What is a family trust?

By {mds} law, published on: 11/06/2013
This information PDF provides an overview of what a trust is, and how it can help you meet your needs.

What is a trust?

A trust is a fiduciary relationship established between the person who creates the trust (the settlor) and the person the settlor has chosen to hold the trust assets (the trustees). The trustees hold the trust assets in their own names on trust for the benefit of the persons who may enforce that obligation (the beneficiaries).

Trusts are used to protect assets for individuals and their families, preserving them for the future. Family trusts are one of the most common types of trusts and are perfectly set up to benefit a group of family members, often across several generations.

In New Zealand, the most typical form of family trust is a discretionary family trust. A discretionary trust is one where the trustees may exercise their right to distribute assets to the beneficiaries in accordance with their discretion and the provisions contained within the trust deed.

Unlike a company, a trust is not a separate legal person. It is the trustees who hold the legal title to the trust assets however they do not hold the beneficial interest in those assets. Trust assets become the property of the beneficiaries (both legally as well as beneficially) when the trustees exercise their rights and powers to transfer the legal ownership of those held on trust to the beneficiaries personally.

Download the PDF booklet below to read more...

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