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Starting a new business can be a risky venture. It can be devastating if something goes wrong, and the business fails. If you take appropriate steps to protect your assets beforehand, you can somewhat reduce the fallout. You can protect your assets by setting up a family trust. This is a common legal practice in New Zealand, where you transfer your assets to a trust and do not own them anymore. In most circumstances, this means that creditors cannot claim these assets as part of debt proceedings. Trusts are complex, so you should make sure you know your obligations when setting one up. This article will explain how a family trust protects your assets and other aspects of these trusts.

What Is a Family Trust?

There are three key parties in a family trust. These are the:


The individual (or company) that sets up the trust.


The individual (or company) that manages and maintains the assets held in the trust, as according to the trust deed. The settlor (or someone else specified by the trust deed) is the one who appoints them.


The individual (or company) that manages and maintains the assets held in the trust, as according to the trust deed. The settlor (or someone else specified by the trust deed) is the one who appoints them.

The settlor gives their assets to the trustee to hold and maintain for the beneficiaries’ benefit. The trust is the legal relationship created in this process. The trust deed details this, and the trustees follow what the trust deed says. Trustees also have duties that correspond to their power, such as:

  • knowing the terms of the trust and acting accordingly;
  • acting honestly and in good faith;
  • acting for the benefit of the beneficiaries; and
  • using their power for proper purposes.

Think carefully about what kind of trustee you want for your trust. For family trusts, often family members are the trustees. But it is a good idea to have a professional trustee with experience in the area. You also have the option of making a company your trustee.

How Does a Trust Protect My Assets?

When you place assets in a trust, you no longer personally own them. A trust is a separate entity. So, if you incur debt, then assets held in the trust are not included in the possible pool creditors can claim from for debt repayment. Common assets put in trusts include:

  • the family home;
  • commercial property;
  • shares;
  • cash;
  • bank deposits; or
  • artwork.

For example, if you put your family home into a trust, it usually cannot be claimed by creditors to pay back your business’s debts. You do not own the family home personally, so it is not in the available pool of assets creditors can claim for repayment.

Further, trustees legally own the trust assets, and they are responsible for maintaining those assets. You can still dictate how trustees should maintain these assets by: 

  • giving yourself the power to appoint trustees (as the settlor);
  • outlining in the trust deed how trustees should handle assets; or
  • becoming a trustee yourself.

Additionally, it is a good idea to get independent legal advice when transferring your assets into a trust. You also have the option of changing your trust deed.  A professional can help you make sure this process happens properly. If the trust does not own the assets and you still do in your personal capacity, the courts can declare the trust a ‘sham.’ You lose the trust’s benefits, and trustees are liable.

Other Benefits of a Trust

Protection against relationship property claim

In relationship separation proceedings, relationship property is split evenly between partners. If your property is held separately in a trust, the law cannot classify it as relationship property, and you maintain control.

Tax advantages

If trust assets earn an income, the law bases tax rates on the income level of the beneficiary to whom the trustees distribute it. This means you can efficiently plan your taxes based on the trust beneficiaries.

Asset consolidation

Trusts can help for organisational purposes by keeping your personal assets and your business assets separate.

Inheritance planning

If you want to leave money for your children and other family members, a trust is a good way to do so. You can dictate when they can access money from the trust, and what amount.


Trusts are not publicly registered, but you have to make sure trustees keep good records of trust proceedings. 

Key Takeaways

A family trust can be an effective way to protect your assets. Because you do not continue to own assets put in a trust, in most cases, creditors cannot claim these assets to pay back your debts. But, trusts are complex, and if not set up correctly could open you up to liability. There are also continuing administrative and legal fees attached to them. If you would like more information or help with protecting your assets, contact LegalVision’s trust lawyers on 0800 005 570 or fill out the form on this page.


What is a trust?

A trust is a legal relationship where someone (the settlor) gives property to someone else (the trustee) for the benefit of a third party (the beneficiary). The beneficiaries receive distributions from the trust. The trust deed outlines the terms of the trust.

What is a family trust?

A family trust (also known as a discretionary trust) is a kind of trust where trustees have the discretion to decide what kind of distributions beneficiaries get from the trust. Depending on the trust deed, they can alter this as is appropriate.

What are the benefits of a trust?

A trust is beneficial because it can protect your personal assets if your business fails. It can also provide a continuing source of income for your family members depending on the assets you put in the trust.

Does a family trust protect my assets?

A family trust protects your assets because its trustees own your assets, and you do not. This means that creditors cannot claim these assets as part of debt repayment proceedings.

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