{"id":202682,"date":"2021-02-23T14:21:34","date_gmt":"2021-02-23T01:21:34","guid":{"rendered":"https:\/\/legalvision.co.nz\/?p=202682"},"modified":"2023-01-16T20:19:01","modified_gmt":"2023-01-16T07:19:01","slug":"3-reasons-to-set-up-a-trust","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/business-structures\/3-reasons-to-set-up-a-trust\/","title":{"rendered":"Three Reasons to Set Up a Trust in NZ"},"content":{"rendered":"<p><span style=\"font-weight: 400\">Trusts can offer a range of benefits and flexibility for your family or business. They can be particularly relevant if you have assets you want to protect. You also may wish to distribute your assets to other people or family members. This article sets out three reasons you might set up trust, such as:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">where you have shares and other property to protect;<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">to take advantage of possible tax efficiencies; and<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">securing income for your family into the future.&nbsp;<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400\">1. Protecting Your Shares and Other Property<\/span><\/h2>\n<p><span style=\"font-weight: 400\">One of the most common reason to <\/span><a href=\"https:\/\/legalvision.co.nz\/business-structures\/discretionary-trust\/\"><span style=\"font-weight: 400\">set up a trust<\/span><\/a><span style=\"font-weight: 400\"> is to protect your assets from creditors and relationship property claims. Assets can include shares in a company and other personal property, like real estate. After you set up a trust with your assets designated as the trust\u2019s assets, you are no longer the legal owner of those assets. Instead, your chosen trustees gain control of those assets and hold them on behalf of the <\/span><a href=\"https:\/\/legalvision.co.nz\/business-structures\/key-legal-terms-about-trusts-in-nz\/\"><span style=\"font-weight: 400\">beneficiaries<\/span><\/a><span style=\"font-weight: 400\">.&nbsp;<\/span><\/p>\n<p><span style=\"font-weight: 400\">Those shares and other assets, now trust assets, are usually out of reach of creditors. This is beneficial if your business (or yourself) gets into financial difficulty or declares bankruptcy. For this reason, it is common for founders to hold shares in their family trust rather than their personal name. Legally and practically, there is a separation between your personal assets and any assets the trust holds. Therefore, trust assets are usually better protected against creditors and cannot be drawn from to pay back personal debt.<\/span><\/p>\n<h2><span style=\"font-weight: 400\">2. Possible Tax Efficiencies&nbsp;<\/span><\/h2>\n<p><span style=\"font-weight: 400\">There are also possible tax efficiencies from having a trust, depending on your personal and family situation. Many businesspeople find trusts useful for tax planning. For example, distributing income among the trust\u2019s beneficiaries on lower marginal tax rates can reduce the effective tax rate on a trust. This reduces the tax rate compared to taxing the entire amount through an individual with the highest marginal tax rate.&nbsp;<\/span><\/p>\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-weight: 400\">When considering a trust to explore tax efficiencies, it is a good idea to seek specialised legal and financial advice. The benefits of setting up a trust will differ depending on your individual circumstances.<\/span><\/p>\n<\/div>\n\n<a href=\"#content-next\"\n   class=\"block p-4 mt-10 text-xl font-bold text-center text-white no-underline bg-gray-800 rounded-t-xl\">\n    Continue reading this article below the form\n    <i class=\"text-xl fa-regular fa-arrow-down\"><\/i>\n<\/a>\n<div class=\"px-6 pt-10 pb-12 mb-10 text-center bg-gray-100 rounded-b-xl sm:px-12 test\">\n    <div class=\"mb-8 text-2xl font-bold text-orange\">\n        Need legal advice?\n        <br>\n        <span class=\"text-lg not-prose\">\n                            Call <a href=\"tel:+64800005570\" class=\"not-prose\">0800 005 570<\/a> for urgent assistance.\n                <br>\n                Otherwise, complete this form, and we will contact you within one business day.