On trusts, rest home subsidies and good honest motivations

Author -  Steve Barns

Trusts have never been a reliable mechanism for facilitating fully subsidised rest home care and as such it’s nothing new that there is always a slight risk of ‘claw backs’ when it comes to means testing for rest home care, for example.

Spicers Authorised Financial Adviser in the Waikato, Steve Barns, has more than 20 years’ experience working for the Public Trust and Guardian Trust and says that there is no substitute for good legal advice.

There is no replacement for proper advice on family trusts

“If you have a concern about your trust, or you are wondering if it would be useful to set one up, there is no replacement for proper advice from somebody who knows what they are talking about.

“My view is that the establishment of a trust is largely a legal function, so a trust company or a lawyer who has ability and competence in the field of trusts is essential.”

Steve says the Ministry of Social Development is well versed in how trusts are set-up and run, and will look closely at them when they are in the picture for rest home subsidy applications.

“What happens is that benefits might be declined if you purposely deprive yourself of an asset to make yourself eligible for a benefit. The risks however might be mitigated if you work within the rules.”

Keys to robust family trust are governance and motivation 

The key to setting up and maintaining a robust trust is good or objective governance (your trustees are well chosen and competent). The other key factor is that your motivations behind wanting the trust are reasonable. 

“A trust may not achieve its objectives if it is something you set up to defeat your legitimate obligations, such as trying to defeat the legal entitlements your partner may have under the Property Relationship Act if the relationship were to break up, or putting all your assets in a trust to try and get subsidised rest home care.”

Steve says good motives are important for creating a robust trust.

Family trusts that work within the rules work

“Work within the allowances and limits of the law. Ultimately trusts are about protecting and preserving assets. It is common for people to keep their non-business assets in a trust, because it separates their professional obligations from their home life.

“For some people, not owning their assets personally – in other words contained in a trust – may create succession or inheritance advantages. A trust may potentially provide greater certainty of where assets will go, or how they will pass to the next generation, and gives more control over who benefits and when. A will is more easily challenged than a properly run and structured trust.”

Steve says trusts have also been useful for ‘predator and creditor’ protection; for example, where there is concern that the family home might be put at risk by things that happen outside of a business owner’s control, such as a frivolous law suit.

“If you have concerns, talk to the professional trustee, lawyer or accountant who is involved with your trust. If you do not have a professional trustee and you have concerns about your trust, it is perhaps time to get one. Either way, take good legal advice.”

On trusts, rest home subsidies and good honest motivations

Trusts have never been a reliable mechanism for facilitating fully subsidised rest home care and as such it’s nothing new that there is always a slight risk of ‘claw backs’ when it comes to means testing for rest home care, for example.

Trusts have never been a reliable mechanism for facilitating fully subsidised rest home care and as such it’s nothing new that there is always a slight risk of ‘claw backs’ when it comes to means testing for rest home care, for example.

Spicers Authorised Financial Adviser in the Waikato, Steve Barns, has more than 20 years’ experience working for the Public Trust and Guardian Trust and says that there is no substitute for good legal advice.

There is no replacement for proper advice on family trusts

“If you have a concern about your trust, or you are wondering if it would be useful to set one up, there is no replacement for proper advice from somebody who knows what they are talking about.

“My view is that the establishment of a trust is largely a legal function, so a trust company or a lawyer who has ability and competence in the field of trusts is essential.”

Steve says the Ministry of Social Development is well versed in how trusts are set-up and run, and will look closely at them when they are in the picture for rest home subsidy applications.

“What happens is that benefits might be declined if you purposely deprive yourself of an asset to make yourself eligible for a benefit. The risks however might be mitigated if you work within the rules.”

Keys to robust family trust are governance and motivation 

The key to setting up and maintaining a robust trust is good or objective governance (your trustees are well chosen and competent). The other key factor is that your motivations behind wanting the trust are reasonable. 

“A trust may not achieve its objectives if it is something you set up to defeat your legitimate obligations, such as trying to defeat the legal entitlements your partner may have under the Property Relationship Act if the relationship were to break up, or putting all your assets in a trust to try and get subsidised rest home care.”

Steve says good motives are important for creating a robust trust.

Family trusts that work within the rules work

“Work within the allowances and limits of the law. Ultimately trusts are about protecting and preserving assets. It is common for people to keep their non-business assets in a trust, because it separates their professional obligations from their home life.

“For some people, not owning their assets personally – in other words contained in a trust – may create succession or inheritance advantages. A trust may potentially provide greater certainty of where assets will go, or how they will pass to the next generation, and gives more control over who benefits and when. A will is more easily challenged than a properly run and structured trust.”

Steve says trusts have also been useful for ‘predator and creditor’ protection; for example, where there is concern that the family home might be put at risk by things that happen outside of a business owner’s control, such as a frivolous law suit.

“If you have concerns, talk to the professional trustee, lawyer or accountant who is involved with your trust. If you do not have a professional trustee and you have concerns about your trust, it is perhaps time to get one. Either way, take good legal advice.”

On trusts, rest home subsidies and good honest motivations
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