Setting Up a Family Trust in New Zealand

Establishing a trust properly is essential for asset protection and long-term success. A poorly drafted trust is worse than none.

Understanding the process, costs, and requirements upfront ensures your trust achieves its purpose and complies with the Trusts Act 2019.

Steps to Set Up a Trust

1. Define Purpose

Be clear about why you need a trust:

  • Asset protection from business risks
  • Relationship property protection
  • Succession planning
  • Supporting vulnerable beneficiaries
  • Estate planning

Your purpose shapes the trust structure and provisions.

2. Choose Trustees

Select people who will:

  • Manage trust assets responsibly
  • Make decisions in beneficiaries’ interests
  • Understand trustee duties under the Trusts Act 2019
  • Keep proper records
  • Have time and commitment

Options:

  • Family members
  • Professional trustees
  • Corporate trustees (company as trustee)
  • Mix of family and professional

Best practice: At least 2-3 trustees, including one independent trustee.

3. Draft Trust Deed

The trust deed is the foundation document that sets out:

Essential clauses:

  • Trust name and date
  • Settlor details
  • Trustee appointments and powers
  • Beneficiaries (discretionary or fixed)
  • Distribution provisions
  • Investment powers
  • Amendment procedures
  • Vesting date (up to 125 years)

Trusts Act 2019 compliance:

  • Mandatory trustee duties
  • Beneficiary disclosure requirements
  • Record-keeping obligations
  • Trustee liability provisions

Critical: Use an experienced trust lawyer. DIY or template trusts often fail.

4. Transfer Assets

Assets move to the trust through:

Sale:

  • Trust “purchases” assets from you
  • Creates debt back to you
  • Usually not used for family trusts

Gift:

  • Most common method
  • Assets gifted over time
  • $27,000 per year per person is common
  • Debt recorded and progressively forgiven

What to transfer:

  • Family home
  • Investment properties
  • Cash and savings
  • Shares and investments
  • Business interests (carefully)

What NOT to transfer:

  • Mortgaged property (need bank approval)
  • Assets you’ll personally use regularly
  • Business assets subject to trading

5. Create Gifting Programme

When assets exceed gift amount:

Process:

  1. Asset valued
  2. Gift amount decided (e.g., $27,000/year)
  3. Balance recorded as debt to settlors
  4. Annual gifting resolutions prepared
  5. Debt progressively forgiven

Timeline:

  • $500k home = 18-19 years of gifting
  • Can accelerate with multiple gifters

Important: Document every gift with trustee minutes.

6. Register with IRD

All trusts need:

  • IRD number
  • Annual IR6 tax return
  • Proper accounting records

Registration:

  • Apply online or via accountant
  • Provide trust deed copy
  • Receive IRD number within days

7. Set Up Trust Bank Account

Open account in trust’s name:

  • Trust deed required
  • Trustee identification
  • IRD number
  • Keep completely separate from personal accounts

8. Maintain Annual Records

Required annually:

  • Trustee meetings and minutes
  • Financial statements
  • Distribution resolutions
  • Gifting resolutions (if applicable)
  • Beneficiary communications
  • Investment decisions

Record retention:

  • Keep all records for trust’s life
  • Physical or secure digital storage
  • Accessible for trustee reference

What You Need to Provide

Asset List

Document everything you want to protect:

  • Property addresses and values
  • Bank account details
  • Investment portfolios
  • Shares and securities
  • Business interests
  • Vehicles
  • Other significant assets

Beneficiary List

Identify who benefits:

  • Spouse/partner
  • Children (including step-children if appropriate)
  • Grandchildren
  • Other family members
  • Organizations (for charitable purposes)

Be specific with:

  • Full legal names
  • Dates of birth
  • Relationship to you

Trustee Details

For each trustee:

  • Full legal name
  • Address
  • Date of birth
  • Relationship to you
  • Occupation
  • Contact details

Purpose Statement

Clear explanation of:

  • Why you’re establishing the trust
  • What you want to achieve
  • How long you expect it to operate
  • Specific goals or restrictions

Relationship Status

Important for timing and structure:

  • Married
  • De facto
  • Single
  • Divorced/separated
  • Widowed

Why it matters: Affects relationship property protection timing.

Gifting Considerations

Discuss:

  • How much you can gift annually
  • Who can participate in gifting
  • Timeline for full transfer
  • Impact on personal finances

Costs

Setup Costs

Simple family trust: $2,500 – $3,500

  • Standard trust deed
  • Basic asset list
  • 2-3 trustees
  • Family beneficiaries

Complex trust: $4,000 – $6,000+

  • Multiple trusts
  • Business assets
  • Corporate trustee setup
  • Complex beneficiary structures
  • Special provisions

Corporate trustee company: +$500 – $1,500

Additional costs:

  • Property transfer fees: $200 – $500
  • Land registry fees: $200+
  • Valuation: $500 – $1,500 (if required)

Annual Maintenance

Basic compliance: $500 – $800

  • Trustee minutes
  • Basic resolutions
  • Simple record-keeping

Full service: $1,200 – $2,500+

  • Complete financial statements
  • Tax returns
  • Trustee meeting facilitation
  • Distribution planning
  • Compliance monitoring

Professional trustee fees: $2,000 – $5,000+ per year

Optional Ongoing

  • Annual trust review: $500 – $1,000
  • Gifting resolutions: Included or $200 – $400
  • Beneficiary communications: Included or time-charged
  • Trust modifications: $750 – $2,500 each

Common Setup Mistakes to Avoid

1. Using Template Trusts

Generic templates don’t account for:

  • Your specific circumstances
  • Trusts Act 2019 requirements
  • Potential challenges
  • Tax implications

Result: Trust may be invalid or ineffective.

