2024 has raced by in a flash. If you’re one of those who have been meaning to look at the structure of your affairs and check it’s still “fit for purpose” but just haven’t got around to it, or to finalise the update of your trust and estate planning that you started with your legal adviser some months ago but put it in the “too hard basket” – you’re not alone!
Similar to the false starts, splutters and green shoots appearing in the NZ economy this year, we have also observed our private clients hitting go, hitting pause and then re-engaging with us to get their affairs in order.
If you have a trust, then you’ll be all too familiar with the increase in time, energy and cost relating to meeting ongoing compliance obligations, such as:
- Anti-Money Laundering regime – From your Bank, to your Lawyer, Accountant, Real Estate Agent or Investment Manager, it sometimes feels like you are always being asked to confirm your ID and proof of address, or where the trust fund originated from. All your professional advisers are required to gather the same information from you in order to comply with their legal obligations, but it can be frustrating to go through it again, and again…
- FATCA/CRS – The international regimes introduced with a view to improving cross-border tax compliance, being the Foreign Account Tax Compliance Act and Common Reporting Standards. Financial institutions in NZ are required to report certain information about their US/non-resident account holders to relevant tax authorities, which means more information requests and forms to fill out (even when you are not a non-resident account holder).
- Disclosures – From tax disclosures to the IRD to beneficiary disclosures under the Trusts Act 2019, you are now having to bring heightened awareness and diligence to matters such as children beneficiary current accounts, non-financial distributions (e.g. rent free occupation of property) and meeting the reporting requirements of IRD.
We have seen the increase of compliance, time and costs prompt many clients with multiple trusts to rationalise and streamline their affairs through restructures and collapsing assets into less entities. It can be a complex exercise, requiring your accountant to give advice on tax impacts (e.g. depreciation recovery income, bright-line tax on land, etc) and your lawyer to give advice on the best structure and changes that may be required to ensure the remaining trust is in ship-shape – however life afterwards is a lot simpler! We’ve also seen some clients elect to not continue with a trust and have assets distributed to beneficiaries and then closed.
Another trend we are seeing are clients increasingly concerned about how to protect the inheritance of their children from relationship property claims, and how to have “tough” conversations with their children about protecting assets as they enter relationships. It can be an awkward and challenging conversation to have, but just like the other “life skills” we teach our children as they grow up, socialising the concepts, risks and concerns from late teens and beyond is a good start. It’s always about arming our children with knowledge and confidence, so they in turn can have the conversation with their partner. Knowledge is power, and the earlier you can have those conversations, the better for everyone.
So if you’ve been putting off the “relationship property” chat with your child, or if you’re one of those who haven’t quite completed the update of your affairs (or it’s been on your mind or weighing on your conscience), then 2025 is the year to get this done.
Reach out to us and we’ll be able to assist with guidance and information on how to achieve your goals. Contact our private client law team.
Special thanks to Partner Lisa Small for preparing this article.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.
