Speaker 1: You're listening to the Weekend Collective podcast from News Talks EDB.
Speaker 2: And welcome back to the show. I'm Tim Beverage. This
Speaker 2: is the Weekend Collective. By the way, if you missed her,
Speaker 2: the conversation with Greg Pain about gadget's quite fascinating actually
Speaker 2: because I thought that the purest form of exercise without
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Speaker 2: Weekend Collective on iHeartRadio or wherever you podcasts, and you
Speaker 2: can even go to the News Talk ZB website. But
Speaker 2: now it has time for smart money. And we've been
Speaker 2: sort of looking at doing this for a while, but
Speaker 2: the issue of trusts often they've come up, and I've
Speaker 2: sort of tried to rely on my very distant memory
Speaker 2: on trust law, which is pretty pretty pathetic. So if
Speaker 2: you've got any questions on trusts, this is the hour
Speaker 2: to give us a call. And joining me is She
Speaker 2: is the managing director of the New Zealand Family Trust
Speaker 2: Services and I've been trying to pronounce her name and
Speaker 2: all sorts of exotic ways and I got close. But
Speaker 2: Janet Zukoa, Hello, how.
Speaker 3: Are you hello there?
Speaker 2: Yes, it's because it's your name is spelled z u
Speaker 2: ccoa and I was sure it had to be a
Speaker 2: shower or something in there. But anyways, Zaka, So you're
Speaker 2: managing director of New Zealand Family Trust Services. What is
Speaker 2: that organization?
Speaker 3: Ah? Well, that organization is really New Zealand as Trustee
Speaker 3: of Choice, so it acts as an independent trustee for
Speaker 3: many trusts in New Zealand and it carries out all
Speaker 3: of the administration compliance work that we have to do
Speaker 3: now for trusts.
Speaker 2: And how did you Okay, I'm guessing being the managing director,
Speaker 2: you've been at the game a little while. How did
Speaker 2: you get into trust work in the first place?
Speaker 3: Well, if I if I tell you how many years
Speaker 3: I've been out, no, we wade away, but we won't
Speaker 3: be doing that but definitely definitely for for several decades.
Speaker 2: Yeah, So what made you get interested in the trust
Speaker 2: side of things?
Speaker 3: Well, I was a little like you. I liked equity
Speaker 3: at law school. I enjoyed equity and I do believe
Speaker 3: in really protecting wealth and not just for the sake
Speaker 3: of building up assets. But when you have assets, you
Speaker 3: have choices and options, and when you satisfied your base
Speaker 3: level of living, you can help others if you've got assets.
Speaker 2: Yeah, and actually, when you mean protecting wealth, it's not
Speaker 2: about protecting huge wealth necessarily. It's just any anything you've accumulated,
Speaker 2: is it.
Speaker 3: Well, that's right. People think that you've got to be
Speaker 3: ultra wealthy to have trust, but that's not the case
Speaker 3: in New Zealand. Our spirit of entrepreneurship is well and
Speaker 3: surely alive. I mean New Zealand has made up of
Speaker 3: small and medium sized companies. They dot our landscape. And
Speaker 3: when you're in business, that comes with a risk. And
Speaker 3: so people that have built, you know, just to simply
Speaker 3: fail in the home, they don't want to put that
Speaker 3: on the line, and putting it in a trust can
Speaker 3: help protect.
Speaker 2: That because there are people who would see if you
Speaker 2: are hired, not hiding, of course, but there an ethical
Speaker 2: dimension to trusts because there will always be a headline
Speaker 2: somewhere where someone has done some dodgy dealings, but most
Speaker 2: of their wealth has tied up in a family trust,
Speaker 2: which means that people who maybe have felt they've been
Speaker 2: hard done by can't get at it is there. I
Speaker 2: guess it doesn't mean matter, Yeah.
Speaker 3: Deep, devious, dishonest, there's all the words that come to mind,
Speaker 3: aren't they with when you're looking at trusts, And I
Speaker 3: think that's care of the likes of TV and books
Speaker 3: and Panama papers. But in New Zealand, in New Zealand
Speaker 3: in general, in Zealand in general, we have honest, hard
Speaker 3: working kiwis that are just trying to get ahead and
Speaker 3: protect what, protect what they've built up, and trusts to
Speaker 3: use as a great device for that in relation to assets,
Speaker 3: but not just against creditor claims, You've got relationship claims too.
Speaker 4: Oh.
Speaker 2: Actually, of course people if you are well. He's an
Speaker 2: example I guess would be if you were in another relationship,
Speaker 2: you've got children from your previous relationship and you don't
Speaker 2: want to relationship where you find that suddenly half your
Speaker 2: assets are gone to this new and you want to
Speaker 2: protect the assets for your kids.
Speaker 3: Well, So a lot of people are entering into even
Speaker 3: first relationships later on in life and they've built their
Speaker 3: careers and they've got some wealth behind them. Then you've
Speaker 3: got the second second types of relationships where they've been
Speaker 3: through a divorce or or a split on a de
Speaker 3: facto and they want to bring you know, they're going
Speaker 3: to bring assets with them to that relationship and they're
Speaker 3: happy to share what they've built up with that new person,
Speaker 3: but they want to ring fence the assets that they
Speaker 3: bring into the relationship for themselves and their and their children.
Speaker 3: And trust along with a good property relationship agreement and
Speaker 3: helps that.
Speaker 2: Do you actually do you need both? When you so,
Speaker 2: if you had you, if you had a family, if
Speaker 2: you had a trust to protect your assets. You're in
Speaker 2: a new relationship, do you need the property agreement or
Speaker 2: does your trust do all that for you?
Speaker 3: Well? I don't. I don't necessarily think that a trust
Speaker 3: solely will do the job. Because we've got New Zealand
Speaker 3: courts can see through trusts and they can you know
Speaker 3: that they can make judgments to break trusts if they
Speaker 3: if they think that that's necessary.
