Trusts are a popular way for New Zealanders to protect their assets. There may be a number of reasons why you are considering setting up a trust or have been advised to do so. A trust can offer a number of benefits and these are explained in this book. Before you make any decisions about this, however, it’s important that you understand what a trust is and how it works. This book sets out some of the important features of a trust and what is required in order for your trust to work as intended. Unless the legal obligations are met, your trust may not be legally effective or a court may later decide it’s a sham and therefore of no benefit to you.
New Zealand trust law is the result of centuries of development by Acts of Parliament and by the courts both here and, in earlier times, in England. We cannot cover all the detailed rules in this book. If you need further explanation about some aspects or you have any questions, you should talk to your lawyer. A trust is a legal arrangement under which a person (the trustee) holds money, property or other assets for the benefit of a specified person or people (the beneficiary or beneficiaries). Usually, the original owner of the assets (the settlor) will transfer the assets to the trustee after they have both signed a deed to record the terms of the trust. Of course, a trust may have two or more settlors, several trustees and a number of beneficiaries. It’s possible, and quite common, for one person to be a settlor, as well as being one of the trustees and one of the beneficiaries.
At the heart of a family trust is the relationship between trustees and beneficiaries. There are other types of trust, for example charitable trusts are established not for the benefit of individual people but for charities or charitable purposes.
The other essential element is trust property or assets: a trust arises whenever a trustee holds an asset on trust but without an asset there is no trust.
For more information please contact Tina McLennan