If you have a trust which has either come to the end of its life or you wish to wind up early, we can assist and take you through the steps to bring that trust to an end.
Most trusts are established for a period of 80 years (the Trusts Act 2019 came into force on 30 January 2020 and now allows trusts made on or after 30 January 2020 to be established for a maximum term of 125 years).
The trust deed may specify an end date for the trust and may give the trustees the power to wind it up early. Whether the trust is wound up early or because it has come to the end of its life, there are certain formalities that are required to bring the trust to an end.
The decision to wind up a trust should not be taken without careful consideration of the circumstances of the settlor, trustees, beneficiaries, and the terms of the trust deed itself.
Trustees may decide to wind up the trust early for various reasons including:
Before winding up a trust you should obtain legal and tax advice. You need to ensure that a distribution does not trigger a tax liability for the trust or a beneficiary, particularly if the Trust owns residential land that is not your “main home” as transferring such a property out of the trust could trigger a “bright line” tax liability.
We can check the trust deed to ensure that the trust can be wound up early and to identify the specific process to be followed for your trust. Once it is clear that winding up the trust is possible then we can advise and step you through the process including:
The trustees remain liable for a trust’s liabilities after the trust’s assets have been paid out. Once the assets are fully distributed then the trust will be at an end but the trustees’ liabilities continue. It is important that the trustees ensure that there will be sufficient funds to pay any liabilities before any distribution is made.
Though winding up a trust can be relatively straightforward, it pays to ensure that good legal and accounting/taxation advice has been obtained about the implications of winding up the trust.
Reach out to Michael O'Hagan or someone in our Trust and Asset Protection team if you want to talk about winding up your trust.
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