Speaker 2: And when you say see through, the common understanding is
Speaker 2: see through as I know what you're doing here. But
Speaker 2: when you say c through, you mean like look through
Speaker 2: in terms of they can say I don't care what
Speaker 2: wall you've set up here, I'm knocking it down.
Speaker 3: Yeah, I'm knocking down I'm going to come through and
Speaker 3: take the assets, and I'm going to divide the assets
Speaker 3: in an appropriate way that they that they feel is
Speaker 3: just so properly relationship agreements. I think every lawyer would
Speaker 3: say properly relationship agreement as a keystone to protecting health
Speaker 3: in the first instance. And then a trust or two helps.
Speaker 2: Yeah, so who so who needs No I'm trying to put,
Speaker 2: at what stage do you think people should consider having
Speaker 2: a trust? Because and how many trusts are there actually
Speaker 2: in New Zealand you consider we've got a population of
Speaker 2: five million people.
Speaker 3: We don't actually have a register of trusts in New Zealand.
Speaker 3: We do, of course when the government does you know,
Speaker 3: statistics every sort of is it three years? That is statistics?
Speaker 2: The census is every five years?
Speaker 3: Five years? Okay, okay, maybe every five years then.
Speaker 2: Four I have to google that.
Speaker 3: Yeah, whenever they do that. Whenever they do that that activity,
Speaker 3: trusts do come up there. Yeah, but they and so
Speaker 3: so you do see trusts and numbers like three hundred thousand,
Speaker 3: five hundred thousand all banded around. But we don't actually
Speaker 3: have a register in New Zealand of trusts. It's been
Speaker 3: mooted every now and again you hear some grumbles about it,
Speaker 3: but hasn't come out yet, so we don't know the
Speaker 3: exact number.
Speaker 2: Are the what are the biggest mistakes? By the way,
Speaker 2: it is every five years the census, my producers, just
Speaker 2: right now? What are the Can you set up your
Speaker 2: own trust? Can you?
Speaker 3: Literally it would be very difficult to set up your
Speaker 3: own trusts and unwise yeah, and definitely imprudent. Yeah, you
Speaker 3: want to want a lawyer to set up a trust,
Speaker 3: someone who actually understands the law and knows what they're doing.
Speaker 3: Because trust have longevity, I mean under around you and
Speaker 3: you act the trusts at twenty nineteen, one hundred and
Speaker 3: twenty five years those trusts live now. Of course you
Speaker 3: can bring them for which you can invest them earlier
Speaker 3: than that. But trusts are for a long duration. They're
Speaker 3: not just for today and next year.
Speaker 2: So how is there a limit to how long a
Speaker 2: trust can last?
Speaker 3: It used to be eighty years, now it's one hundred
Speaker 3: and twenty five.
Speaker 2: How do they come up with that number?
Speaker 3: Don't know, you'd have to ask the Low Commission that.
Speaker 3: But if you think it through, it does make sense
Speaker 3: because you would have this generation the parents say, and
Speaker 3: then the children, yeah, and then maybe the grand children
Speaker 3: and then the grand children.
Speaker 2: Depending on how late they have.
Speaker 3: Absolutely, so you can see that a trust could be
Speaker 3: for three or more generations, and that would that's I
Speaker 3: suppose what they were thinking about in the back of
Speaker 3: their minds when they chose one hundred and twenty five years.
Speaker 2: So legally, when you set up a trust, the assets
Speaker 2: I'm trying to remember everything and I'll get it wrong,
Speaker 2: but they belong that the trustees actually become the legal
Speaker 2: owners of whatever you put in the trust.
Speaker 3: Yeah, so have we have some positions in the trust
Speaker 3: and well, so first off, the people that say up
Speaker 3: the trust, they're called the settlers, and then you have
Speaker 3: people that appoint trustees and the tire trustees and they're
Speaker 3: called the appointurs. And then we have the trustees. They're
Speaker 3: the people the charge was managing the assets for the
Speaker 3: benefit of the beneficiaries, and they're the people that benefit
Speaker 3: from the trust. So I always I liken it in
Speaker 3: my mind too. I don't know a bit like a
Speaker 3: cargo ship. You've got you've got the captain of the ship, okay,
Speaker 3: and then you've got all the passengers, and then you've
Speaker 3: got all the assets. The cargo is sitting in the
Speaker 3: cargo holt.
Speaker 2: I think, what's the rules around who can be a trust?
Speaker 2: And if you are trying to protect your own assets
Speaker 2: for you and your family, how does it work with
Speaker 2: you establishing a trust where you are the beneficiary?
Speaker 3: Yeah, you went all those hats, aren't you. You're like
Speaker 3: the settler, you're setting it up. You're the appointeror who
Speaker 3: has the ability to hire and fire trustees. You're the
Speaker 3: trustee who's meant to be looking after the assets, and
Speaker 3: then you're one of the beneficiaries and you can't. That
Speaker 3: doesn't look it, does it? Yeah? I know, and it
Speaker 3: is possible, and in fact it does happen. That is
Speaker 3: how most of our discretionary family trusts are set up
Speaker 3: in New Zealand. And then we run into all sorts
Speaker 3: of complications there because there are rules about self benefiting
Speaker 3: and being prudent too, making the right decisions for the beneficiaries.
Speaker 3: And I suppose if you're challenged, it's quite hard to say, well,
Speaker 3: I've made a complete independent decision. I haven't thought about
Speaker 3: haven't thought about myself at all. When you're in that
Speaker 3: position where you're holding all of the roles. And that's
Speaker 3: one of the reasons why independent trustees are are put
Speaker 3: into a trust arrangement because they bring some independence to
Speaker 3: some decision making.
Speaker 2: Does that mean if you are a trustee and a beneficiary,
Speaker 2: but they are also a couple of independent trustees, does
Speaker 2: that mean you might not be part of that decision
Speaker 2: or you would still just say, look, I've been part
Speaker 2: of a decision, but I'd supported by my independent trustees
Speaker 2: or something.
