Section HC 36 — Income Tax Act 2007: Trusts and minor beneficiary rule

HC 36 Trusts and minor beneficiary rule Trusts excluded from application of minor beneficiary rule (1) Section HC 35(2) does not apply to an amount of beneficiary income derived by a minor if all settlements on the trust were made by— (a) a person who is neither a relative or a guardian of the minor, nor a person associated with a relative or a guardian; or (b) a person who is a relative, guardian, or a person associated with a relative or guardian, if— (i) the settlor is acting as agent of the minor and has received the property from a person other than a relative, guardian, or their associate: (ii) the settlor is required by a court order to pay damages or compensation to the minor: (iii) the minor is a protected person, as defined in section 2 of the Domestic Violence Act 1995, in relation to a protection order, and the settlement, whether made jointly with another person or not, is made before the protection order is made or during the time the order is in force. When some settlements do not meet requirements (2) Subsection (3) applies when more than 1 settlement is made on a trust, and 1 or more but not all settlements meet the requirements of subsection (1) or section HC 37(1) . Small additional settlements permitted (3) Section HC 35(2) does not apply to an amount of beneficiary income derived by a minor if the only settlements that do not meet the requirements are made through— (a) the disposal for less than market value of property whose total value is no more than $5,000 at the end of the trust’s income year, valuing each settlement at the date of settlement; or (b) providing financial assistance for less than market value in the form of a loan whose total value is no more than $1,000 on any day in the trust’s income year. Exclusion if significant services provided to trust (4) Subsection (3) does not apply if services are provided to the trust by a relative, guardian, or associated person, unless those services are incidental to the operation of the trust. Examples of incidental services are bookkeeping, accounting, or trustee services. Some definitions (5) In this section,— associated person or person associated does not include a person associated only under sections YB 4 and YB 5 (which relate to relatives who are treated as associated persons) financial assistance may include assistance through a loan, guarantee, security, or in another way, and financial assistance is treated as having been provided to, or for the benefit of, a trust for less than market value if— (a) the assistance is provided at below market rates; or (b) an amount payable for the assistance is payable on demand and the right to demand is not exercised or is deferred guardian has the meaning set out in section 15 of the Care of Children Act 2004, and persons are connected by guardianship if 1 is the guardian of the other, but guardian does not include a guardian appointed under— (a) section 110(1)(a) to (d) of the Children, Young Persons, and their Families Act 1989; or (b) section 31 of the Care of Children Act 2004; or (c) section 53 of the Public Trust Office Act 1957 by a court order; or (d) section 7(4) of the Adoption Act 1955 relative means a person referred to in paragraph (a) of the definition of relative in section YA 1 (Definitions) extended to include being in a marriage, civil union, or de facto relationship with a person connected to the other through adoption, as described in paragraph (a)(iv), or guardianship. Defined in this Act: agent , amount , associated person , beneficiary income , financial assistance , guardian , income year , loan , minor , pay , relative , settlement , settlor , Compare: 2004 No 35 ss HH 3C(1)(a)–(d), (2), (3) , HH 3D , HH 3F(1), (2A)–(4) Section HC 36(5) associated person or person associated : substituted, on 1 April 2010 (applying for the 2010–11 and later income years), by section 267(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34). Section HC 36(5) relative : amended, on 1 April 2010 (applying for the 2010–11 and later income years), by section 267(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).