\n                    <\/span>\n    <\/div>\n\n    \n\n<div class=\"not-prose flex justify-center text-left gform_input_bg_white    \">\n    <script>\nvar 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Secure Income for Your Family Into the Future<\/span><\/h2>\n<p><span style=\"font-weight: 400\">Setting up a trust is also beneficial for estate planning. You can use a <\/span><a href=\"https:\/\/legalvision.co.nz\/business-structures\/family-and-discretionary-trusts\/\"><span style=\"font-weight: 400\">family trust<\/span><\/a><span style=\"font-weight: 400\"> to secure income or assets for family members for the future. The key feature of a family trust is that you create it to benefit your family. Family trusts typically work by a family member putting their assets into a trust and setting other family members as beneficiaries. Those family members can then gain income or other forms of payment from the assets in the trust in the future.<\/span><\/p>\n<p><span style=\"font-weight: 400\">In some common circumstances, a family trust is a useful way of structuring your finances. For instance, you may wish to start a business with other family members, such as your partner. Consequently, putting your assets into a trust can protect it from claims from creditors if your business venture does not work as well as you would have intended. Another common reason for a family trust is for a parent to guarantee assets or a source of income for their children.<\/span><\/p>\n    <div class=\"my-7 lg:my-10 border-y-2 border-gray-100 py-7 lg:py-10 flex flex-col sm:flex-row items-start gap-10\">\n                    <img decoding=\"async\" class=\"w-52 mx-auto my-0! rounded\" src=\"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/2\/2021\/12\/22115855\/cytonn-photography-GJao3ZTX9gU-unsplash-e1640129621597.jpg\" alt=\"Front page of publication\"\n                 loading=\"lazy\" width=\"208\" height=\"298\">\n                <section>\n            <div class=\"text-2xl font-bold\">Commercial Contracts Checklist<\/div>\n            <div class=\"body-text\">\n                <p>To protect your business, ensure supplier contracts meet your business\u2019 needs. Our free Commercial Contracts Checklist will help.<\/p>\n            <\/div>\n            \n\n<a href=\"https:\/\/go.legalvision.co.nz\/Commercial_Contracts_Guide_NZ.html\" class=\" block px-5 py-3.5 max-w-fit bg-orange button__hover transition rounded text-white font-bold text-lg no-underline uppercase leading-tight text-center\" target=\"\" rel=\"\">Download Now<\/a>        <\/section>\n    <\/div>\n\n<h2><span style=\"font-weight: 400\">Key Takeaways<\/span><\/h2>\n<p><span style=\"font-weight: 400\">There are various reasons why it is a good idea to set up a trust to manage your assets. These include when you have shares or other property you would like to protect, particularly from the risk of a business\u2019s failure and creditors\u2019 claims. Other common reasons to use trusts include exploring tax efficiencies and securing income or other assets for your family. When considering a trust, it is always important to get specialised legal advice about your individual situation and circumstances.<\/span><\/p>\n<div class=\"box box--warning box--icon\">\n<p><span style=\"font-weight: 400\">LegalVision cannot provide legal assistance with this topic. We recommend you contact your local law society.<\/span><\/p>\n<\/div>\n<p><span style=\"font-weight: 400\">However, if you would like assistance with your business structuring options or other commercial matters, our experienced <\/span><a href=\"https:\/\/legalvision.co.nz\/business-lawyers-lp-new-zealand\"><span style=\"font-weight: 400\">business lawyers<\/span><\/a><span style=\"font-weight: 400\"> can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on <a href=\"tel:+64800005570\" class=\"AVANSERnumber dynamic-number\">0800 005 570<\/a> or visit our <\/span><a href=\"https:\/\/legalvision.co.nz\/membership\/\"><span style=\"font-weight: 400\">membership page<\/span><\/a><span style=\"font-weight: 400\">.<\/span><\/p>\n<h2><span style=\"font-weight: 400\">Frequently Asked Questions<\/span><\/h2>\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1673240486082\"><strong class=\"schema-faq-question\"><strong>Why hold company shares in a trust?<\/strong><\/strong> <p class=\"schema-faq-answer\">Your shares are held as trust assets rather than your personal assets. This means that those shares are better protected against creditors.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1673240557415\"><strong class=\"schema-faq-question\"><strong>What is the benefit of a family trust?