To Trust or Not to Trust

29 Jun 2017
Author: Hayley Willers

The need to protect family assets is not a recent phenomenon. For hundreds of years, people have wanted to safeguard their family’s assets by sheltering them in a trust. Whether you are a family or a business or a group of people that own assets that have a risk component, a trust is often a good idea. Assets can be put at risk in many ways; you don’t know what the future holds and how it may affect your assets. We live in a volatile environment and taking measures to secure your assets in the form of a trust is a great solution.

What is a Trust?

A trust is the legal structure created when a person (the settlor) places assets under the control of another person or persons (the trustee/s) for the benefit of beneficiaries or for a particular purpose. Essentially, the settlor will create the trust, the trustees can legally own/hold the property and the beneficiaries are the people who benefit from the trust. It is common for trusts to have an independent trustee such as a lawyer or an accountant to avoid the suggestion that the settlor continues to have control of the assets.

Why Trusts are Useful

  • Protection from creditors: If you are a professional person or business owner that has professional and/or personal liability, creditors may have access to your personal Protecting your family and yourself from the stripping of these assets by creditors can be done through a trust. By transferring your assets to a trust they are no longer personal assets. The only catch with this is that any gifts to the trust made within two years of bankruptcy can be challenged by creditors as this could be seen as gifting for the purpose of defeating creditors. Therefore it is best to gift the assets to the trust before the creditors come knocking.
  • Claims by family members or others: Transferring your assets into a trust reduces the ability for people to make a claim against your personal Under the Family Protection Act, certain family members can make a claim against your Estate if they feel they have not been adequately provided for. If your assets are held in a trust they do not have the same rights to make a claim against such assets.

  • Matrimonial/Relationship property: In most cases trust assets are not regarded as “relationship property” in a marriage or de facto situation and are therefore not subject to equal sharing upon separation. For trust protection to work it is important for assets to be held in the trust prior to the commencement of the relationship. We also recommend an agreement contracting out of the Property (Relationships) Act 1976 also be considered.
  • Estate duty: Estate duty is something which should be considered when deciding to set up a trust as it taxes the value of assets of a deceased person, especially considering that the last form of estate duty imposed in New Zealand was 40 percent of the estate. Although New Zealand is said to be one of the only countries in the West who does not have an estate duty, there is no reason why it couldn’t be introduced in the future.

Legal Advice

Trusts have become an increasingly popular way of structuring one’s affairs so it is very important that all people involved in the trust understand the legal relationships and obligations involved. A trust may or may not suit your specific family circumstances, nor does one size fit all. However, a trust structure ring fencing your assets to safeguard your family’s wealth may be your best solution.

To discuss trusts in further detail and for professional legal advice in relation to trusts, please contact Hayley Willers, DTI Lawyers.

(Article first published in the Raglan Chronicle, July 2017)

To Trust or Not to Trust
About the Author
Hayley Willers
Hayley Willers is a Managing Director at DTI Lawyers. She is a highly experienced property and commercial lawyer who deals with a wide range of commercial and private property matters including Property Development and Relationship Property. You can contact Hayley at