The assets you own are your store of wealth. These can include your home, investment properties, bank deposits, KiwiSaver, superannuation funds, investment portfolios and businesses. When you are starting out in life, it is easiest to purchase assets in your own name but for most assets there are other options. Ownership options for personal assets can include:
Individual ownership. Your assets are held in your name and you are liable for any tax payable in relation to the assets. On your death, they pass to your estate.
Joint ownership. You share the ownership of the assets equally with another person or entity. On your death, ownership transfers to the surviving person or entity. Tax liability is shared by the owners.
Tenants in common. Two people own a property in equal shares or shares of different sizes, for example, 60% and 40%. If one owner dies, that owner’s share passes on to whoever they choose.
Family trust. A family trust is a legal way for you to hold assets for the benefit of you and your family over the long term. The assets are owned by trustees for the beneficiaries (usually you and your family). There are many reasons to consider a trust, mostly aimed at protecting your assets – for example, from creditors, the threat of estate duty and relationship property claims.
For business assets, ownership options include sole trader, partnership and limited liability company.
As your wealth increases, there may be benefits from using different forms of ownership. It pays to think ahead and decide on which ownership structures are best suited to your circumstances, because changing the ownership of assets can be costly. Tax, estate planning and asset protection are all important considerations. Your solicitor and accountant can advise you on the advantages and disadvantages of the various options.
