Trust restructure advice

[cube]

Who are the current favourites for trusted Trust advice, specifically re-structuring a (simple) family trust and wills now that the kids are all adults.

Specific questions;

a. If an adult child is made a trustee of the family trust, containing family assets including the family home, does that affect their 'First Home Buyer' status when it comes to Kiwi Saver/Kiwi Build?
b. Given that the trustees are listed on the property documents ' as trustee for the XYZ Trust', does changing the trustees trigger a full 'Sale and Purchase' process, or just a (hopefully cheaper) re-documentation exercise?
c. Is it generally a good idea/normal practice for named beneficiaries (i.e. the adult children) to be trustees?

[Anthonyacat]

GRA are good trust-expert accountants, but you'd probably be better talking to a lawyer.

My good-but-not-quite-expert understanding:

A: Yes I am fairly sure First Home status under Kiwisaver relies on a name never being on a title of land. Trustees names go on the title instead of the trust.
B: Does not trigger a full sale and purchase process. And does not reset the Bright Line test (there is a specific exemption in legislation). I don't know about the cost of redocumentation, but you would presume it to be cheaper.
C: NOT normal practice for named beneficiaries to be trustees. My personal opinion not good idea either. Trustees have the power to control the trust. Having the main beneficiaries in full control risks temptation and self interest and potential for sham trust and etc... For a normal family trust the trustees would be Mum + Dad + Close Friend or Lawyer or Other Professional Trustee

[Perry]

NOT normal practice for named beneficiaries to be trustees. My personal opinion not good idea either. Trustees have the power to control the trust. Having the main beneficiaries in full control risks temptation and self interest and potential for sham trust and etc.

Although I agree with the first sentiment Anthonyacat describes above, my view is the risk of a sham Trust is less than sibling / beneficiary conflict. Any sibling beneficiary who is a Trustee risks being seen in an unfriendly light by other sibling beneficiaries who are not Trustees.

For a normal family trust the trustees would be Mum + Dad + Close Friend or Lawyer or Other Professional Trustee

Agreed.

But as the parents age and die, replacement Trustees can become a vexing dilemma.

I held a PoA for both and I was co-executor of my mum and dad's Will, but not a Trustee of their Trust, by my choice / insistence. Events after their death made me most grateful to have made that decision.

[Anthonyacat]

...my view is the risk of a sham Trust is less than sibling / beneficiary conflict. Any sibling beneficiary who is a Trustee risks being seen in an unfriendly light by other sibling beneficiaries who are not Trustees.

I did mention this directly prior to sham trust - I called it 'self interest'. But yes you've certainly unpacked the concept.

[cube]

For a normal family trust the trustees would be Mum + Dad + Close Friend

This is where we are now, but friend has moved overseas and with the kids all coming of age, I thought it might be a goods time to review things.

[Rosco]

How is the Trust really operated? Do Mum + Dad really make all the decisions, and then the third Trustee just rubber stamps the odd document and minute?

In the ideal world all Trustees should be fully involved in making all decisions. The third Trustee should know fully what is going through bank accounts, plus have at least annual meeting.

If this hasn't been the case, and probably won't be the case in the future, are you better just having two Trustees, but ensuring you have signed Trust minutes for each decision (plus annual accounts, annual meeting minutes etc). NOTE , you would need to check your Trust Deed as you might need 3.

In general a third Trustee is better and helps the Trust have independence, plus on titles for land it makes it a lot clearer. But if the third Trustee isn't involved, then is that worse than not having one?

If you are going to replace your third trustee, generally this would be an independent trustee. Your children are not independent and are likely to also be beneficiaries. Meaning you would have 3 beneficiaries running the Trust, which isn't ideal. Also are your children going to act in the best interests of the Trust, or their best interests? For example I'm not a trustee in my parents Trust.

Ross

[cube]

Thanks Rosco - apart from one house move, nothing has really happened for the trust - the financial statements are as boring as they can be, and the trust has no bank account, just the property.

[King13]

Thanks Rosco - apart from one house move, nothing has really happened for the trust - the financial statements are as boring as they can be, and the trust has no bank account, just the property.

Then why have the Trust? Was it to protect the house in case of credit litigation?

[Rosco]

Thanks Rosco - apart from one house move, nothing has really happened for the trust - the financial statements are as boring as they can be, and the trust has no bank account, just the property.

A Trust should really have a bank account! Just one of the things that helps to make a Trust legit!