Some of the things you should consider are:

New requirement to make disclosures to beneficiaries

One of the changes that concerned many people is the requirement to make disclosures to beneficiaries. Children, their spouses and other beneficiaries in most instances must be provided with copies of the trust's annual financial statements, except in very specific circumstances.

Cost to maintain a trust

If your trust has a professional trustee, they will charge a fee for dealing with trust matters and ensuring compliance with obligations under the Act. The Act also requires you to keep financial statements to accurately record trust assets, liabilities, beneficiary accounts and more.

In many cases, the only trust asset is the family home, which does not earn income, so these fees come out of the settlors' own pockets. Naturally settlors and trustees will review these out-of-pocket costs and consider winding up their trust to avoid the annual fees.

Why did you set up the trust in the first instance?

Coming back to my initial point above, when clients ask us if they should wind up their trust, I ask them why they first set it up. Revisiting this initial decision will often give them a clear answer on how to move forward.

Here are some of the common reasons family trusts are set up:

Protection of personal assets from business creditors

If you have a business for which you have signed a personal guarantee to the bank or other creditors, you are risking exposing your personal assets to third party creditors if you wind up the family trust. In these current difficult economic times, this must be a consideration in your decision-making. 

Keeping assets in the family

Unfortunately, not all relationships last. While it may not be a comfortable thing to discuss, it is the sad reality that relationships do break up. A trust can help provide protection in respect of relationship property claims.

You should also consider that a person’s will is able to be legally challenged, however this does not apply when a property and/or other assets are owned in a trust.

Finally, a trust can be a relatively simple mechanism for holding assets for the benefit of multiple family members at once, or for family members who face particular difficulties.

Residential Care Subsidy

This is a very important consideration. Keeping assets in a trust means they cannot be considered personal assets when asset testing for a Residential Care Subsidy (RCS) application. The caveat here is that you must have complied with the allowable gifting limits. Annual administration costs for the trust could be a small price to pay for the benefit of obtaining a RCS when the time comes.

These days there are many different opinions on family trusts, and it is important that you consider all angles before making decisions about the future of your own trust. Please contact us to make a time to discuss your options to ensure you make the best decision for your personal circumstances.