Key Takeaway: Setting up a trust can offer powerful protection and planning benefits — but only when it's the right fit for your circumstances. Professional advice is essential to ensure the trust is structured and operated correctly.
A trust is a legal structure where a trustee holds and manages assets on behalf of beneficiaries, according to the rules set out in a trust deed. Trusts are commonly used for asset protection, estate planning, and managing family wealth.
- Settlor – The person who creates the trust and transfers assets into it.
- Trustee(s) – The individuals or companies responsible for managing the trust in the best interests of the beneficiaries.
- Beneficiaries – The individuals or entities who will benefit from the trust assets.
- Appointor/Protector (optional) – A person who may have powers to appoint or remove trustees.
- Asset Protection: To separate personal and business assets, and to safeguard against legal claims or relationship property disputes.
- Succession Planning: To control how wealth is distributed to family members or others over time.
- Tax Efficiency: In some cases, to spread income among beneficiaries for tax advantages. - Means Testing: Trusts may assist in limiting exposure to asset-tested benefits or subsidies, though caution and proper advice are needed.
- Continuity: Trusts can continue after death, unlike individual ownership.
- You have minimal assets and no need for complex estate planning. Generally the assets you want to protect would need to have a value of or above $400,000, otherwise the costs of administering a trust would outweigh the benefits of having the trust. There are some certain circumstances where a trust protecting assets under this value could still be of value. For example, you may want the Trust to ensure an asset is used for a family member who has special needs.
- You want simple, direct control over your assets.
- You’re unwilling or unable to manage ongoing trustee duties and compliance requirements.
- The cost of establishing and maintaining the trust outweighs the benefits.
- Trustees must act prudently and in accordance with the Trusts Act 2019.
- Keep proper records, including financial statements.
- Meet at least annually and document decisions.
- File annual tax returns if the trust earns income.
- Manage beneficiary distributions and keep them informed as required.
- Residential or commercial property.
- Cash and investments.
- Shares in companies.
- Business interests.
- Family heirlooms or personal items of value.
- Setup: Legal and advisory fees (typically $1,500–$3,000+ depending on complexity)
- Annual administration: Trustee services, compliance, and accounting (can range from $500–$2,000+ per year)
There may be other costs associated with the setting up and running of a Trust, for a full break down please email info@abelarmstrong.co.nz
Yes, but indirectly. As a settlor, you can have influence, especially if you are also a trustee. However, legal ownership transfers to the trustees. If you retain too much control, the trust could be considered a “sham” and set aside by courts.
- A will: Ensures assets are distributed upon death but doesn’t protect during your lifetime.
- Joint ownership: Useful for simple succession but may not be suitable for asset protection.
- Company structure: May help in business asset protection, but not personal estate planning.
The Trusts Act introduced stricter trustee obligations, required better record-keeping, and gave beneficiaries more access to information. It has made trust governance more transparent and accountable.