Speaker 3: Well, at lawd decision making is unanimous unless unless the
Speaker 3: trustees says otherwise, so they would always be part of
Speaker 3: the decision making. But you would like to think that
Speaker 3: the dependent trustee is well qualified and able to be
Speaker 3: smart enough to know what's best for the beneficiaries.
Speaker 2: So that's what you guys do. Is not New Zealand
Speaker 2: Family Trust Services, So you provide trustees.
Speaker 3: Yeah, first off, we will be an independent trustee for
Speaker 3: people's trusts. And you know, under the under the New
Speaker 3: Trust Act and and different pieces of legislation like for example,
Speaker 3: the Amendments to the Tax Administration Act and the Income
Speaker 3: Tax Act, trust trustees can really be held to high
Speaker 3: high standards of behavior. They can be really liable, can
Speaker 3: be real libil.
Speaker 2: If you're a trustee for a trust that has not
Speaker 2: followed its obligations through then Bengo, you're in the gun,
Speaker 2: aren't you.
Speaker 3: Yeah, absolutely real liability and in that your assets could
Speaker 3: be on the line. So independent trustees they're harder to
Speaker 3: find these days, and we have we've taken the position
Speaker 3: where we want to be independent trustees of clients trusts.
Speaker 3: However we do do the job right, we will make
Speaker 3: the trust, we'll ensure that it will be compliant. We
Speaker 3: know what I call settlers censure behavior where setlers just
Speaker 3: want to do whatever they want to do and and
Speaker 3: you know they're just going to have their way.
Speaker 2: Well that's I mean, that's ideally what you'd want anyway,
Speaker 2: if you're if you're if you are a bona fide
Speaker 2: a news person who's got some wealth that you want
Speaker 2: to protect and you want to look after it for
Speaker 2: your descendants. You don't want to be left to your
Speaker 2: own devices. You want someone like you, guys, because otherwise
Speaker 2: the courts are going to look through your trust before
Speaker 2: you know it and puffit's all gone.
Speaker 3: Well they are music to my years.
Speaker 2: But it's what's music, It's what I just said.
Speaker 3: Yeah, exactly, because it's quite surprising. It's quite clients are
Speaker 3: comments like, no, they're my assets. Some under us it's like, well, actually,
Speaker 3: hang on a minute, they belong to the trust, they're
Speaker 3: not your assets.
Speaker 2: In fact, hell, is that quite common that people think
Speaker 2: I'm going to get a trust and they come in
Speaker 2: and you're sitting there going, oh, we're going to have
Speaker 2: to have one of those conversations because this is not
Speaker 2: about hiding stuff away and just doing what you want
Speaker 2: and avoid it.
Speaker 3: Yeah, it's called settler centric behavior, and there's been a
Speaker 3: lot of it that's gone on. And of course that's
Speaker 3: happened in the past because there hasn't really been a
Speaker 3: lot of scrutiny on trustees. But now under that new
Speaker 3: piece of that new piece of legislation, trustees are subject
Speaker 3: to high levels of scrutiny. Beneficiaries can hold them to
Speaker 3: account much more easily than what they've ever done before.
Speaker 3: And so you'll find a lot of independent trustees who
Speaker 3: have been fairly passive, who haven't been who haven't wanted
Speaker 3: to or haven't demanded to look at balance sheets every
Speaker 3: year and sit down and hold annual trusting meetings, who
Speaker 3: haven't don all of that they want to actually get
Speaker 3: out of the job, out of the role, and so
Speaker 3: trust to look around for an independent trustee. And I
Speaker 3: guess that's where we come in. Our company comes in.
Speaker 2: Because obviously, if you've got let's say you've got a
Speaker 2: significant level of wealth, like many millions of dollars, then
Speaker 2: that level of the level of asset sort of wealth,
Speaker 2: you'd be able to have trustees where you obviously there's
Speaker 2: time is money, and you could have a more complex
Speaker 2: trust where you would expect the the the trustees in
Speaker 2: your role to be hands on a lot of the time,
Speaker 2: whereas for many people they would just want a fairly
Speaker 2: simple arrangement where the trustee I mean, where am I going?
Speaker 2: Where am I going with? Yes?
Speaker 3: Where you're going with that is like, well, if it's
Speaker 3: just if the if the trust just holds the home
Speaker 3: and maybe a family badge, Yeah, and then they have
Speaker 3: an independent trustee sitting alongside them. Mister and missus Smith
Speaker 3: are the independent trustee sitting alongside them. That's going to
Speaker 3: involve lots of costs. That's probably where you're going, mate.
Speaker 2: I'm asking how you can avoid it being something where
Speaker 2: it's you've got someone who's on the on the clock,
Speaker 2: you know, several months.
Speaker 3: Of the year, Well it would be it'd be everybother
Speaker 3: the year because of independent trustees. Trustees, it's there all
Speaker 3: the time, but they only they probably only access them
Speaker 3: in a situation where there's pacificst that's like the family
Speaker 3: home and a back probably only access them a couple
Speaker 3: of times the year. And I don't think there is
Speaker 3: any way to avoid the cast good professional trustees chart.
Speaker 5: No.
Speaker 2: I guess what I mean is there would be trusts
Speaker 2: where the job of the trustee is going to be
Speaker 2: more complex and more expensive. Whereas if you've got a
Speaker 2: family batch and the family home and you shove it
Speaker 2: in a trust. Yes, intuitively, that tells me that you're
Speaker 2: not really going to have a huge amount of trust expenses,
Speaker 2: would you, I don't know how.
Speaker 3: Well you would. You still need to pay for the
Speaker 3: independent trustee to be there, and we do take we
Speaker 3: take insurance policies that a fair whack. We still need
Speaker 3: to spend time meeting the trustees and considering the beneficiaries
Speaker 3: and reviewing the assets. So you've still got to have
Speaker 3: an annual trustee meeting. You know, you still got to
Speaker 3: have your eye over those trust assets. The law doesn't
Speaker 3: distinguish between assets that are only worth I don't know,
Speaker 3: half a million tire assets worth gazillions of dollars. It's
Speaker 3: the law, is the law?
