The concept of a family trust can be confusing to initially comprehend. A Trust is a mechanism for holding assets where property is put into the name of certain people “Trustees” (usually you and an independent person) who hold the property for the benefit of someone else (the beneficiaries, which would usually include you). It is important to understand that although creating a separate asset holding mechanism, the Trust itself will not (unlike a company) have any legal existence separate from the Trustees. The Trustees are, for all intents and purposes, the Trust. The Trustees can only use and deal with the Trust assets for the benefit of the beneficiaries and cannot treat the assets as their own.

In recent years, there has been increases in Trust compliance and administration requirements. The new legislation has been in place since January 2021 which has allowed some development of thinking around the practical implications for Trustees.

These include;

• Mandatory Trustee’s duties which require amongst other things the holding and understanding of all Trust documentation, including any expressions of the settlors wishes, which are now given a real emphasis.
• Unless certain criteria are met a requirement to notify all Beneficiaries (even if considered to be only “back-stops”) of the fact that they are Beneficiaries under your Trust.
• Certain default duties which unless excluded, will by law be deemed to apply. Examples of default duties causing Trustees particular problems include;
• To invest prudently, which definition would usually exclude tying up most of the trusts wealth in the family home.
• Not to exercise Trustees power for own benefit­, which makes it difficult for a trustee who is also a Beneficiary to allow him or her self rights of occupation of the family home now held in trust.
• To act impartially between all Beneficiaries, no matter whether or not some were only included in the first place to give the Trustees some flexibility and as a fall back position to operate only if everybody else originally intended to take was dead!

A failure to comply with the above puts a Trustee at risk of being sued PERSONALLY by a disgruntled Beneficiary.

There is an increased compliance cost to operating a Trust as there is a requirement for annual meetings and accounts. The cost to set up a Trust depends entirely on your situation, however, we can review your situation and provide a proposal with costs to set it up. 

Yes they do. Trusts are currently taxed at 39%. You can distribute the Trust Fund to beneficiaries who are subsequently on lower tax rates. Beneficiaries are also able to have their own allocation of the Trust Fund, it is important that the beneficiary is aware of this and that any current account incurred by them is exhausted. Dependent beneficiaries are also entitled to $1000 tax free income each year. The allocation of Trust funds are best to be left to sort by your accountant. The reason for establishing a Trust has to be for a legitimate commercial reason (i.e. tax efficiency is not, however, restructuring, preventing property relationship can be).

Trusts are currently taxed at 39%

There is no register in New Zealand for Family Trusts. If you are a beneficiary under a Trust, the trustees have an obligation to notify you that you are a beneficiary. You may be able to identify the trustees when you search on the land registry for a particular property, however, you will still need to obtain confirmation from the trustees.