2. Poor Trustee Selection

Choosing trustees who:

  • Don’t understand duties
  • Have conflicts of interest
  • Won’t keep records
  • Make decisions for their benefit

Result: Trust fails or is challenged.

3. No Gifting Programme

Transferring assets without proper gifting:

  • Creates immediate tax liability
  • May be fraudulent transfer
  • Could be relationship property

Result: Transfer may be void.

4. Mixing Personal and Trust

Using trust assets for personal benefit:

  • Living in trust home without proper arrangement
  • Using trust funds personally
  • Not keeping accounts separate

Result: Sham trust, no protection.

5. Poor Documentation

Not keeping records of:

  • Trustee decisions
  • Asset transfers
  • Distributions
  • Meetings

Result: Cannot prove trust legitimacy.

6. Wrong Timing

Setting up trust:

  • After relationship problems (relationship property)
  • After business trouble (fraudulent transfer)
  • When insolvent (voidable transaction)

Result: Trust can be set aside.

7. Ignoring Spouse

Not involving spouse in:

  • Trust decisions
  • Trustee appointments
  • Asset transfers

Result: Relationship property issues.

Trust Setup Checklist

Before Meeting Lawyer:

  • ☐ Define clear purpose
  • ☐ List all assets with values
  • ☐ Identify proposed trustees
  • ☐ List all beneficiaries
  • ☐ Understand relationship property status
  • ☐ Know your budget
  • ☐ Gather financial documents

During Setup:

  • ☐ Draft trust deed
  • ☐ Review and sign deed
  • ☐ Appoint initial trustees
  • ☐ Open trust bank account
  • ☐ Apply for IRD number
  • ☐ Value assets for transfer
  • ☐ Prepare gifting programme
  • ☐ Complete first trustee meeting

After Establishment:

  • ☐ Transfer assets progressively
  • ☐ Maintain annual minutes
  • ☐ File annual tax returns
  • ☐ Keep beneficiaries informed
  • ☐ Review annually
  • ☐ Update for life changes

When Professional Help Is Essential

Always use a lawyer for:

  • Drafting the trust deed
  • Complex assets or beneficiaries
  • Business interests
  • International assets
  • Significant wealth

Consider an accountant for:

  • Tax implications
  • Financial structuring
  • Gifting strategies
  • Annual compliance

Professional trustee recommended for:

  • High-value estates
  • Complex families
  • Business trusts
  • Long-term trusts

FAQs — Trust Setup

How long does it take to set up a trust?

2-4 weeks typically:

  • Week 1: Consultation and information gathering
  • Week 2: Deed drafting and review
  • Week 3: Signing and bank setup
  • Week 4: First meeting and asset transfer planning

Do I need independent trustees?

Not legally required but recommended. Independent trustees:

  • Demonstrate genuine trust
  • Provide objective decisions
  • Strengthen protection

Can I be a trustee myself?

Yes, most settlors are also trustees. But:

  • Must have at least one other trustee
  • Must act in beneficiaries’ interests
  • Can’t treat assets as your own

What assets should go into the trust?

Generally:

  • Family home (most important)
  • Investment properties
  • Significant savings
  • Shares and investments

Don’t transfer:

  • Assets subject to active trading
  • Assets you’ll personally use daily (cars)
  • Assets with restrictions

Can I transfer my home later?

Yes, but:

  • Sooner is better for protection
  • Need bank approval if mortgaged
  • Use gifting programme for valuable assets
  • Document properly

What if I don’t have many assets yet?

Still worthwhile to establish trust:

  • Protection in place before acquiring assets
  • Easier to add assets later
  • Lower setup costs when simple
  • Forward planning

Do I need a corporate trustee?

Benefits include:

  • Limited liability protection
  • Continuity
  • Professional appearance

But adds:

  • $500-$1,500 setup cost
  • $500+ annual compliance

Recommended for:

  • Business trusts
  • High-risk situations
  • Professional advice

Can I change trustees later?

Yes, trust deeds include:

  • Trustee appointment procedures
  • Trustee removal procedures
  • Successor trustee provisions

Document all changes properly.

What happens if a trustee dies?

Remaining trustees continue:

  • Trust doesn’t end
  • Appoint replacement trustee
  • Update IRD and bank
  • Continue normal operations

How much does it cost annually?

Typical range: $500 – $2,500/year

  • Basic compliance: $500-$800
  • Full service: $1,200-$2,000
  • Professional trustee: +$2,000-$5,000

Can I set up a trust myself?

Not recommended. Risks include:

  • Invalid trust deed
  • Missing Trusts Act requirements
  • Poor asset protection
  • Tax problems
  • Easy to challenge

Lawyer fees are insurance against failure.

Should I transfer everything at once?

No. Use progressive gifting:

  • Annual gift amounts
  • Debt forgiveness over time
  • Maintains financial flexibility
  • Tax efficient
  • Easier to manage