Trust Registration

Registration of Trust

Introduction

In New Zealand and in some countries there is no register for standard inter vivos or testamentary trusts. In respect of incorporated charitable trust boards, registration is the process that establishes such a trust board as a corporate body. As trusts otherwise do not have legal personality, there is not the same necessity for a registration system to establish legal personality. Most trusts registration systems can only serve information collection and record-keeping functions.

At present there is little registration of trusts in New Zealand.

Tax Registration

In New Zealand, Foreign trusts must be registered with the Inland Revenue regardless of whether they derive taxable income or not.360 Income-earning trusts also must register as tax payers with Inland Revenue. Resident trustees of a foreign trust must disclose the name or other identifying particulars of the trust (such as the date of settlement of the trust), the name and contact details of resident foreign trustees, and details of membership of trustees in approved professional organisations.

There are also no external reporting requirements for domestic trusts other than the requirement for income-earning trusts to submit a tax return to the Inland Revenue. Up until 1 October 2011, those making gifts in excess of $12,000, including settlors gifting to private trusts, had to submit an annual gifting return to the Inland Revenue indicating how much had been given in order to be assessed for gift duty. This included settlors who were gradually gifting to the trust the value of the settlement of trust property at a rate that was under the threshold for gift duty. This created a de facto reporting requirement for a number of trusts. Gift duty has now been abolished so the accompanying reporting has ceased.

In Malta, the trustees of a trust that are persons resident in Malta need to register the trust for the purposes of the Income Tax Acts.

In the United Kingdom, Trustees of trusts other than bare trusts should tell HMRC as soon as the trust is created if they expect a new trust to:

  • receive income
  • make chargeable capital gains (profits) from the sale of assets – such as shares, buildings or land – within the next tax year

If an existing trust starts receiving income or making chargeable gains, they need to notify HMRC. There is no need to tell HMRC if a trust is not going to receive any income or make any chargeable gains.

Registration of Charitable Trusts

In New Zealand, Charitable trusts that wish to incorporate as charitable trust boards register when incorporating under the Charitable Trusts Act 1957. Charitable trusts (whether incorporated or not) must also register with the Charities Board under the Charities Act 2005 if they want to be recognised as charities.

Anti-Money Laundering

In many countries, the Anti-Money Laundering and Countering Financing of Terrorism legislation imposes some reporting requirements in respect of trusts. Those who form trusts in the course of their business are required, in general, to obtain, verify and retain records of the beneficial ownership and control of trusts.

Benefits of Registration

Registration is normally suggested as a way of attempting to make more information about the use of trusts and about individual trusts available. Because most trusts are essentially private arrangements, in the same way most contracts are private arrangements, there are few official requirements that alert the Government or the public to the existence of a trust. The Government has limited information about the use of trusts generally in New Zealand and about features of individual trusts that may be relevant to applications for government assistance.

Registration would mean that more information would be available about the number of trusts in existence and how they are being used. Government agencies, beneficiaries and potential creditors would all be likely to gain some benefit from having information available about trust relationships.

It can also be difficult for third parties to know that they are actually contracting with a trustee rather than a beneficial owner. In same countries, like New Zealand, the requirements for the administration of trusts are obligations owed only to the beneficiaries. There is no official body that has the responsibility and access to information to ensure that trusts are being properly administered. Compared with the registration and reporting requirements for companies, the absence of a register for trusts means it is comparatively easy for trusts to be established, administered and altered, and for property ownership in trusts to be flexible.

No Registration

A register would significantly alter the nature of trusts by giving them a publicly registered status. This would be a significant shift away from the current treatment of most trusts as essentially private arrangements between citizens. Privacy and confidentiality have historically been recognised as among the essential virtues of the trust form.

The overall costs associated with registration are a significant barrier. First, the costs of establishing and maintaining a register are likely to be substantial. Secondly, registration would impose compliance costs on all trusts, many of which are modest family trusts that could gain no benefits from registration. Unlike companies, which obtain corporate status and with it limited liability via the registration process, trusts would gain nothing through registration; they would only incur cost. The benefits obtained from a system of registration are of a public nature, taking the form of more accurate and better quality information that can be made available to (at least some) government agencies and possibly others.

Registration is not the most appropriate way to improve accountability to beneficiaries.

Registration in South Africa

Registration of inter-vivos trusts in the Republic of South Africa are at the office of the Master in whose area of jurisdiction the greatest portion of the trust assets is situated. If more than one Master has jurisdiction over the trust assets, final jurisdiction will rest with the Master of the office where the trust was first registered.

Registration in India

The application for registration a trust in India should be made to the official having jurisdiction over the region in which the trust is sought to be registered. After providing details (in the form) regarding designation by which the public trust shall be known, names of trustees, mode of succession, etc., the applicant has to affix a court fee stamp to the form and pay a very nominal registration fee, depending on the value of the trust property.

The application form should be signed by the applicant before the regional officer or superintendent of the regional office of the charity commissioner or a notary. The application form should be submitted, together with a copy of the trust deed.

Two other documents which should be submitted at the time of making an application for registration of a Trust are affidavit and consent letter.

See Also

Interest on lawyer trust accounts
Outline of Trust and Estates
Agricultural Law Estate Planning
Should Trusts file income tax returns to the IRS?


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