Rainey Collins Lawyers

The Main Purposes Of Family Trusts

By Alan Knowsley, Thursday, 29 March, 2007, Trusts

Trusts are for the protection of assets. Money, property and investments belonging to a Trust are held separately from those for whom the Trust has been established (the beneficiaries).  Here are some examples of the kinds of protection available.

• Creditors.  If you are a sole trader or a professional without limited liability, your home and other significant assets, if placed in Trust, cannot be claimed by creditors or by anyone claiming damages from you for negligence or a mistake made by you.
• Relationship breakdowns.  Trust assets are not “relationship property” available for equal division between spouses or de facto partners if they separate.  While there can be exceptions to this, a Trust is still a very powerful tool for protecting property from the consequences of a relationship breakdown.
• Protecting children.  Assets that you place into a Trust for children are absolutely protected from claims by a child’s partner, de facto or married.  As well, a Trust can protect spendthrift children from themselves by preventing them from getting their hands onto capital that they might waste.
• Special needs children.  A Trust is probably the best way to protect funds set aside for the support of a special needs child.
• Challenges to a Will.  Assets put into a Trust where the value has been fully disposed of by a gifting regime are no longer the personal property of the testator of a Will.  As a result, these assets are as a rule protected both from family protection claims and from changes to the testator’s wishes being implemented after their death.
• Rest home care.  If assets have been held in a Trust for a sufficient time they are unlikely to have to be used for rest home care so remain available for the family.

As well as the above, Trusts can sometimes be useful for reducing income tax.  However, a Trust set up solely for the purpose of avoiding tax can be treated as invalid by the Inland Revenue Department.

If you think you might need the protection offered by a Trust, or wish to investigate establishing one, you should talk to a lawyer who is experienced in trust law.

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