Is Your Family Trust Still Working for You?

Family trusts were once seen as the ultimate tool for asset protection. Many asset holders believed that by establishing a trust and transferring their assets into it, they could protect wealth from rest home care fees and reduce tax liabilities. However, the landscape has changed significantly.

Changes in Gift Duty and Rest Home Care Subsidy

Since gift duty was abolished in New Zealand, the amount that can be gifted to a family trust without being considered a deprivation of assets has been reduced. Currently:

• The maximum amount gifted is $27,000 per year, or

• $6,000 per year for the five years before applying for the Residential Care Subsidy.

  
  

This is half the previous threshold before the abolition on 1 October 2011. When applying for the Residential Care Subsidy, Work and Income includes any unforgiven debt owed to the applicant by the family trust in their financial means assessment. The thresholds are adjusted annually on 1 July and vary based on relationship status and spouse’s care needs.

Because of this, many New Zealanders can now maintain their family home and cash assets without the ongoing costs and administration of a family trust.

Tax Changes Affecting Family Trusts

Family trusts were also commonly used to minimise tax by distributing income to beneficiaries taxed at lower rates. This allowed higher wage earners to benefit without paying the higher tax brackets. Due to widespread misuse, legislation has changed, and family trusts no longer serve as a powerful tax minimisation tool.

Is It Time for a Trust Review?

Numerous new rules affect how family trusts operate, and the issues above are only the beginning. If you feel your family trust may no longer be necessary or isn’t functioning as you expected, a trust review can help.

Our experienced lawyers in Pukekohe and South Auckland can assess your trust, identify any shortcomings, and help you achieve optimal asset protection tailored to your needs.

Contact Arnet Law for a No-Obligation Trust Review

If you want to ensure your family trust is working effectively, contact Arnet Law today.

Our trust experts provide clear, practical advice to protect your assets and financial future.

Visit Arnet Law to learn more and schedule your consultation.