Under the Spotlight: An Introduction to Trusts

Although Family Trusts have become popular recently they have been with us in one form or another for more than Four Hundred years. Their basic nature remains much the same but their role has evolved to meet the needs of each generation.

Why use a Trust?

To Protect Important Assets

Assets can be put at risk in a number of different ways. These can include business failure, legal action or a relationship breakdown. We also do not know what the future holds. Government policy can change on a whim, bringing risks to the value of those assets we have strived so hard to acquire.

Will we get a Capital Gains Tax or will the Asset Testing Regime be extended to other Government Benefits? – We live in volatile times and there are no guarantees the government policies we have now will be here next year.

What is a Trust?

When someone who owns assets and perceives that these could be put at risk or could have some potential for loss that person would therefore look to divest or remove themselves from those assets, however at the same time still wishing not only to enjoy the use of these assets but also to control them. To continue to do so they will then look to transfer the assets to Trustees of their Trust. The Trustees then hold these assets on behalf of the family group, rather than the individual.

It is common in New Zealand for those who establish the Trust to be kept in total control of this new entity as most fear that they will otherwise loose control of their assets. Most would therefore agree that in order to achieve this control you must also be a Trustee. We would agree with this advice however we maintain that you cannot possibly control something that you simply do not understand. This in our view is where Trusts have the potential to be challenged as the individuals that are in ‘control’ of the Trust simply do not understand the new position that they take. At New Zealand Trustee Services we look to educate as it is only with knowledge that you can successfully manage and control your Trust.

Enquire here for more information about all Trusts.