Speaker 2: Yeah? Yeah, okay. Look, if you've got any questions on
Speaker 2: trusts and you're or you're thinking maybe do I need one?
Speaker 2: And now you're listening to this and you're thinking, you've
Speaker 2: got a small business and with the way things are,
Speaker 2: maybe you need to protect some assets. Any questions you've got,
Speaker 2: will have a crack at it. Well, I won't have
Speaker 2: a crack at answering them, Janet will. And by the way,
Speaker 2: you have you've given me a copy of the You've
Speaker 2: written a book which actually is not out yet, Janet,
Speaker 2: Is that right?
Speaker 3: No, Well, it's nationwide book distributors. They have got that
Speaker 3: book now and they will be visiting I would think
Speaker 3: most of the bookshops in New Zealand in the next
Speaker 3: in the next month or so. I did have a
Speaker 3: call from from a chain of bookshops last week who'd
Speaker 3: heard that the book was available, and I just pushed
Speaker 3: them to nationwide book distributors, who will good on movies.
Speaker 2: And it's called trusts one two three. But you can't
Speaker 2: quite get it yet. Soon okay, I eight hundred eighty
Speaker 2: ten eighty will take your texts as well. But what
Speaker 2: any questions you've got around protecting your assets and trusts?
Speaker 2: Then we'd love to hear from you on I eight
Speaker 2: one hundred eighty ten and eighty text nine two nine two.
Speaker 2: It's twenty three past five News Talk zed B. It's
Speaker 2: welcome back to the show. This is the weekend collective
Speaker 2: Smart Money and we're doing a bit of a special
Speaker 2: talking about trust. If you've got any questions, we'd love
Speaker 2: to hear from you on eight hundred and eighty ten
Speaker 2: and eighty even if you are the beneficiary of a
Speaker 2: trust or you want to know if there's some way
Speaker 2: you can actually get your hands on. Actually my guest
Speaker 2: is Janet Zukoa and she is the managing director of
Speaker 2: New Zealand Family Trust Services. Janet, if you are a trustee,
Speaker 2: say there's a couple of you and you are beneficiaries
Speaker 2: of a trust, you can you if you both agree,
Speaker 2: you can just get you can? Can you dissolve the
Speaker 2: trust if you are the only beneficiaries? How on a second, sorry,
Speaker 2: I'll just set your microphone. They're sorry about that.
Speaker 3: First, or if you would have to be a beneficiary,
Speaker 3: So that's really important, and the beneficiaries have to be
Speaker 3: certain everybody. We have to know who all the beneficiaries are.
Speaker 3: So if it was certain that it was just the
Speaker 3: two of you as beneficiary.
Speaker 2: Or three or four but whoever, well, if.
Speaker 3: It's really certain who the beneficiaries are and the classes
Speaker 3: are closed it's just them, it's not future children or grandchildren,
Speaker 3: that's sort of thing, then yes, they can all mind
Speaker 3: together and they can agree to one the trust to
Speaker 3: an end.
Speaker 2: Because the example would be, I guess and your parents
Speaker 2: or your grandparents have set up a trust and there's
Speaker 2: a maybe there's just there's three or four grandchildren, and
Speaker 2: everyone would think that you have to sort of just
Speaker 2: receive and come from the trust according to the terms
Speaker 2: of it. But if you're all together and you go,
Speaker 2: hang on a minute, do we all want to just
Speaker 2: get hold of the assets and sell it and split
Speaker 2: them up? You can as long as you all agree.
Speaker 3: You've got to all agree. But a lot of the
Speaker 3: time when a trust is brought to an end, the
Speaker 3: assets moved from trust to trust. So let's say it's
Speaker 3: two beneficiaries and the parents have died, and the two
Speaker 3: beneficiaries now want the assets. The assets can be divided
Speaker 3: equally and then to a new trust set up, and
Speaker 3: then they move from trust to trust for the beneficiaries.
Speaker 3: And you might do that because the beneficial have lists
Speaker 3: of their own.
Speaker 2: Oh so they just want to have their own They
Speaker 2: want to split it up, but they're like, look, I
Speaker 2: still want to protect my assets absolutely, and so is
Speaker 2: that quite common?
Speaker 3: Very common? And so they may have business with themselves,
Speaker 3: they have a relationship risk.
Speaker 2: How would it work? Say, actually, I'm just coming out
Speaker 2: with some scenarios here to if say someone set up
Speaker 2: a trust and let's say grandma and granddad and grandma
Speaker 2: and granddad have passed on, and the trust is for
Speaker 2: the kids, and ultimately when those kids are gone, their grandchildren.
Speaker 2: If for the time being the trust is just in
Speaker 2: the favor of the first generation, do they do all
Speaker 2: the grandchildren have to agree at all? Or can the
Speaker 2: you know, I forget you know how things get passed
Speaker 2: down through the generation. So those, once those potential beneficiaries
Speaker 2: are alive, they all have to agree. Whether they be
Speaker 2: the first generation or the second generation or the third
Speaker 2: they've all got.
Speaker 3: To agree absolutely, and there could also be unborn beneficiaries.
Speaker 3: And so that's where it gets really what.
Speaker 2: If someone's pregnant you mean, or just imaginary, but.
Speaker 3: They haven't they don't exist yet, Okay, So it might
Speaker 3: be for for it might be like a bloodline trust,
Speaker 3: and so there might be unborn beneficiaries that haven't been
Speaker 3: born yet.
Speaker 2: So you can't get rid of that trust.
Speaker 3: Well, at that point you can result to the courts,
Speaker 3: because there is sections in the new Trust Act which
Speaker 3: allow the courts to to have a look at that
Speaker 3: sort of thing and bring the trust to an end.
Speaker 3: But it is a result back to.