<\/strong><\/strong> <p class=\"schema-faq-answer\">A family trust is helpful to protect a family\u2019s assets from being put at risk due to debts or liabilities in the future. Family trusts also help set up the distribution of assets to younger family members in the future.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1673240575313\"><strong class=\"schema-faq-question\"><strong>What are the disadvantages of a family trust?<\/strong><\/strong> <p class=\"schema-faq-answer\">One disadvantage is the initial cost of setting up a family trust, plus the ongoing disclosure and maintenance responsibilities you will have. You also need to remember that when placing assets into a trust, those assets become trust assets. Hence, you lose control of those assets, including personal property or shares in a company.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1673240587134\"><strong class=\"schema-faq-question\"><strong>Do trusts mean you pay less tax?<\/strong><\/strong> <p class=\"schema-faq-answer\">Not necessarily. There is no guarantee that a trust structure will result in tax savings. We suggest you seek specialist tax and legal advice to determine whether a trust is appropriate for you.\u00a0<\/p> <\/div> <\/div>\n<div class=\"not-prose m-feedback-prompt\">\n    <!-- Thumbs up\/down bar -->\n    <div class=\"m-feedback-prompt__main\">\n        <div class=\"m-feedback-prompt__title\">Was this article helpful?<\/div>\n        <div>\n            <!--span class=\"m-feedback-prompt__button--text\">Thanks!<\/span-->\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--yes\"\n                    data-analytics-link=\"feedback-prompt:yes\" aria-label=\"Agree\">\n                <i class=\"fa-regular fa-thumbs-up fa-3x\"><\/i>\n            <\/button>\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--no\"\n                    data-analytics-link=\"feedback-prompt:no\" aria-label=\"Disagree\">\n                <i class=\"fa-regular fa-thumbs-down fa-3x\"><\/i>\n            <\/button>\n        <\/div>\n    <\/div>\n\n    <!-- Feedback form -->\n    <div class=\"m-feedback-prompt__form\">\n        <div class=\"m-feedback-prompt__form--thanks \">\n            <div>Thanks!<\/div>\n            <p>\n                We appreciate your feedback \u2013 your submission has been successfully received.            <\/p>\n        <\/div>\n        <form id=\"contact-form\" class=\"m-feedback-prompt__form--form\" action=\"\" method=\"post\">\n            <input type=\"hidden\" id=\"authenticity_token\" name=\"authenticity_token\" value=\"3bc3beddae\" \/><input type=\"hidden\" name=\"_wp_http_referer\" value=\"\/api\/wp\/v2\/posts\/202682\" \/>            <input value=\"https:\/\/legalvision.co.nz\/business-structures\/3-reasons-to-set-up-a-trust\/\" type=\"hidden\" name=\"currenturl\"\n                   id=\"currenturl\">\n            <input value=\"Three Reasons to Set Up a Trust in NZ\" type=\"hidden\" name=\"currenttitle\"\n                   id=\"currenttitle\">\n            <label>\n                <!-- display on thumbs-up -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--yes\">\n                    Can you tell us <span class=\"font-semibold\">why<\/span> you found it helpful?\n                <\/span>\n\n                <!-- display on thumbs-down -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--no text-lg\">\n                    How can we better improve this article?\n                <\/span>\n                <textarea name=\"feedbackmessage\" id=\"feedbackmessage\" required><\/textarea>\n            <\/label>\n\n            <div class=\"m-feedback-prompt__form--error\" id=\"form-submit-error\"><\/div>\n            <button id=\"submit-contact-form-button\" type=\"submit\" name=\"commit\" class=\"m-feedback-prompt__form--submit\"\n                    data-analytics-link=\"feedback-prompt:submit\">\n                Submit            <\/button>\n        <\/form>\n    <\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Trusts can offer a range of benefits and flexibility for your family or business. They can be particularly relevant if you have assets you want to protect. You also may wish to distribute your assets to other people or family members. This article sets out three reasons you might set up trust, such as: where<a href=\"https:\/\/legalvision.co.nz\/business-structures\/3-reasons-to-set-up-a-trust\/\">Continue reading <span class=\"sr-only\">&#8220;Three Reasons to Set Up a Trust in NZ&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13241,"featured_media":201718,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"1425,1749,1713,202550,203079,202230","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[4],"tags":[25,44,54,515,548,586],"class_list":["post-202682","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-structures","tag-small-business","tag-trust","tag-medium-business","tag-beneficiary","tag-asset-protection","tag-tax-efficiencies"],"acf":[],"yoast_head":"<!