to the thread when I remember...

Cheers

[spaceman]

You don't need another person.... there is no compulsion....but it might be a good idea

OTOH...it might be a bad idea too......the most common reason trotted out why you "must" have another trustee is the provide an independent person the stop the trust being a sham trust.... however if the trustee is just a rubber stamper it may very well not help at all

FWIW, for my family trust I chose to have no other trustee

I like this book ... the author has a web site and has other books......I have no affiliation with them other than I read and liked this book

Successful Trust Management: Asset Protection Planning and the Administration of TrustsBy Ross HolmesPaperback (NZ), April 2002

Cheers
Spaceman

[crackennz]

Thanks Spaceman

[Orkibi]

"Technically" you don't need to have more the one Trustee to run a trust.

BUT and a gain BUT - Trust need to be administered correctly and resolutions need to be recorded.

By having one Trustee as yourself and one beneficiary as yourself you are running a Risk that the trust may be looked at as Sham if tested in curt.

Note; this is not Legal advice and Im not Trust experts, I recommend you to talk to a good solicitor or Good property accountant.

Good option could be; yourself and your solicitor and another family member as Trustees or share holders in a company which would be acting as Trustees. your solicitor or accountant can administer the paperwork like director resolutions and trust minutes etc.

you can be sole beneficiary or together with any other entity you operate with, Or even future partner and children, this is depend on your personal and financial situation - this need to be looked at professionally so you rely need to seek advice.

[Rosco]

Hi,

Lawyers would normally form Trusts, not accountants. Forming a Trust requires legal expertise. Sometimes accountants have lawyers that they work with, and it is actually the lawyer who forms the Trust not the accountant. But I would check who is forming the Trust and what legal expertise they have to do this.

I recommend that clients take their time when forming Trusts, and generally suggest that the client researches Trusts through books and seminars for 6 months, before committing to doing one. How the Trust is operated and admistered long term is very important.

Why do you want one Trustee? If it is so that you have sole power, and can do anything you want with the Trust, then are you really setting up a Trust, or just another entity for yourself? The Trust needs to be treated as a seperate entity and not just yourself acting for yourself.

If your sole reason is to protect against future partners, you will probably find that a pre-nup is the only safe way to protect from partners. A Trust can work, but is not fool proof.

I would recommend you discuss forming a Trust with a reasonable lawyer as well, to get their advice!

Ross

[crackennz]

Thanks all...the only reason I want to be the sole trustee is purely to make it easy if I do decide to change things..ie, I don't require sending documents to another person to sign or to record minutes/resolutions.
I was or am (depending upon decision) going to have my brother as co-signer who is available in the same city at the moment to do this...however he does live out of town usually and due to my work situation, I myself am in varied parts of the country and out of Wellington a lot of the time...

Then again, for the reasons I am forming the trust (asset protection from future partners only) and I am planning on keeping the house for awhile, I can't imagine I would be requiring many signatures etc for changes/resolutions...in my eyes there wouldn't be many...

Just curious as to the process really...lots of different info from different sources and want to make it as easy and hassle free for myself obviously. It's certainly not for a sham but for asset protection and surely anybody who looked at it could see that? Then again maybe not....

My accountant who I have been with for several years has told me she will do a Will and Trust for $650 and she was the one who told me to do it for the asset protection reason (so I would assume she has it right).
She has done many I'm told (I do know of 2 people she has done them for) but have never seen them taken to court to be contested....unless that happens how could I know it will stand up to scrutiny? Probably have a lawyer go over it...charge me lots and say it's good....or just get a lawyer to do it from the start...

Or is a pre-nup the only real way to guard assets (from above post)...which makes it sound like a whole lot of people out there have trusts purely for asset protection which aren't worth a great deal...in which case surely the lawyer/accountant putting together the trust would be the shammer and surely liable for giving false information, which in turn brings me back around to the fact that that doesn't seem possible in my opinion (not because I believe lawyers or accountants have higher moral codes than other people but because I can't see them wanting to jeopordise their businesses)...

Why, if a trust is formed for asset protection, would it not be fool proof?
Surely if a pre-nup is formed for the same reason, it's not fool proof either?

Too many questions and loopholes to think about sometimes

[One]

I think the point is if you put assets in a trust then act totally like they're still yours, your trust looks like a sham.

[Rosco]

1) I have been to a lot of seminars on Trusts and asset protection. Just about every speaker says that the only guaranteed way to protect your assets from a partner is a pre-nup! I agree a Trust should do it, but it's not guaranteed. An example of where a Trust might not work is if you and your partner live in the house owned by the Trust. Your partner has a right to a home, and family courts are likely to award your partner a share of the house, as if you owned it personally.

2) I normally tell clients that a Trust should cost around $1,500 + GST, just for the Trust. $650 is really cheap, and I wonder if this could be cheap and nasty?

3) Preparing a Will is definitely a legal matter. Again what legal expertise does your accountant have to prepare two legal documents, a Trust and a Will?4) If your sole reason in forming a Trust is to protect against a potential partner, the pre-nup might be a lot more effective, a lot cheaper and save a lot of hassle

5) Generally a Trust is set up to protect a person's assets long term, and to accumulate assets and wealth for the beneficiaries (ie generally more than one)

6) Do you already have the partner? If so, it may be too late to form a Trust to protect against your partner. If a Trust is deliberately set up to deny creditors, then it can be voided by the courts.

7) Have you thought about a corporate trustee instead of having multiple trustees? This allows you to change the other people easily and without cost. As director of the corporate trustee you could make day to day decisions on behalf of the Trust, but major decisions would require shareholder approval (you would have at least one other shareholder)

If the Trust just owns your personal house, the administration would be very simple. Generally we do a minute at the start of the year to cover and approve what will happen for the year. So who will pay the rates, insurance, mortgage, etc etc, and what repairs will be pre-approved.From what you have written, I think you need to take a bit more time understanding Trusts and ensuring a Trust will meet your needs, before forming one.Ross

[Orkibi]

2) I normally tell clients that a Trust should cost around $1,500 + GST, just for the Trust. $650 is really cheap, and I wonder if this could be cheap and nasty?

I agree with Ross, sounds strange that your accountant are not insisting on at list 2 trustees - better to have 3. and $650 is very low price - Be careful that you get what you paid for...


go to see a good solicitor pay him and get it done once and properly

[Perry]

Have a look at Trusts On-line. I have no
affiliation or interest in them. Just that
you may find it a useful resource.

Any other forumite in this thread have
any experience with them?

[Perry]

Why, if a trust is formed for asset protection, would it not be fool proof?
Surely if a pre-nup is formed for the same reason, it's not fool proof either?

Simply because the Family Court makes up law as it goes along.
A bit like Tenancy Kangaroo Kourt Klutzes do. Nothing in this
world is fool- or idiot-proof, or safe from judiciary lawlessness.
With a Trust and RPA, you may have the best you can get.

[kapitibeanman]

Re Ross Holmes, his books are clutter-free and very informative.
Not all lawyers provide methodical running instructions and resources,
and some are years out of date with Trust law, particularly if they don't
specialise, so beware.
I'm no expert, but I've been led to believe it's safe to make yourself a sole
trustee, provided certain other safeguards are in place.