Once your trust has been established it is very important that it is administered properly. Your trust achieves its objectives by separating ownership of your family’s assets from you personally. If the trust is not administered properly to make this separation of ownership clear then the trust could be challenged as a sham. Such a challenge could be made by a business creditor, relationship partner, the IRD or Work and Income New Zealand. If such a challenge is successful then the trust assets could be treated as your own personal assets and the benefits available through the trust structure will be lost.
Articles tagged with: Trust
Establishing a family trust is a decision that can have a significant impact on the benefits you and your family can receive from your family assets.
It is therefore very important that the trust is established in such a way that it will meet the needs of you and your family. For this reason, trusts should not be established thoughtlessly using standardised documents. There are a number of particularly important decisions which you need to make in establishing a family trust. Your Lawlink lawyer is trained to identify and discuss these issues with you and to ensure that the family trust you establish will meet your particular needs.
There are six major things you need to think about before setting up a family trust.
What is a family trust?
A trust exists whenever one person, a settlor, gives property to another person, a trustee, to hold for the benefit of a third person, a beneficiary. A family trust is therefore a relationship amongst:
- The settlor, who creates the trust and decides what goes into the trust deed; and
- The trustees, who hold title to the trust assets in their own names and deal with them as instructed in the trust deed; and
- The beneficiaries, who receive the benefits from the trust. They may include:
- discretionary beneficiaries, who may receive a benefit from the trust at the discretion of the trustees;
- final beneficiaries, who are entitled to whatever funds are still left in the trust when it is wound up; and
- primary beneficiaries, who are discretionary beneficiaries given some sort of priority ahead of the other beneficiaries.