What is a Family Trust?

A family trust is a legal structure where a person or people (the trustees) hold and manage assets for the benefit of family members (the beneficiaries). The trust owns the assets, not the individual family members, which provides significant legal and financial advantages.

Key Benefits

Asset Protection

Family trusts protect your assets from:

  • Business creditors
  • Relationship property claims
  • Professional liability
  • Aged care means testing

Succession Planning

Ensure smooth transfer of wealth to future generations without probate delays or disputes.

Tax Planning

Strategic income distribution among family members within IRD guidelines.

Privacy

Trust ownership keeps your assets private, unlike personal ownership which is public record.

How Family Trusts Work

The typical structure involves:

  1. Settlor - The person who establishes the trust (usually with a small initial gift)
  2. Trustees - The people who manage the trust (often family members and/or professional trustees)
  3. Beneficiaries - Family members who can benefit from the trust
  4. Trust Property - The assets held by the trust

Who Should Consider a Family Trust?

You should consider a family trust if you:

  • Own your home (fully or partially)
  • Have total assets over $500,000
  • Own a business
  • Are in a profession with liability risks
  • Want to protect assets from relationship property claims
  • Have children from different relationships
  • Are planning for retirement and aged care

Costs

Setup: $2,500 - $5,000 depending on complexity Annual Administration: $800 - $1,500 per year

Trusts Act 2019 Compliance

All family trusts must comply with the Trusts Act 2019, which requires:

  • Proper trustee appointments and removals
  • Clear trust deeds
  • Adequate record-keeping
  • Beneficiary information rights
  • Annual trustee obligations

Recent Updates (2025)

The Trusts Act 2019 modernized trust law in New Zealand. All family trusts established before 2021 should be reviewed for compliance with the new requirements.

Common Mistakes to Avoid

  1. Not updating the trust deed - Older trusts may not comply with current legislation
  2. Poor record-keeping - Can lead to beneficiary disputes and IRD issues
  3. Gifting too quickly - May trigger relationship property claims
  4. Mixing personal and trust assets - Undermines asset protection
  5. Not reviewing beneficiary provisions - Circumstances change over time

Alternatives to Consider

Before setting up a family trust, consider:

  • Will only - Simpler and cheaper for straightforward estates
  • Company structure - Better for active trading businesses
  • Life insurance - For specific beneficiary protection
  • Relationship property agreement - For partner asset protection

Next Steps

  1. Assessment - Evaluate if a trust suits your situation
  2. Professional advice - Consult with a specialist lawyer
  3. Trust deed preparation - Tailored to your family’s needs
  4. Asset transfer - Move property into the trust
  5. Ongoing administration - Annual meetings and record-keeping

Getting Started

Setting up a family trust requires careful planning and legal expertise. Contact us for a free consultation to discuss whether a family trust is right for your situation. We’ll connect you with qualified professionals who can guide you through the process.