Speaker 2: The court that's fascinating this area of law because the
Speaker 2: thing about law, this area of law, and we have
Speaker 2: talked about it in the break, is while there is
Speaker 2: legislation now that the government has drafted and passed, the
Speaker 2: law of trust goes back. I mean how many.
Speaker 3: How far people think that it goes back to the
Speaker 3: Crusades times, but an actual factor goes much further back.
Speaker 3: By the late by the late Roman Republic period, we
Speaker 3: had trusts that we're operating well at least that a
Speaker 3: trust type of arrangement that was reflected in the laws
Speaker 3: of succession So trusts are thousands of years old and
Speaker 3: I can't see them. Every now and again you get
Speaker 3: a murmur or maybe they're going to get rid of trust?
Speaker 3: How much?
Speaker 2: How much has the nature of trust change? But with
Speaker 2: the legislation, are they still essentially the same?
Speaker 3: Well, I think at their base level they are the same.
Speaker 3: But trust. That's one of the wonderful reasons of trust.
Speaker 3: One of the why trusts have endured for so long,
Speaker 3: because they respond to our varying and different socio economic
Speaker 3: conditions and our norms and our values.
Speaker 2: I can hear cynical people who listen to talk about
Speaker 2: going that's because it's a great way to hide. Well,
Speaker 2: you know, we'll protect or protect wealth, depending which way
Speaker 2: you want to look at it. Let's take some calls. Colin,
Speaker 2: good afternoon, Yeah, good afternoon.
Speaker 6: Just regarding I guess tax and I understand that the
Speaker 6: tax rate's going to be up to thirty nine percent
Speaker 6: for all trusts. So would that mean basically, you're going
Speaker 6: to be greater burden of tax putting your assets into
Speaker 6: a trust compared to if you didn't, for.
Speaker 3: Example, Well, that that is true. The trust the new
Speaker 3: trustee taxad is thirty nine percent and that that changed
Speaker 3: on the first of April twenty twenty four. Prior to
Speaker 3: that worth thirty three percent. And of course, because our
Speaker 3: individual highest marginal tax rate was thirty nine percent, you
Speaker 3: did see money moving from companies, for example, at twenty
Speaker 3: eight percent into you know, moving around, so that you've
Speaker 3: got good benefits of a tax. The benefits are still
Speaker 3: there now despite the alignment with the individual top marginal
Speaker 3: tax rate. And I'll give you an example. Let's say
Speaker 3: that a trust does receive dividend income from a company
Speaker 3: and the trustees they decide that they're not going to
Speaker 3: retain that income, they're going to actually pay it out
Speaker 3: to beneficiaries. Well, when the beneficiaries receive the income they've got,
Speaker 3: they've got declared that a course in their personal tax return,
Speaker 3: and then they pay tax at their personal martinal tax rate.
Speaker 3: And that could indeed be lower than thirty nine percent.
Speaker 3: So there are some benefits there, possibly, possibly, But nobody
Speaker 3: would set up a trust these days for a tax benefit. First,
Speaker 3: it would be illegal anyway, the tax benefits are merely incidental, okay.
Speaker 3: And then really the costs of running a trust. You
Speaker 3: we've did mention that before on the on the cost
Speaker 3: of running a trust. You know, they don't they don't
Speaker 3: have to be exorbitant, but that is going to cost
Speaker 3: you something. So people don't run around trying to save
Speaker 3: three or four cents when they've got to incur the costs.
Speaker 2: Any follow up their Colin, are you looking at getting
Speaker 2: a trust or you've got one?
Speaker 6: I've had one for a few years, and yeah, so
Speaker 6: I just I probably need to talk to my accounts
Speaker 6: a bit more about it as well. But you know,
Speaker 6: I'm currently paying on my normal salury thirty nine percent
Speaker 6: top rates.
Speaker 3: But with.
Speaker 6: Then I'm not earning them, will I'd be paying thirty
Speaker 6: nine percent on the trust income to myself, even though
Speaker 6: it might not be that much money.
Speaker 3: Well, I think I think good account at this experience
Speaker 3: with trusts, and maybe companies they can they can often
Speaker 3: help you with that.
Speaker 2: Okay, okay, thanks Colin. Does that get my head around this?
Speaker 2: If you've got assets, so if you it's not really
Speaker 2: a part of it is really that relevant what the
Speaker 2: tax top tax rate is. If your personal tax rates
Speaker 2: thirty nine percent, if you keep those assets in there,
Speaker 2: any income, you're going to be paying thirty nine percent anyway,
Speaker 2: So who cares? If you're sticking in a trust, have
Speaker 2: I got that rights?
Speaker 3: Yeah, that would be true. But trusts are often used
Speaker 3: in conjunction with companies. So companies pay dividends and they
Speaker 3: may pay a dividend through to a trust. And so
Speaker 3: of course at that point you're paying t twenty eight
Speaker 3: percent company tax rate. To pay a dividend out, you've
Speaker 3: got to pay that thirty three percent. So there's got
Speaker 3: to be you know, you've got to pay an extra
Speaker 3: top upper tax I suppose of five percent, and then
Speaker 3: it moves into the trust and you would think, do
Speaker 3: we have to do we now have to top it
Speaker 3: up again to the thirty nine percent, But that depends
Speaker 3: on whether the trust is retained the income or not.
Speaker 3: It depends on whether the recipient's got high tax rate
Speaker 3: as well. It might have low tax rates.
Speaker 2: So okay, we've got lots of text. Let's see how
Speaker 2: we can get into these questions. What's the difference between
Speaker 2: a trust and a will?
Speaker 3: Ah? Well, wills deal with personal assets of individuals, like
Speaker 3: I don't know, jewelry and cars, and trusts tend to
Speaker 3: they still hold assets. But really, when you're looking at
Speaker 3: a trust, it's a device for holding assets for a
Speaker 3: long time. The will doesn't really come near it. Usually
Speaker 3: you have what's called a memorandum of bushes rather than
Speaker 3: a will, which sets out what needs to happen when
Speaker 3: the person dies.
