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Summary of Trusts

A trust can be an efficient vehicle that can provide asset protection, allow for succession planning, and may provide incidental tax savings. Profits are taxed at 33% compared to the top marginal tax rate of 39% for individuals with income over $180k. This article looks at a brief overview of the nature of trusts and trustees.

A trust is an arrangement where a person (the Settlor) settles on a person or persons they trust (the trustees) property for the benefit of others (the beneficiaries) on terms recorded by the deed (the trust deed).

A trust is primarily designed to protect assets to the benefit of the Settlor and members of the Settlor's family, including beyond the lifetime of the Settlor. A trust's assets can also be used to benefit philanthropic and charitable purposes important to the Settlor.

A discretionary trust is one that does not define the specific interests of the beneficiaries and provides flexibility on the timing and nature of distributions amongst two beneficiaries. Beneficiaries have no automatic entitlement to receive or to be provided (either regulatory or at a beneficiary's request) trust assets. The trustees have discretion to distribute income or capital assets to beneficiaries as they see fit, at any time, as well as on final termination of the trust.

Any type of real or personal property can be the subject matter of a trust.

It is prudent that the Settlor's succession wills, general and enduring powers of eternity of attorney and Memorandum of Wishes are put in place concurrently to support the ongoing management of the trust. A Memorandum of Wises provides guidance to the trustees of the trust regarding intentions and objectives for the trust as the trust continues to operate past the settlor(s) lifetime.

The following powers (known as reserved rights) are automatically reserved to the Settlor (s) when settling a trust, allowing ongoing oversight over the governance of a trust;

  1. the ability to appoint and remove trustees; and
  2. the ability to appoint and remove beneficiaries.

These powers may be assigned by deed to another person. 


Trustees are recorded as the registered legal owner of the trust property but hold that property for the benefit of the beneficiaries. Generally, when looking at a trust property such as the title of real estate, you will see the trustee's name on the title (not the Settlor, the beneficiaries, or the trust itself).

Trustees in New Zealand have traditionally been natural persons who are primarily liable for any debts or claims against the trust. This is usually the Settlor along with an independent person such as an accountant or lawyer.

A private corporate trustee company may can provide benefits compared to a natural person as the trustees. This is because they:

  1. simplify the day-to-day administration of the trust,
  2. acts to mitigate cost over the lifetime of the trust; this is because directors of the company can retire without giving rise to costs associated with the transfer of trust property. For example, if a director of the corporate trustee company changes, the title of the property is still owned by the corporate trustee company and the title of the property doesn’t need to be redocumented (only the resignation of the director and appointment of new director), and,
  3. it limits the exposure of natural persons to liability as they are no longer acting personally (a company has limited liability)

A private corporate trustee is particularly attractive to the person acting as the independent trustee, and it's a commonly accepted arrangement internationally.

When settling a trust, we recommend working closely with us and your solicitor to ensure that it meets your specific needs. 

Contact Us

Contact Tim Doyle or Jane Evans today to discuss your business continuity planning needs  (or any other matter) on 07 823 4980 or email us. Our office is in Cambridge, NZ, but distance is no problem. We have many international and national clients.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.