The home and other assets of some individuals are inherited. However if the individual is married and later divorced, the partner may stake a claim to the inherited asset. In other cases, a person may have plenty of money initially, yet due to legal claims or business problems the person may not have money a decade later for basic requirements like children’s education. Hence to protect the assets of the individual or family, increasingly families in New Zealand are contacting a reputed qualified family lawyer for setting up a trust which will their estate and protect it from claims against the family members.
Often the details of assets of wealthy individuals do not remain confidential and are leaked, resulting in fake cases or claims against the individual mainly to extort money. Hence many wealthy individuals are setting up a trust to which they are transferring their assets, so that they do not lose their assets in case of legal claims, debt, divorce or other reasons. The trust can also ensure that family home remains in the family, a former partner of a family member does not claim the home or inherited asset. Additionally the trust may also financially support the children or grandchildren, paying for their expenses, even if their parents are unable to do so.
The person or persons setting up the trust is called the settlor while the persons benefiting from the trust are called the beneficiaries. The trust is managed by the trustees who take decisions regarding who will use the assets of the trust like the homes or other property, how the assets especially funds will be invested or utilised. The settlor or settlors may be the trustees. It is advisable to appoint professionals like lawyers, accountants as trustees, so that they manage the trust properly, and take the right decisions so that the assets of the trust increase in value while helping the beneficiaries
Each family, its assets and requirements will differ, so every trust in unique. The family lawyer will understand the requirements of the settlors to finalise the trust deed, considering the relevant laws in New Zealand. In the trust deed the settlor will nominate the trustees and specify the beneficiaries. He will also define who has the power to appoint or remove trustees for the trust. Since trustee appointment/removal is an important power for the trust, the settlor should also define who will get the power after he dies. The trust does not end with the settlor’s death, it can continue for 80 years after the death and can be extended for longer if required.
How trusts function
First the family lawyer will make a trust deed considering the settlor’s requirements and get it registered, complete the legal formalities. Then the settlor will transfer the assets he wishes to protect to the trust. In addition to the family home, artwork, shares, bank deposits and cash may also be transferred to the trust. Often the trust does not have the funds to purchase the assets, so the settlor can gift his assets to the trust. It is not advisable to gift homes purchased by taking a loan, since the settlor would become insolvent.