Speaker 2: Can I will establish a trust?
Speaker 3: Yes it can, Yeah, you can. You can establish a
Speaker 3: trust via a will.
Speaker 2: But in general, and the person who actually administers the
Speaker 2: will I acco't reanmyber, the executive. The executives they are
Speaker 2: acting in a sort of position as a trustee for
Speaker 2: the time temporarily.
Speaker 3: Well, they are there. They're overseeing the personal distribution of
Speaker 3: the assets and accordance with the will instructions.
Speaker 2: How do you say set up a trust as parents
Speaker 2: who want their children to benefit from it, but not
Speaker 2: any partners of children if their relationships break down.
Speaker 3: You just make sure that the children are named as
Speaker 3: specifically yes, efectly. Yeah. And also when when you do
Speaker 3: pay out the assets to the children, you would, you know,
Speaker 3: you would make sure you've got the right documentation around that.
Speaker 3: You might also do that via a trust as well.
Speaker 3: A lot of parents these days pay pay deposits, you know,
Speaker 3: for children to get them into houses and that sort
Speaker 3: of thing. You need to make sure that there's plenty
Speaker 3: of documentation around that if it's coming via the trust.
Speaker 2: Okay, we've got the calls rolling in now it would hapen.
Speaker 2: And since we get into these texts, one more text,
Speaker 2: then we'll get into the cause. I think I almost
Speaker 2: can answer have a crack at answering this myself, but
Speaker 2: I'll hand it to you. Here we go. Hi, guys,
Speaker 2: I'm looking at I'm looking at going through a divorce.
Speaker 2: I'm looking at going through a divorce. You're anticipating a divorce? Okay,
Speaker 2: I have moved most of my assets into a trust.
Speaker 2: Will this protect them for the divorce? I had these
Speaker 2: assets before meeting my wife, but I don't have a prenup.
Speaker 2: I would say that he's in trouble.
Speaker 3: That's from being I would say they definitely go go
Speaker 3: talk to a lawyer. That's for sure. Moving assets into
Speaker 3: a trust to try and avoid sharing them on a
Speaker 3: relationship that's probably not going to.
Speaker 4: The court's going to look through that doesn't think they're
Speaker 4: good at Yeah, And even if the assets are in trust,
Speaker 4: if a person's done significant work on an asset then
Speaker 4: that's held in the trust, then the courts would likely
Speaker 4: still award some benefit to that person.
Speaker 2: Actually probably the answer is in matrimonial property law, really,
Speaker 2: isn't it, Because if you have kept those assets completely
Speaker 2: separate and they've had nothing to do there with a relationship,
Speaker 2: then talk to a lawyer and may be able to
Speaker 2: just that's part of the argument. But it's not going
Speaker 2: to be argument free, is it.
Speaker 3: Well, it's not going to be argument free. So I'll
Speaker 3: give you an example. Let's say that the trust owned
Speaker 3: the house well before this gentleman met his newest and dewiest,
Speaker 3: and then the newest and dewest moves into the house
Speaker 3: and she does substantial work on the house, maybe puts
Speaker 3: money into the house into renovations. Then I don't think
Speaker 3: on the dissolution he's going to be able to say
Speaker 3: it's all mine. Okay, I think I think somewhere along
Speaker 3: the line.
Speaker 2: It's intermingled, isn't it.
Speaker 3: Yeah, Yeah, it's into vangled and a lawyer and a
Speaker 3: judge is going to say, you know, Purney up in
Speaker 3: saying that I'm not I'm not giving I'm certainly not
Speaker 3: giving financial.
Speaker 2: No, No, that's important we do that. Do that have
Speaker 2: that disclaimer. There's no specific advice, but where you know
Speaker 2: you've yeah, you need to get some good advice on that.
Speaker 2: But it's easy. I can just remember from my legal
Speaker 2: days that if you keep your assets separate, if you've
Speaker 2: got a separate bank account, never used by the relationship
Speaker 2: and it sits there separately, you've got a better chance
Speaker 2: that you're going to keep it. Probably should have set
Speaker 2: up the trust before the relationship though.
Speaker 3: That's helpful.
Speaker 2: Yeah, that's helpful. Right, We're going to take some calls.
Speaker 2: In just a moment. It is twenty two minutes to
Speaker 2: six News Talks. There'd be. My guest is Janet Zuchoa.
Speaker 2: She is the managing director of New Zealand Family Trust Services.
Speaker 2: Answering your questions, give us a call back in a
Speaker 2: mow and welcome back to News Talks. Be gosh, time
Speaker 2: flies when you're talking about this stuff. We're talking about trusts.
Speaker 2: My guest is Janet Zucchoa. She's managing director of New
Speaker 2: Zealand Family Trust Services. And let's get into the calls now.
Speaker 2: We're going to have to move as quickly as we
Speaker 2: can because time is upon us.
Speaker 7: Ron.
Speaker 2: Hello, Hi, here you doing good things?
Speaker 7: What good couple of couple of quick questions. A lot
Speaker 7: of these older family trusts have been set up where
Speaker 7: the trustees have full discretion of how the trust is
Speaker 7: managed and all the rest of it. As they view
Speaker 7: a beneficiary to be a discritionary beneficiary, are they able
Speaker 7: to withhold information about the trust and not provide it
Speaker 7: to that beneficiary upon request?
Speaker 3: Ah, you're moving now into the disclosure obligations under the
Speaker 3: new Trust Act. So that's an interesting point in itself.
Speaker 3: You used to be under the old Act. That used
Speaker 3: to be that, you know, people didn't actually necessarily know
Speaker 3: that they were beneficiary. So there's a duty where you know,
Speaker 3: you can hold trustees to account, but to hold a
Speaker 3: trustee to an account, you've got to at least know
Speaker 3: that you're beneficiary, haven't you in the first instance.
Speaker 8: Yes?
