According to the New Zealand Law Society, the numbers of family trusts are picking up from the last couple of years. According to the law society “Trusts are becoming an increasingly popular way of protecting property and managing assets.”
Now, when we say trusts, that can cover a whole lot of things but basically, a trust is a legal arrangement between the grantor (creator of the trust), a trustee (one legally assigned to manage the trust) and the beneficiary or beneficiaries (the one who will benefit from the trust).
Family Trust Beneficiaries must only include family members, relatives or in some cases, close friends. Everyone can be a beneficiary if he or she is related to the grantor by marriage, blood or law.
The purpose of a family trust is to provide financial security and transfer assets (mostly investment) to beneficiaries. To be subjective, it is a legal arrangement that assures all assets of the grantor benefits his or her beneficiaries with his or her death.
There are different classifications for a family trust. One is the living trust, wherein the grantor is still alive. This is also referred to as the inter vivo trust. When the trust was created in the grantor’s last will, this is what we refer to as testamentary trust.
A testamentary trust is an irrevocable trust meaning the grantor can’t any longer revoke or cancel it. From that, we go to the revocable trust. It is the opposite of an irrevocable trust, meaning you can cancel or revoke it.
What can be covered?
Family trusts can cover a lot of assets, mostly financial and property. Let’s say, your father wants to leave his small duplex in Auckland to the eldest child, a trust will take care of that. Let’s say he wants to leave his apartment for rent to the youngest child, a trust will take care of that.
A family trust here in New Zealand is also one way to ensure your family members get financial security or even a business asset when you are gone. For more content, subscribe to our blog.