Company and trust formation/administration

New Company Setup

Setting up a new company is an exciting venture, but we are also aware that it can be daunting at the same time. Especially if it’s your first one.

Sometimes it can be hard to figure out what your new business actually does or does not need, and the administration involved can often become ‘too hard basket’. Whether it’s registering the company, banking services, insurances or even job descriptions and employment contracts – we are just a call and a cup of coffee away if you need assistance figuring out what’s next for you to get started.

Trusts & Gifting

Trusts can protect the ownership of your assets while you are alive. Reap the benefits of enjoying your assets even when you’ve transferred the legal ownership over to the trust. So for example; the family home is in a trust, you no longer personally own the house – but you could still live in it if that’s what it states in the trust deed.

People usually set up a family trust to get some benefit from no longer personally owning an asset. A family trust may be useful to:

  • Protect selected assets against claims and creditors – for example, to protect your family home from the potential failure of a business venture.
  • Set aside money for special reasons, such as a child or grandchild’s education.
  • Ensure your children, not their partners, keep their inheritances.
  • Avoid unwanted claims on your estate when you die – such as from a former partner.
Who is involved?

A settlor: The person or company who creates the trust (e.g. you)

Trustees: The people who handle the trust. If you are the settlor, you can also be a trustee. It is also a good idea to appoint an independent trustee like a lawyer or accountant.

Beneficiaries: The people who benefit from the trust, for example you or members of your family.

In most cases there is more than one trustee, also more than one settler of a trust. The settlor or someone else can have the power to appoint and remove trustees. This is an important (super)power that you can also transfer to someone else in your will. Note that a trust does not necessarily end with your death – it was last for a maximum of 80 years from when it began.

What is involved?

First you will need to decide what things you own should be put into the trust, and what their value is. In most cases this will be the family home, but other things of value like cash, bank deposits, shares, artwork etc. can also be included.

The ownership of these assets will then be transferred to the trust and the trust then owes a debt back to you, the settlor. This debt can then be ‘forgiven’ through a process called gifting.

A legal document called a ‘trust deed’ will formally set up the trust. It will appoint the trustees, list the beneficiaries, and state various rules for the admin and management of the trust. The trust deed needs to be very carefully written!

Asset transfers

Once the trust is made, assets can be sold into the trust, at market value. However, although the trust wants to buy, say, your house (and you want to sell it to the trust), the trust has no money to buy it.

How then does the trust pay for the house? The answer to this is that you lend the trust the money.

Initially this is a ‘paper’ transaction – you sell the house to the trust, and the trust now owes you a house-sized debt.

However, the debt that the trust owes you is still counted as a personal asset. So, you will need to get rid of the debt so you can achieve the aim of owning less in your name. The way you do this is through ‘gifting’.

Gifting

Most people who form trusts, ‘gift’ away the debt that the trust owes them. Before October 2011 there was a limit of $27,000 that you could gift in one year without paying a tax called ‘gift duty’ to Inland Revenue. Gift duty has been stopped and there is no limit to how much you can gift in one year.

This means that where previously it would have taken 14 years to gift the value of a house worth $400,000 to a family trust without paying gift duty, you can now gift the whole amount of the debt straight away. However, it’s always best to seek legal advice before proceeding.

Gifts above $27,000 are included in your assessment for a Residential Care Subsidy.

Risks of trusts

If trusts are not set up or managed well, it can be costly, and a massive inconvenience. You could run the risk of having the trust declared a ‘sham’, which would mean that the assets are not really the trust’s but are in fact still yours. If the trust is a sham, you could lose all the advantages that you were hoping to gain from it.

Once you put your assets into a trust, you no longer personally own or control them. Instead, ownership passes to the chosen trustees who must abide by the terms of the trust deed in the best interests of the beneficiaries.

There have been cases of family members suing other family members for a breach of the trust’s provisions. The courts treat claims like this quite seriously and they will normally be expensive to resolve.

Forming a trust is a big decision. So if you are going to form one, make sure that it is established properly, for the right reasons, and managed well.

We can talk about your requirements,
just fill in the enquiry form below, or contact us here.

