Buying your first home using KiwiSaver funds (Trust eSpeaking, Issue 33, Spring 2021)

But you’re already the trustee of a trust

The rules around the use of KiwiSaver have evolved over recent years as banks and other financial institutions have developed their understanding of the KiwiSaver regime.

KiwiSaver members may use their funds to help buy their first home; this is straightforward. What happens, however, if you want to buy your first home and you are already a trustee of a trust that owns property?

Initially, you could only access your KiwiSaver funds to buy your first home in your personal name; using a trust as a vehicle to purchase was not allowed. Now, however, the situation is more nuanced. An increasing number of lenders allow KiwiSaver members to make a withdrawal to finance the purchase of a first home, even where trusts are involved. 

Let’s look at three scenarios to illustrate how this can work.

1. You are a trustee of your friend’s trust, but not a beneficiary; as a trustee, your name is on the title to your friend’s home

2. You are a trustee and a beneficiary of your parents’ trust; your name is on the title to their home, and

3. You are a trustee and a beneficiary of a trust that has just been settled and so far only holds the initial $100 settlement; the trust does not hold property.

Trustee but not beneficiary

In scenario #1, the general rule is that if you are currently registered on the title to a property or land you will not qualify for a KiwiSaver first home withdrawal. The Financial Services Council of New Zealand, however, suggests that you will be eligible if you are registered as an owner of ‘an estate in land as a trustee who is not a beneficiary under the relevant trust’, because you haven’t previously held an estate in land (as you didn’t have a beneficial interest). ¹

Your argument will be even stronger where the trust of which you are a trustee has sold the property and you can establish that you received no financial gain from the sale.

Trustee and beneficiary

In scenario #2 where you are a trustee and a beneficiary of a trust which already owns property, it is necessary to establish that you have ‘no reasonable expectation that you will be entitled to occupy the land as your principal place of residence before the death of the occupier or of their survivor.’²

It may be difficult to establish that you have no reasonable expectation of being entitled to occupy the land as your principal place of residence if, for example, you are:

• 18 years old or over 

• A trustee of the trust

• Named on the title to the trust property, and

• Occupying the home with your parents under a resolution that says ‘the settlors and their children aged under 20 years may occupy the property on the basis that they pay the rates, insurance and all outgoings usually payable from income.’

However, you could argue that once you turned 20 you would no longer have a reasonable expectation until after the death of your parents.

If there is no resolution in place, however, or a resolution that only authorises the settlors to occupy the home, then you may be able to argue that you have no reasonable expectation of being entitled to occupy the land as your principal place of residence (that is, you are there at the whim of your parents/the trustees and they can ask you to leave at any time).

Trustee and beneficiary of new trust

In scenario #3 where the trust has not purchased any property, some lenders, such as ASB, now allow the withdrawal of KiwiSaver funds to purchase your first home through a trust. The provisos are that the property being purchased is your first home, you are both a trustee and beneficiary of the trust, and you intend to live in the property as your principal place of residence. 

To be eligible, your name (as the KiwiSaver member applying for a first home withdrawal) must be on the sale and purchase agreement or on a deed of nomination. This is good news for first home buyers who have good reason to want to hold assets in a trust, though care must be taken to ensure that your KiwiSaver provider will agree you are effectively in the same position as a first home buyer: one way to ensure that is to apply for approval prior to finding a property.

Being a trustee of a property-owning trust can create unwitting complications if you want to buy your first home using KiwiSaver funds. If you need some help in steering your way through the process, please don’t hesitate to be in touch. 

¹ Financial Services Council of New Zealand.
² Clause 8(5), Schedule 1, KiwiSaver Act 2006.