REASONS TO FORM A TRUST
1. To Protect Separate Property
Trusts are often used when individuals have separate property they do not wish to intermingle with their relationship property. If the separate property is placed in a Trust they no longer own this asset and it can then be kept separate from relationship property. This is particularly important to those people who have just left a relationship or have property and are forming a new relationship.
2. To Reduce Risk of Asset Loss through Business Failure
New Zealand is a country of small businesses and unfortunately some of them do not trade successfully. Placing your house in a Trust may help protect your family in the event of a business failure.
3. To Reduce Risk of Loss of Assets through Legal Action
As a country we seem to be becoming more litigious in nature. If your business is one that could expose you to a legal action through advice or actions, you may wish to protect your family by placing your home into a Trust.
4. For Succession Planning (passing assets from one generation to the next)
Most New Zealanders wish to provide for their families. This may be done by passing on the family farm or business or even just the family home. There are many obstacles to this happening. Using a Trust is a way to plan for the smooth succession of assets from one generation to the next.
5. To Gain Taxation Efficiency
When income is received in a Trust the Trustees can elect to either retain income within the Trust or allocate it to a beneficiary. This decision should be made in conjunction with the Trust’s Accountant.