  • This field is for validation purposes and should be left unchanged.

Yi Ping Ge

Business Advisory Lead.
Read Yi Ping’s profile.

Humphrey Hart

Senior Analyst and Entrepreneur.
Read Humphrey’s profile.

As a client Gilligan Sheppard you will have access to international networks and resources to enable optimal outcomes for your business / trust / transaction. xero logo It’s small business accounting software that’s simple, smart and occasionally magical. Log in online anytime, anywhere on your Mac, PC, tablet or phone to get a real-time view of your cash flow. 
As a client Gilligan Sheppard you will have access to international networks and resources to enable optimal outcomes for your business / trust / transaction. tax traders logo Tax Traders allows you to buy someone else’s tax to settle your account with Inland Revenue, as well as save on interest and late payment penalty charges.
As a client Gilligan Sheppard you will have access to international networks and resources to enable optimal outcomes for your business / trust / transaction. smart ar logo Astute cash flow management is essential for operating a small business.
As a client Gilligan Sheppard you will have access to international networks and resources to enable optimal outcomes for your business / trust / transaction. myob logo Trusted by 1.2 million businesses, myob is New Zealand’s largest accounting solutions provider. The platform is equipped to support the needs of New Zealand organisations.
As a client at Gilligan Sheppard you will access to international networks and resources to enable optimal outcomes for your business/trust/transaction.  accountancy insurance logo Tax Audit Insurance specifically designed for accountants in public practice. This provides cost effective protection and peace of mind against the substantial cost that may be incurred should IR or other government authorities conduct a random review, investigation or audit.
As a client Gilligan Sheppard you will have access to international networks and resources to enable optimal outcomes for your business / trust / transaction. cpa logo A CPA is a finance, accounting and business professional with a specific qualification. It indicates a soundness in depth, breadth and quality of accountancy knowledge and gives you competitive advantage over your peers.
As a client Gilligan Sheppard you will have access to international networks and resources to enable optimal outcomes for your business / trust / transaction. agn international logo AGN International is a worldwide asociation, composed of four regions, of independent accounting and advisory businesses.
Tax Updates: 18 March 2024
Welcome to this week’s review of tax issues where Richard comments on what’s been happening in the world of tax over the past week. If you have a question or would like a second opinion [...]
Tax Updates: 11 March 2024
Welcome to this week’s review of tax issues where Richard comments on what’s been happening in the world of tax over the past week. If you have a question or would like a second opinion [...]
Tax Updates: 26 February 2024
Welcome to this week’s review of tax issues where Richard comments on what’s been happening in the world of tax over the past week. If you have a question or would like a second opinion [...]
Tax Updates: 20 February 2024
Welcome to this week’s review of tax issues where Richard comments on what’s been happening in the world of tax over the past week. If you have a question or would like a second opinion [...]
What is a family office?
What is a “Family Office”, Why have one, what have others done, and what choices exist? The “Family Office” is a relatively new label for a relatively old structure Family offices have their [...]
The difference between a leader and a manager
What’s the most important thing to a company’s sustainable success? After considering the standard metrics such as market, the bottom line and a quality product, the majority would likely say [...]
Employee development: comfort is the enemy of progress
Your professional development as an employee holds an integral part of what makes you thrive in the workplace. When we are given the tools and opportunities to grow, it not only benefits us [...]
Don’t settle for an average company culture
This is a topic I am incredibly passionate about, and you should be, too. Everyone knows intuitively that if you have a great culture, great things happen. But most companies don’t have any [...]
A life-long journey of time management
Tick, tick, tick, tick…does this remind you anything? Time. It continually ticks, running eternally without pause. It is the most precious and finite resource. It accompanies us throughout our [...]
Tax Updates: 5 February 2024
Welcome to this week’s review of tax issues where Richard comments on what’s been happening in the world of tax over the past week. If you have a question or would like a second opinion [...]

Click here for details.

We are recognised as authorities in our specialised fields. We publish newsletters with informed opinions that are free for you to subscribe to.

Click here for details.

Richard Ashby (our tax specialist) provides advice, comments and updates on what’s been happening in the world of tax each week.