Speaker 3: Yes, And so now under the new Trust Act there's
Speaker 3: sections there which layout that disclosure to be made to
Speaker 3: beneficiaries and factors to be taken into accounts. So I
Speaker 3: think that most trustees that I see do in detail
Speaker 3: tell people that they are beneficiaries. But there are provisions
Speaker 3: also under that Act not to disclose to beneficiaries they
Speaker 3: are indeed beneficiaries, and not to disclose information.
Speaker 7: What about the basic information that they're required to you
Speaker 7: know how they're mandated by that new Act.
Speaker 3: Yeah, so, well, it's not necessarily strict mandate. There are
Speaker 3: there is a provision under the Act where you can
Speaker 3: you can with hold information and not disclose. So as
Speaker 3: long as long as the act provisions are followed, then
Speaker 3: I guess.
Speaker 2: Hey, did you mention the expression of discretionary beneficiary? Run
Speaker 2: is that what's a discretionary beneficiary.
Speaker 3: Discretionary beneficiaries is where where they are indeed beneficiary, but
Speaker 3: they are not entitled to anything as of right, so
Speaker 3: the trustees and trustees have to consider them. Okay, that's
Speaker 3: what they are entitled to be, is considered, but benefiting
Speaker 3: is discretionary and at the discretion of the trustees.
Speaker 2: It sounds like a family trust where Dad's set up
Speaker 2: a trust and he and dad's trustee and decides whether
Speaker 2: that's what he's going to give each.
Speaker 3: Child absolutely, whereas fixed beneficiaries fex beneficiaries are actually in
Speaker 3: the trusteed depending upon terms of the trusteed, of course,
Speaker 3: but fixed manifesturies will be entitled to capital and income,
Speaker 3: and that's that's usually stated for kids.
Speaker 2: Can be so complicated. I love the idea of secret
Speaker 2: trust where you can have a secret trust that none
Speaker 2: of the beneficiaries know that they're and it's.
Speaker 3: Like that was that was the old time with it not.
Speaker 2: Now old days. Okay, hey, thanks for you call Ron Lance.
Speaker 5: Hello, yeah, Hi. So my question is I'm thirty five
Speaker 5: years old and I've got a free freehold house and
Speaker 5: if I was to ever get in a relationship, it's
Speaker 5: not currently in a trust. But would it be worth
Speaker 5: putting in a trust purely for the purposes of protecting
Speaker 5: it in any possible future relationships?
Speaker 3: Definitely, So you don't really want to You don't want
Speaker 3: the nearest and dearest to come in and it's all
Speaker 3: fine while we're playing in the sandpit happily. But when
Speaker 3: that done, when you know, when we're starting to fight
Speaker 3: over the bucket and spade, then that's where things can
Speaker 3: get kind of nasty. So trust will work with them
Speaker 3: plenty of time behind them. So if you're going to
Speaker 3: protect or try to protect your home, you want to
Speaker 3: do that well in advance of a relationship. So yes, indeed,
Speaker 3: talk to a lawyer put that. I would recommend that
Speaker 3: it would be put into a trust. But at the
Speaker 3: same time, when you are entering into a serious relationship,
Speaker 3: you do need to think about a property relationship agreement,
Speaker 3: and a good lawyer will be able to guide you
Speaker 3: on that.
Speaker 8: Yeah.
Speaker 5: Sure, Yeah, because during the ownership I think like, yeah,
Speaker 5: I joined income would be paying for rates and insurance
Speaker 5: and and some some of the ongoing expenses holding the house,
Speaker 5: even though and so's and so.
Speaker 3: That's where you where you get into murky territory, which
Speaker 3: is why the properly relationship is the agreement is really important.
Speaker 2: Yeah, so a couple of things there. Yeah. Actually, it's
Speaker 2: the purpose of setting up the trust there is quite
Speaker 2: a relevant one to whether the court's going to look
Speaker 2: through it, isn't it. So what's what's an example of
Speaker 2: a legitimate purpose? It's that a legitimate purpose. I'm about
Speaker 2: to get into a new relationship. We're going to bang
Speaker 2: my house and a trust so my if it doesn't
Speaker 2: work out, they can't get the hands on it.
Speaker 3: That's not quite a legitimate I mean, that's that's illegitimate
Speaker 3: or no, No, that would be quite legitimate because you
Speaker 3: wanted to try try and protect protect the house.
Speaker 2: As opposed to I'm setting up a new business and
Speaker 2: I'm going to go into debt a lot, and I'm
Speaker 2: going to save the family house. That sounds dodgier.
Speaker 3: No, well, you're trying to protect the house there. But
Speaker 3: what wouldn't what probably wouldn't be tolerated, is you've been
Speaker 3: in a relationship for five years with your nearest and
Speaker 3: dearest and as that last last gentleman said, you know,
Speaker 3: joint income is going towards the outgoings of the house,
Speaker 3: the mortgage, the rates, the insurance, is that sort of thing,
Speaker 3: and you decide, oh, well, I think that I'll put
Speaker 3: this into a trust so that when I when I
Speaker 3: leave my wife or my wife lives at the husband,
Speaker 3: then it's all going to be mine. I mean, you're
Speaker 3: in the relationship and that's not going to be tolerated,
Speaker 3: I doubt by the courts.
Speaker 2: Okay, right, let's take another court bill.
Speaker 9: Hello, hello, I am A quick question for a discretionary trust.
Speaker 8: Can the trustees.
Speaker 9: Decide to use the the assets of their trust or
Speaker 9: the money and their trust a charity that doesn't benefit
Speaker 9: the beneficiaries.
Speaker 3: It would depend upon the terms of the trusteed, so
Speaker 3: you would need to look there.
Speaker 2: So that how and you're talking about there's a trust,
Speaker 2: there are some discretionary beneficiaries, but the person who set
Speaker 2: up the trust or the trustees also want to give
Speaker 2: some money to a charity which gives no benefit to anyone,
Speaker 2: but that charity beneficiaries. That God gets complicated, doesn't it.
