Trusts are set up to protect your assets and provide for succession planning for future generations. They are created by a settlor, who transfers the ownership of the property or asset to the trustees, who legally hold onto it on behalf of the beneficiaries. The beneficiaries are the ones that will benefit from the trust and can also include the settlor. In New Zealand, there are several types of trusts you can set up to protect your asset and properties. Hayman Lawyers explain the four most common types of trusts across the country and how you might benefit from them.

Family trust

Family trusts are most commonly set up by parents, who jointly own property and assets that they would like to protect for the benefit of the next generation. These can include a family home, investment, land or other assets such as jewellery and vehicles. The beneficiaries can include children, grandchildren, parents, other family members and trusts and the settlors themselves. A family trust ensures that if the settlor passes away, the beneficiaries get income and capital benefits while also avoiding a complicated legal process. A family trust protects assets from potential relationship property claims or someone contesting the will. It ensures that your family won’t be put through a challenging legal process after a member has passed away. They are also a great way to manage the assets of someone who isn’t able to do it themselves anymore due to health reasons. Family trusts support tax efficiency for the beneficiaries and are a straightforward process of controlling the assets and property until the beneficiaries are at the age they need them.

Inheritance trust

An inheritance trust is set up by parents who would like to protect their children’s inheritance. Unlike in a family trust, where children often only benefit after their parents have passed away, an inheritance trust offers benefits to beneficiaries while the settlors are still alive. It can be a great idea to set up this kind of trust if your children are inheriting significant assets and to protect them from future relationships, business partners and creditors. Inheritance can often become mingled into relationship property, which might mean that your children’s assets aren’t protected in the best way possible. This might mean that part of your inheritance will be transferred to your partner if the relationship ends. An inheritance trust prevents this from happening and ensures children, as beneficiaries are the only ones that benefit from the process.

Business trust

Business trusts are often established for efficient tax planning and to avoid any business succession issues. They ensure that your private and business assets are kept separately and prevent creditors from accessing your personal funds if the business fails. The business assets alone will be vulnerable to the claim if an issue arises and ensures that your family property and assets are inaccessible by the creditors. They also ensure thorough business planning if an owner passes away or becomes incapable of dealing with the aspects of the business. This enables the succession of the business to go to plan even when a disaster occurs and that the assets will be protected from others. A major benefit is the reduction of taxes, as beneficiaries (which is often a family trust) are usually taxed at a lower rate than a principal business operator.

Charitable trust

A charitable trust is designed for a charitable purpose, whether it’s for poverty, advancing education, religion or any other philanthropic causes. As a donor with a charitable trust, you can provide long-lasting benefits to a specific cause even after you pass away. Registering a trust with the Charities Commission can also provide you with tax benefits. Having a trust can be very beneficial for you, whether it’s for family, business or charity purposes. The friendly Hayman Lawyers team can support you in setting up a trust and managing it so that your benefits are continuously protected. Our professional lawyers can give specialist advice and answer any questions you might have about the process. Get in touch with us before setting up a trust to ensure that everything goes the way you wish!