Family trusts have been a popular part of estate and asset planning in New Zealand for many years. While the reasons for establishing a trust have changed over time, they can still be an effective tool for protecting and managing assets for the benefit of family members and future generations.
However, a trust is not simply a document that can be signed and forgotten. Trustees have important ongoing responsibilities, and it is important to understand both the benefits and obligations before deciding whether a trust is right for you.
What is a Family Trust?
A family trust is a legal arrangement where assets are transferred to trustees to hold and manage for the benefit of beneficiaries. The beneficiaries are often family members, such as a spouse, children, grandchildren or other relatives.
Once assets are transferred into a trust, they are generally owned by the trustees rather than by any individual person. The trustees must manage those assets in accordance with the terms of the trust deed and their legal duties.
Why Have a Family Trust?
Every family’s circumstances are different, but common reasons for establishing a trust include:
- Protecting assets for future generations.
- Assisting with estate and succession planning.
- Providing for children or vulnerable beneficiaries.
- Helping preserve family wealth over the long term.
- Managing assets in a structured and flexible way.
- Protecting assets from certain personal or business risks.
Trusts are also often used where families wish to ensure that assets are distributed according to long-term family objectives rather than passing directly to individuals.
Are Trusts Still Relevant?
Yes, but not everyone needs one.
Changes to trust law and greater reporting requirements mean that trusts now require more active administration than in the past. For some families, a trust remains a valuable planning tool. For others, simpler arrangements such as a well-prepared Will and Enduring Powers of Attorney may be more appropriate.
Obtaining legal advice before establishing a trust is important to ensure the structure will achieve the desired outcomes.
Trustee Responsibilities
Being a trustee carries significant legal responsibilities.
Trustees must:
- Act honestly and in the best interests of the beneficiaries.
- Understand and comply with the trust deed.
- Participate in decisions affecting the trust.
- Keep proper records and trust documentation.
- Manage trust assets prudently.
- Consider the interests of all beneficiaries.
Trustees can be held personally liable if they fail to carry out their duties properly.
Ongoing Administration Requirements
A trust requires ongoing management and record-keeping.
This may include:
- Holding trustee meetings where appropriate.
- Recording important decisions.
- Maintaining financial records.
- Preparing annual accounts where required.
- Managing tax obligations.
- Reviewing trustee appointments and beneficiary circumstances.
- Ensuring trust assets remain correctly owned by the trust.
The Trusts Act 2019 introduced clearer requirements for trustees to maintain records and make certain information available to beneficiaries in appropriate circumstances.
Is It Time to Review Your Trust?
Many trusts were established years ago and may no longer suit the family’s current circumstances. Changes in family situations, business interests, tax rules and trust law can all affect whether a trust continues to serve its original purpose.
A periodic review can help ensure the trust remains effective, compliant and aligned with your family’s goals.
How Mee & Henry Can Help
Mee & Henry can advise on whether a family trust is appropriate for your circumstances, assist with establishing new trusts, review existing trust structures, and provide ongoing guidance to trustees regarding their legal obligations.
If you would like advice about creating, reviewing or administering a family trust, contact our team to discuss the options available to you.