Speaker 3: Well, the settler I wanted that the settler might have
Speaker 3: wanted that to happen, and so the deed of trust
Speaker 3: he may actually provide for the trustees to have that
Speaker 3: power to put money into charities.
Speaker 2: Which tells me that a trust is much more flexible
Speaker 2: than people might imagine. Then, depending on the terms of it.
Speaker 3: Very flexible device. That's one of the reasons why they've
Speaker 3: endured for so long.
Speaker 2: Any other follow up there, Billy there, Yes, it's for
Speaker 2: some context.
Speaker 8: It's a wide ranging Indeed, it does have the word
Speaker 8: charity in it. The main trustee has passed away, the
Speaker 8: leftover trustees have got They say a verbal that this
Speaker 8: person wants to set up a trust set up a
Speaker 8: charity at some stage. I think it doesn't necessarily mean
Speaker 8: family trust to set up a charity, but maybe personal.
Speaker 8: So the independent trustees have decided that they will use money.
Speaker 3: Okay, sounds sounds like some good advices needed via lawyer
Speaker 3: on that.
Speaker 2: Gosh, So if you can set up, so people can
Speaker 2: basically can set up a trust where they can still
Speaker 2: sort of enjoy the assets, et cetera. There are some
Speaker 2: discretionary beneficiaries, but you can still sort of do whatever
Speaker 2: you want with the assets and the trust up to
Speaker 2: a point if you've journ it up.
Speaker 3: So trustees have to use the assets for the benefit
Speaker 3: of the beneficiaries.
Speaker 2: And also well that one.
Speaker 3: Well, yes, that's actually not using it for that. It
Speaker 3: sounds like it's not using the money for the benefit
Speaker 3: of the beneficiaries. But the settler may also have wanted
Speaker 3: the trustees to be able to use money for charitable
Speaker 3: purposes to.
Speaker 2: Okay, are is there a limit to other purposes that
Speaker 2: are not in favor of the beneficiaries? So, for instance,
Speaker 2: that sounds like all charitable purpose sounds like something their
Speaker 2: trustees might be able to do. But can they do
Speaker 2: other things that are not in favor of the beneficiaries?
Speaker 3: Deep question question.
Speaker 2: With about two minutes to answer it about that We'll
Speaker 2: come back with some more texts in just a moment.
Speaker 2: It's ten to Sex News Talks. I'd be and welcome
Speaker 2: back to the show. This is the weekend collector Smart Money.
Speaker 2: My guest is Janet Zuchoa, that's x u c coo
Speaker 2: A just for because it is a it's a new
Speaker 2: one for me, Janet, Look, we've got one. I've selected
Speaker 2: one text because we've only a couple of minutes. Just
Speaker 2: a quick question. A trust house now for sale as
Speaker 2: one of two beneficiaries, Can the trust be dissolved if
Speaker 2: you're not happy with how trustees are dividing the sale all?
Speaker 3: Well? Again, for a question like that, there's there's lots
Speaker 3: of angles on that I would urge in the first
Speaker 3: instance to sit down and have a sensible conversation with
Speaker 3: the trustees and with the other beneficiaries. Couldn't be dissolved?
Speaker 3: I doubt very much. It could be dissolved just on
Speaker 3: one beneficiary, say so.
Speaker 2: It sounds like maybe one's getting more than the other.
Speaker 3: One, not without the course to the courts. But if
Speaker 3: it's discretionary, well, trustees may may have the discretion on
Speaker 3: how they deal with those cell proceeds. I wouldn't. If
Speaker 3: I was a beneficiary and I was missing out on
Speaker 3: something like that, then I'd definitely get a little bit
Speaker 3: of advice and see what I could do for even
Speaker 3: up scales in.
Speaker 2: Terms of finding a legal advice for this sort of stuff.
Speaker 2: You are there specific I mean, you guys are trustees
Speaker 2: more than.
Speaker 3: Yes, yes, so I would I would recommend that you
Speaker 3: would go to a good lawyer that understands trust law.
Speaker 3: Not all lawyers, you know, work in the spere. So
Speaker 3: I definitely find a decent lawyer that works in the
Speaker 3: sphere of trust law if you and.
Speaker 2: If people are looking at setting if people are looking
Speaker 2: at setting up a trust, I mean, would they start
Speaker 2: Could they start with the New Zealand Family Trust Services?
Speaker 3: You guys, yeah, before, and we don't everybody that crosses
Speaker 3: our pathway, we don't say yes absolutely you should set
Speaker 3: up a trust. We want to know the reasons why
Speaker 3: and we want to want to see that that's a
Speaker 3: sensible course of action for an individual to do, because
Speaker 3: as I said before, it's not a five minute exercise
Speaker 3: and you do it. Once it's set up, you do
Speaker 3: have to actually keep the compliance up. So I want
Speaker 3: to make sure that it's going to serve the person
Speaker 3: for why it's being set up, for it's being set up.
Speaker 2: Gosh, we've only scratched the surface, really now I realized.
Speaker 2: But of course your book's going to be out at
Speaker 2: some later on this year or early next year Trusts
Speaker 2: one two three.
Speaker 3: It will be in the bookshop, so I think in
Speaker 3: the next couple of weeks.
Speaker 2: Next couple of weeks, next couple of week week go
Speaker 2: Trusts one two three. Hey Janets, thanks so much for
Speaker 2: your time. Time flies when you're having fun, doesn't it.
Speaker 3: Oh?
Speaker 2: Yes, well done.
Speaker 3: Thank you for having me.
Speaker 2: We're welcome and we'll be back same time next week.
Speaker 2: You can check out the podcast. Look for the Weekend
Speaker 2: Collective on the News Talks website or we podcast thanks
Speaker 2: to my producer, Tyra Roberts, and I'll look forward to
Speaker 2: your company again, same time next week. Sunday at six
Speaker 2: is next Evergrade Evening.
Speaker 1: For more from the Weekend Collective, listen live to News
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