John and Mia:
John and Mia had set their trust up on the advice of their lawyer when they purchased their house ten years ago. John was a school teacher and Mia was a nurse. Their children were now in their late twenties and their first grandchild was on its way. John and Mia had almost paid their mortgage off on their home, and had both been paying into KiwiSaver for some years. They had no other assets.
When they set the trust up, John and Mia weren’t exactly sure why they were setting it up, but as their lawyer had said it was a good idea and they had heard some of their friends talk about trusts, they went along with it. If they were honest, it made no real difference to them – their lawyer was their trustee, but they never heard from him, they never had trustee meetings and as the trust didn’t have any income coming in they didn’t have to file tax returns or see an accountant.
Last December, John and Mia were having their annual Christmas catch up with their friends from university days and the conversation turned to trusts. John and Mia’s friend, Frank, started telling the group how his lawyer was also a trustees of his trust and that they had annual meetings, all trustee decisions were recorded in resolutions, and that it was really important for him to have a trust because of his business activities. John and Mia went home and talked about the fact that they never saw their lawyer, in fact he was probably close to retirement and then what would they do for a trustee? Frank’s lawyer sounded like she knew a lot more about trusts than John and Mia’s, so they decided to make a time to go and see her.
When John and Mia went to see Frank’s lawyer, they were surprised to discover that there probably was no really good reason for having a trust anymore – they had no business risk, the trust wasn’t going to mean that they qualified for the residential care subsidy if one of them went into home, and their assets really weren’t that significant in the scheme of things. They were keen to protect their assets from their children’s partners, but they learnt that with a well-crafted will, they could still achieve the same result. John and Mia decided to wind up the trust and simplify their affairs on the advice of Franks’ lawyer.