Benefits of a family trust

Trusts are an efficient structure to:

  • Accumulate long term wealth
  • Protect your home and other assets from financial risk
  • Provide financial assistance to your loved ones.

A trust can help protect your home and other assets when you:

  • Are in business and want protection from creditors or the risk of business failure
  • Have an occupation with risk of being personally sued
  • Want protection from financial loss due to relationship failure
  • Want to protect your children from financial loss if their relationships fail
  • Want protection from claims by your partner’s children from a previous marriage

Some ways to use a trust to help your loved ones:

  • Pay for education or special needs of your children or grandchildren
  • Finance your children into their homes in a way that protects the funds from relationship failures
  • Transfer family wealth to the next generation

We do not recommend using trusts for the sole purpose of reducing tax or becoming eligible for rest home subsidies. Tax and social welfare laws are constantly changing. IRD and other government departments can challenge arrangements that lack commercial reality or where the intention was to manipulate the tax or welfare systems.

Disadvantages of family trusts

  • Loss of ownership of assets – ownership of the assets transfers to the trustees who must act under the terms of the trust deed in the best interests of the beneficiaries.
  • Administration – you need to allow for the time and cost involved with meeting the trust’s administrative, accounting and tax requirements.
  • Cost of creating the trust & transferring assets into it – this will depend on the complexity of your trust and the assets to be transferred
  • Future law changes which may affect some of the original objectives of the trust

Summary

Trusts are an efficient structure for protecting your assets and providing financial assistance to family members. However, a trust must be managed, maintained and accounted for on an ongoing basis, just like the assets and investments it will own. The real benefits of having a well planned and maintained trust are usually in the future, often when something in your life goes wrong.

Contact us today for a no obligation discussion to learn more about trusts and how they can help you. We have extensive experience and expertise in trusts and will work closely with your lawyer to get the best structure for you.

More information

What is a trust and how does it work?

The Trusts Act 2019 – Trustee duties and beneficiary rights

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