Excess Trust may scupper first home

Photo / Michael Craig

Q: AMP's Therese Singleton said anyone using KiwiSaver funds for a first home must not have owned property, personally or "jointly with others". If an entity, for example a charitable trust, owns property, the name of the trust and all trustees would be on the title. Would an individual so listed be able to access KiwiSaver funds for a first home?

A: Therese Singleton, general manager, investments and insurance at AMP, answered a question late last year from someone who had bought a house with help from his parents. He wanted to know if he could buy out his mum using KiwiSaver funds as a first-home buyer. Singleton's verdict was his co-ownership ruled him out.

I sought an opinion from Emma Dale, a KiwiSaver specialist at law firm Chapman Tripp, who confirms Singleton's answer.

"Your reader is also correct that where a trust (including a charitable trust) owns property, the trustees' names all appear on the title.

"Because of this, any individual trustees will not qualify for a first-home withdrawal unless a specific exception applies," says Dale.

The relevant exceptions are for anyone who:

• holds or has held land as a bare trustee (Trust assets are at absolute disposal of beneficiaries); or

• holds or has held the land as a trustee and is a discretionary, contingent or vested beneficiary under the relevant trust but has no reasonable expectation of being entitled to occupy the land as the principal place of residence for the person or the person's family until the death of the person who occupies the land or the death of the occupier's survivor.

Those exceptions come from the KiwiSaver legislation but Dale confirms that in the case of a person holding land as the trustee of a charitable trust, neither exception would be applicable.

"Unfortunately, the fact that the individual currently holds or has held land as a trustee will mean that she or he will not be able to use his or her KiwiSaver funds for a first home," she says.

"If the charity is yet to be established, the trustees may seek to incorporate a company to act as trustee instead."

Anyone who doesn't own a home but thinks they're likely to use KiwiSaver to get into a first home should check with a lawyer before signing up as a trustee.

There are provisions by which people who have owned a home in the past can access KiwiSaver funds. But, unlike for home buyers who have never been in the market, there are extra requirements to prove you are on an equal financial footing with other first-home buyers.