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Income Tax Act 2007

Taxation of certain entities - Trusts

HC 37: Testamentary trusts and minor beneficiary rule

You could also call this:

“Rules for trusts set up in wills that pay money to young people”

You don’t need to worry about a rule called Section HC 35(2) for money that a young person gets from a trust if the trust was set up in a certain way. This rule doesn’t apply if all the money put into the trust was done according to Section HC 36(1) or if it was put there because of a will, a change to a will, when someone dies without a will, or because a court said so.

For this rule not to apply, one of two things must be true:

  1. The young person must be alive within 12 months after the person who set up the trust died.
  2. The young person must have a brother, sister, half-brother, or half-sister who is alive within 12 months after the person who set up the trust died.

There’s also a rule called Section HC 36(3) that might make this exception last longer.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517375.

Topics:
Money and consumer rights > Taxes
Family and relationships > Children and parenting
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HC 36: Trusts and minor beneficiary rule, or

“Rules for when trusts give money to children”

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HC 38: Beneficiary income of certain close companies, or

“Tax rules for close companies receiving money from trusts”

Part H Taxation of certain entities
Trusts

HC 37Testamentary trusts and minor beneficiary rule

  1. Section HC 35(2) does not apply to an amount of beneficiary income derived by a minor if all the settlements on the trust meet the requirements of section HC 36(1) or were made under a will, codicil, intestacy, or court variation and—

  2. the minor is alive within 12 months of the date of the settlor’s death; or
    1. the minor has a brother, sister, half-brother, or half-sister alive within 12 months of the date of the settlor’s death.

      1. Section HC 36(3) may apply to extend the application of this exemption.

      Compare
      Notes
      • Section HC 37(1): amended, on , by section 214 of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).