What is a trust?
A trust is a legal arrangement where a trustee holds assets for the benefit of another party. In essence people transfer or sell assets to a trust. These assets are held by the Trustees (managers) of the Trust, for the benefit of the beneficiaries (anyone you choose, including you).

Why form a Trust?
Whilst the use of trusts in the UK has long been regarded exclusively for the very wealthy this is not the case in New Zealand which has different social legislation than the UK. This includes Acts of Parliament that can govern such things as the way your estate is distributed if you do not have a valid Will, who can contest or challenge your Will, how your assets are dealt with if your relationship fails and how creditors can pursue your assets if business ventures fail. Perhaps the simplest way of avoiding these potential problems is to establish a New Zealand trust prior to leaving the UK.

An example of this is the following situation, where a widow died leaving her sizeable estate to her only child, being a daughter in her late 30s. Not long after receiving the distribution her relationship of six years ended. As the inherited funds had been treated as joint property her partner was able to receive half of the inheritance on separation. This is clearly not what the widow wanted on her death and could have been avoided by placing her assets into trust.

Tell me about Domicile
Domicile is a legal concept. It is not possible to list all the factors that affect your domicile, but here we explain some of the main points.

You are domiciled in the country where you have your permanent home. Domicile is different from nationality or residence. You can only have one domicile at any given time.

Your ‘domicile of origin’ is normally acquired from your father when you are born. It may not be the country in which you are born. For example, if you are born in France while your father is working there, but his permanent home is the UK, your domicile of origin is the UK.

You can legally acquire a new domicile, known as a domicile of choice, from the age of 16. To do so, you must:

· leave the country in which you are now domiciled and settle in another country, and
· provide strong evidence that you intend to live there permanently or indefinitely.

Living in another country for a long time, although an important factor, does not prove you have acquired a new domicile.

For inheritance tax purposes, there is a concept of ‘deemed domicile’. This means even if you are not domiciled in the UK under general law you will be treated as being domiciled in the UK at the time of a transfer if:

· you were domiciled in the UK within the three years immediately before the transfer, or
· you were resident n the UK in at least 17 of the 20 income tax years of assessment ending with the year in which you make a transfer.

What are my Inheritance Tax obligations?
From 1 April 2009 Inheritance Tax exemptions increased to GBP325,000 per person, or GBP650,000 per couple. It is possible for a spouse to inherit their deceased spouse’s entitlement to this exemption.

If we sell our home to a Trust prior to leaving the UK will we pay Stamp Duty?
If you transfer your house in the UK directly to a trust yes there will be a stamp duty obligation on the trust as the purchaser of the property. However if you transfer the sale proceeds of your UK house to a trust there is no stamp duty liability.

Tell me about Gift Duty in New Zealand
A gift is “any disposition of property, wherever and howsoever made, otherwise than by Will, without fully adequate consideration n money or money’s worth passing to the person making the disposition. Provided that where the consideration in money or money’s worth is inadequate, the disposition shall be deemed to be a gift to the extent of that inadequacy only”.

What is a dutiable gift?
Under the terms of section 63 of the Act they are gifts of property situated in New Zealand together with gifts of property situated outside New Zealand, where the donor is domiciled in New Zealand or is a body corporate incorporated in New Zealand. For the purpose of the Act domicile is the country where the person’s permanent home is located. Intention to reside indefinitely in a country will also be considered in determining domicile. Under this legislation a person cannot have more than one domicile at a time.

Rates of Gift Duty

 
Example
On arrival in NZ, a couple establish a trust and gift assets to the value of GBP500,000 (about NZD1,250,000). Gift duty could be payable of up to NZD286,850. A well-structured plan could avoid gift duty, perhaps through a long term gifting programme or by establishing a migrant trust before leaving the UK.

Do we need an independent Trustee?
We recommend that you always have an independent trustee. This will mean that the trust is more likely to stand up to scrutiny from outside parties such as the Court or New Zealand Inland Revenue Department.

Do we need to make new Wills in New Zealand?
If you intend to remain in New Zealand and to move your assets here then yes you will need to prepare a will in New Zealand.

Some useful definitions

Settlor 
The person who establishes a trust and transfers assets to the trust. There can be more than one settlor.

Trustee
The person or organisation who manages the trust. There can be more than one trustee. Each trustee has an equal say in the running of the trust.

Beneficiary
The people or organisations who benefit from the trust. They may have an entitlement to income or capital or both. This entitlement can e fixed or left to the trustee’s discretion.

Trust Funds
All the assets owned by the trust. All the trust funds must be registered in the name of the trustee, who becomes the legal owner of the property.

Distribution Date
The date when all funds remaining in the trust must be distributed to the final beneficiaries. This must not exceed 80 years from the date the trust is established except where the trust is set up for charitable purposes.