Frequently Asked Questions about Trusts - page 2

Incorporation of a trust

To incorporate a trust we suggest that you make the trustee a nominee company to avoid problems if at a later date you wish to change the individuals administering the trust. A company under the 1993 Companies Act can consist of only one shareholder and one director, although it may be advisable to have at least two. The documents required to formalise a trust in this case are:

• Trust Documents:
• Trust Deed
• Trustee's Initial Resolution
• Company Documents
• Certificate of Incorporation of Company.
• Constitution
• Form 1 - Registration of Company, including Registered Office, Address for Service,
• Postal Address to which Communications from the Registrar may be sent, Directors
• and Shareholders and their shareholding.
• Form 2 - Consent of Directors
• Form 3 - Consent of Shareholders
• First Minutes of Directors Meeting and Appointment of Directors
• Appointment of First Directors.

Transfer of Assets to the Trust

Consequent upon the incorporation of the trust it is necessary to transfer all the property and other business assets owned by beneficiaries transferring their assets to the trust, by way of transfer registered at Land Information New Zealand for real estate, or by deed for non real estate assets. The consent of any mortgagees or chargeholders of property is required to be obtained.

Consideration, Mortgages Back and Deeds of Forgiveness of Debt

The value taken for the property transferred to the trust will need to be carefully assessed. Independent valuations may be necessary. Often the whole of the purchase price is lent by the settlor to the trust, and the trust gives a mortgage to the settlor for this sum. Thus, no cash necessarily changes hands. Acknowledgements of debt and/or mortgages are given by the beneficiaries concerned to the trustee for the value of the assets, although immediate deeds of forgiveness of debt can be executed by the parties forgiving$27,000.00 each without incurring gift duty, reducing the total mortgages by that much. In each ensuing year a further reduction of $27,000 can be made by each of the lenders. You can give consideration to gifting a greater amount in the early years and paying some gift duty if it is sensible to do so.