-- 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Zealand"},"image":{"@id":"https:\/\/legalvision.co.nz\/#\/schema\/logo\/image\/"},"sameAs":["https:\/\/www.facebook.com\/LegalVision","https:\/\/x.com\/LegalVision_law","https:\/\/www.linkedin.com\/company\/legalvision-group"]},{"@type":"Person","@id":"https:\/\/legalvision.co.nz\/#\/schema\/person\/95018e545fe6334d7acf7c5e6c87a2f6","name":"Georgina Toomey","image":{"@type":"ImageObject","inLanguage":"en-NZ","@id":"https:\/\/legalvision.co.nz\/#\/schema\/person\/image\/","url":"https:\/\/legalvision.co.nz\/wp-content\/uploads\/sites\/2\/2021\/01\/Georgina-Toomey-1-e1655874039496-96x96.jpg","contentUrl":"https:\/\/legalvision.co.nz\/wp-content\/uploads\/sites\/2\/2021\/01\/Georgina-Toomey-1-e1655874039496-96x96.jpg","caption":"Georgina Toomey"},"description":"Georgina is General Manager for LegalVision New Zealand and a Practice Group Leader, specialising in corporate and commercial law. She has expertise in capital raising, mergers and acquisitions, business structuring and shareholding arrangements.","sameAs":["https:\/\/www.linkedin.com\/in\/georgina-toomey-a7aa5638\/"],"url":"https:\/\/legalvision.co.nz\/author\/georginatoomey\/"},{"@type":"Question","@id":"https:\/\/legalvision.co.nz\/business-structures\/3-reasons-to-set-up-a-trust\/#faq-question-1673240486082","name":"Why hold company shares in a trust?","acceptedAnswer":{"@type":"Answer","text":"Your shares are held as trust assets rather than your personal assets. This means that those shares are better protected against creditors.","inLanguage":"en-NZ"},"inLanguage":"en-NZ"},{"@type":"Question","@id":"https:\/\/legalvision.co.nz\/business-structures\/3-reasons-to-set-up-a-trust\/#faq-question-1673240557415","name":"What is the benefit of a family trust?","acceptedAnswer":{"@type":"Answer","text":"A family trust is helpful to protect a family\u2019s assets from being put at risk due to debts or liabilities in the future. Family trusts also help set up the distribution of assets to younger family members in the future.","inLanguage":"en-NZ"},"inLanguage":"en-NZ"},{"@type":"Question","@id":"https:\/\/legalvision.co.nz\/business-structures\/3-reasons-to-set-up-a-trust\/#faq-question-1673240575313","name":"What are the disadvantages of a family trust?","acceptedAnswer":{"@type":"Answer","text":"One disadvantage is the initial cost of setting up a family trust, plus the ongoing disclosure and maintenance responsibilities you will have. You also need to remember that when placing assets into a trust, those assets become trust assets. Hence, you lose control of those assets, including personal property or shares in a company.","inLanguage":"en-NZ"},"inLanguage":"en-NZ"},{"@type":"Question","@id":"https:\/\/legalvision.co.nz\/business-structures\/3-reasons-to-set-up-a-trust\/#faq-question-1673240587134","name":"Do trusts mean you pay less tax?","acceptedAnswer":{"@type":"Answer","text":"Not necessarily. There is no guarantee that a trust structure will result in tax savings. We suggest you seek specialist tax and legal advice to determine whether a trust is appropriate for you.\u00a0","inLanguage":"en-NZ"},"inLanguage":"en-NZ"}]}},"_links":{"self":[{"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/posts\/202682","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/users\/13241"}],"replies":[{"embeddable":true,"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/comments?post=202682"}],"version-history":[{"count":6,"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/posts\/202682\/revisions"}],"predecessor-version":[{"id":219883,"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/posts\/202682\/revisions\/219883"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/media\/201718"}],"wp:attachment":[{"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/media?parent=202682"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/categories?post=202682"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/legalvision.co.nz\/api\/wp\/v2\/tags?post=202682"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}