Family Trusts

Aug. 12, 2020

The family trust remains a popular vehicle for asset protection and estate planning in New Zealand. A trust is simply a relationship between people, created when assets are placed by a settlor under the control of trustees for the use and enjoyment of the beneficiaries.


The settlor/s of a family trust are also often trustees and primary beneficiaries. Children and grandchildren are often listed as discretionary beneficiaries.   Trust creation is often part of wider estate planning including drafting new wills for the settlor/s. The trust should take into account the settlor's intentions for the future, which may be recorded in a memorandum of wishes, however such memorandum is not binding on the trustees.


Trustees must act in accordance with the Trust Deed, subject to general obligations to maintain the trust property, to act in the best interests of the beneficiaries and other obligations arising under common law, the Trustee Act 1956 and the Trusts Act 2019.




Benefits of a trust include:

  1. Protection against relationship property claims. If personal assets are in an appropriately drafted trust prior to a relationship beginning, those assets are less likely to be subject to a successful relationship property claim. 

  2. Protection from creditors. People in higher risk professions or who own their own businesses may wish to keep assets such as a family home in a trust to protect themselves and their families in the unfortunate event that the business fails. 

  3. Managing assets for family members who are unable to do so themselves. 

  4. Protection against claims against an estate. Estate planning through a trust can assist to ensure the framework for managing your estate is set up well before the time comes and ensure the property is maintained in accordance with your wishes. 



A word of caution


Despite remaining a popular vehicle for asset protection and estate planning, trusts are not necessarily appropriate for everyone and may be subject to challenge, particularly in the relationship property area. The law in this area is constantly evolving. 


In relationship property claims, the courts may apply "trust busting" powers where: disposition of an asset to a trust had the effect or was made with the intention of defeating a partners' interest in that asset; in the case of a 'nuptial trust', which is a trust settled with sufficient connection to the marriage or civil union; or where trust powers given to one party are so broad that the powers themselves may be considered relationship property.


Changing trust law will also result in trusts becoming more expensive and time consuming to run. The Trusts Act 2019, which came into force on 31 January 2021, will make significant changes to New Zealand trust law and place more onerous burdens on trustees. These increased obligations will necessarily result in higher ongoing costs to maintain a family trust. 


Among other changes, the Trusts Act imposes a presumption that trustees will provide basic trust information to all beneficiaries, and further trust information to beneficiaries who request it. While there are exceptions to this, provision of such information may not be desirable.


Furthermore, trusts are not a fool-proof method for asset protection. For example, a Court may set aside a disposition to a trust where that disposition was made to defeat a claim by a creditor or if an asset was gifted to a trust within the prescribed period.




A family trust may be an excellent way to protect assets and/or preserve them for the next generation. They should be seen as an overall part of estate and asset planning and allowance should be made in your Will. 

If you are considering creating a family trust or would like advice on any matter in respect of your trust, contact our experienced team at for expert advice. David is a Fellow and Registered member of the NZ Trustee Association.



Nina Becker

Staff Solicitor



Disclaimer: The information contained in this article is general in nature and not tailored to your personal circumstances. It is only current as at the date posted and should not be relied upon as legal advice. If you require legal advice, please contact us for further assistance.