A lot of clients we deal with come from an environment that setting up a trust structure is easy, and can happen pretty much overnight. That may have been the case in the past but it is the exception rather than the norm in today’s professional environment.
Too often we are seeing requests come in on a Tuesday or Wednesday to put together a trust structure for a property transaction that settles on a Friday. You can imagine the disappointment when we say that this is not possible.
The main issues causing formation time frames to be greater than in the past are:
- Anti-money laundering rules: trusts are considered to be high risk for money laundering which means enhanced due diligence must be carried out on the parties involved in the structure before any document drafting can start. To complete these checks all know your client documentation needs to be collated which can take a few weeks depending on the geographical spread of the parties.
- The Inland Revenue Department no longer issues IRD numbers on a same day or overnight basis. So, for those trust structures that need an IRD number to get GST registered to complete the land transaction a suitable time frame to obtain an IRD number must be budgeted for.
- A great deal of the work we do is restructuring of current trusts as the trust deed does not reflect what the settlors originally intended as the formation was rushed. Some measured consideration during the trust formation process would have meant a lot of these issues would not have arisen.
Our advice is simple: when forming a trust budget on sufficient time to get everything in place.