Safeguarding Your Family’s Future

A family trust can be an effective tool for succession planning and the long term management of family assets. In New Zealand, the Trusts Act 2019 (“the Act”) sets out the duties of trustees, including acting honestly, in good faith, and for the benefit of beneficiaries. When properly established and administered, a trust can provide flexibility and support for future generations

Why Establish a Family Trust?

·Asset Protection: A trust may assist in protecting assets from certain risks, provided it is established and administered properly and assets are transferred for legitimate purposes. However, trusts do not guarantee protection from all claims and trust arrangements may be challenged in some circumstances.

·Estate Planning: Assets owned by a trust are generally not part of the deceased person’s estate and therefore avoid the need for Probate in relation to those assets. A trust can also assist with the orderly management of family wealth and succession planning. This reduces stress for loved ones and minimizes the risk of disputes under laws such as the Family Protection Act 1955 or the Law Reform (Testamentary Promises) Act 1949.

·Flexibility: Trustees may exercise their powers granted under the trust deed to respond to changing family circumstances such as supporting education, assisting vulnerable beneficiaries, or preserving assets for future generations.

Legal Framework

The Act requires trustees to:

·         Know and act in accordance with the terms of the trust.

·         Act honestly and in good faith.

·         Act for the benefit of the beneficiaries or to further the permitted purpose of the trust.

·         Exercise powers for a proper purpose.

·         Keep core trust documents and appropriate records.

·         Consider the disclosure obligations owed to beneficiaries.

Trustees who fail to comply with their obligations may be exposed to personal liability.

Key Considerations Before Establishing a Trust

·         Purpose: Consider whether a trust is appropriate for your family’s circumstances and objectives.

·         Trustees: Appoint trustees who are capable of carrying out their duties. Consider whether an independent trustee would be beneficial.

·         Costs: Trusts involve establishment, administration and compliance costs.

·         Administration: Ongoing administration is required. Trustees are required to maintain records, document decisions and review the trust regularly.

A well-structured and properly administered family trust can be a valuable tool for succession planning and asset management. Professional legal, accounting and financial advice should be obtained to ensure that a trust is appropriate for your circumstances and remains compliant with applicable laws.