Author: Dr Irina M. Francken, Director at IN Fiduciary Services
As the number of family offices continues to expand, so does the demand for a wide range of essential fiduciary services, including trusts and corporate management.
Given the escalating complexity of financial landscapes, there is a pressing need to diversify the structures in which assets are held. Among the most crucial options are trust structures, which provide a robust and secure framework for safeguarding family assets and facilitating their seamless transfer across generations. From a holistic point of view, the combination of various jurisdictions is important due to uncertainties, policy changes, and amendments of regulation.
Working with private clients usually requires a more strategic approach rather than a purely transactional one. It is essential to establish legal structures for a family that aligns with their specific purposes and goals. Furthermore, it is crucial to consider the dynamics of the family businesses so that the structure can be optimized if the family’s objectives evolve or change over time.
New Zealand foreign trusts have been well-known among family advisors for an extended period and are frequently utilized by high-net-worth individuals (HNWIs) worldwide. New Zealand stands out as a politically and economically stable country, offering a sensible trust law that provides highly effective asset protection structures for individuals and businesses. Tailored to the unique needs of international families, it also offers strategic succession planning solutions.
New Zealand holds the prestigious rank of number one in ease of doing business, signifying a regulatory environment that is highly favorable for initiating and running local entities, businesses, and trusts. The process of setting up and maintaining these structures is straightforward, ensuring a smooth and efficient experience. Moreover, in the event of any legal restructuring of family affairs, adapting the existing structure to accommodate new requirements and goals is a swift and streamlined process, providing flexibility and responsiveness to changing circumstances.
However, over the past half-decade, significant changes have been implemented in response to evolving legal and regulatory frameworks, affecting compliance requirements.
Many benefits of the NZ foreign trust remain unexplored. Typically, the resident trustee of a NZ foreign trust is a NZ company limited by shares. Interestingly, this company is not required to include the word “trustee” in its name, making it difficult to discern the existence of the trust through a simple name search. It’s important to note that NZ foreign trusts are not publicly disclosed, adding an additional layer of privacy and confidentiality to their operations.
NZ foreign trusts with a New Zealand-resident trustee are required to be registered with Inland Revenue, file annual returns, and pay registration and filing fees. The resident trustee of the foreign trust would need to comply with the registration and filing obligations in order to qualify for the exemption from tax on foreign-sourced amounts.
Compliance is an indispensable aspect of trust administration in the present times. AML/CFT (Anti-Money Laundering and Countering Financing of Terrorism) auditing is obligatory, and the audit report is submitted to the Department of Internal Affairs. However, specific reporting information containing personal details of the settlor, trustee, protectors, beneficiaries, and individuals with similar authority is retained by the Inland Revenue Department. It’s essential to note that this information is not linked to the Common Reporting Standard (CRS) and does not undergo automatic exchange of information if the trust is fully compliant with regulatory requirements.
To achieve the objectives mentioned above, it is advisable that the underlying companies of the trust are incorporated in jurisdictions with compliance requirements and AML (Anti-Money Laundering) standards similar to those of New Zealand. By selecting jurisdictions that uphold comparable standards, the trust can benefit from a cohesive and harmonized approach to regulatory compliance, reducing potential complexities and ensuring a seamless integration of the trust’s structure. This strategic decision contributes to the overall effectiveness and security of the trust while reinforcing its commitment to maintaining high compliance standards across all related entities.
As the landscape of family office management evolves, service providers must adapt and offer innovative, personalized solutions tailored to the unique needs of each family. By doing so, they can build enduring relationships based on trust and reliability, and in turn, solidify their position in this thriving sector.
In conclusion, our company, IN Fiduciary Services Group, is wholeheartedly embracing this demand and delivering high-quality, adaptive services to ensure the success and longevity of both family offices and our relationships with our valued clients. We are committed to providing exceptional support and guidance, helping families achieve their financial objectives, and securing their legacies for generations to come.
