Do I need a family trust?
Family trusts are generally used in New Zealand for ASSET PROTECTION. There are two parts to consider – do I have any assets that I need to protect?
And who am I protecting those assets from?
If you are at the stage of life where you haven’t yet built up an asset base, then a trust might be a waste of money. If you own a home with a significant mortgage, then you need to think twice about going through the process of transferring the house to a trust. However, if you have recently inherited a large amount of money, sold a business or won lotto, then your asset base may be worth protecting with a trust.
Which brings us to the second question – who am I protecting my assets from? These fall generally into two categories – business and personal claimants.
Firstly, in the business category there are a couple of sub-categories:
- Some professionals take on personal liability for the work that they do. A solicitor or engineer may be personally liable to clients for professional negligence. A director may be liable for any breaches of his or her directors’ duties.
- Secondly, business people are often asked to give personal guarantees for the debts of the company they own – banks and landlords routinely ask for personal guarantees. Some suppliers may also require a personal guarantee.
In the personal category, trusts are often used to protect assets in the following situations:
- When families want to pass assets on to future generations before the death of the person who has created the wealth. Instead of property passing from one generation to the next under a will, the assets are put into a trust whose beneficiaries include Mum, Dad, the children and grandchildren etc. The death of Mum or Dad does not disrupt the ownership of the property.
- When families want to protect assets from the claims of people outside the family – for example new partners of family members who would otherwise have claims under the Property Relationships Act. Or potential claimants under the Family Protection Act.
So, if you have assets to protect and people that you need to protect them from, give us a call to discuss transferring those assets into a family trust.