What is a trust?

Intro | Benefits | What Assets | NZ Foreign Trust

The trust is a vehicle by which a person's wealth can be protected and enhanced for the future benefit of the family and other parties.

Whilst the origin of the trust concept is much debated, it is generally held that the modern trust can be dated back to Mediaeval Britain and the time of the Crusades. During this period a crusading knight would spend long periods of time abroad and would thus transfer ownership of his property to a trusted third party, so that if he should be die he could take comfort in the fact that his family would inherit his estate.

Essentially a trust is a method by which the legal title of specific assets and property can be transferred from one person to another whilst for the benefit of others.

The Settlor is the person who places the assets into the Trust.

The Beneficiaries are those that are entitled to benefit from the Trust (the settlor may also be a beneficiary). The beneficiaries can be defined by the Settlor at the establishment of the Trust and are named in the Trust Deed (the constitutional document that defines the parameters of the Trust) and others may be added later at the discretion of the Trustees possibly in consideration of the Settlor's Letter of Wishes.

The Trustees are defined as the legal owners of the trust assets, who have a fiduciary duty of care when administering the Trust in accordance with the terms of the Trust Deed and Trust Law.

Whilst the trustees have legal title to the assets, they do not have any beneficial interest, this means that:

. They may not profit personally from the trust assets
. The trustees may only use the assets of the trusts for the benefit of the beneficiaries
. The trust assets cannot be seized by creditors of the trustees

THE POSSIBLE BENEFITS OF UTILSING A TRUST:

Confidentiality:
Trust deeds in New Zealand are confidential documents and are not publicly registered.

Estate planning:
Assets held in trust do not form part of the settlers estate upon their death, thus the trustees may use these assets for the benefit of those beneficiaries specified by the settlor or trust deed, thereby avoiding legal complexities and associated costs.

Tax planning:
A specifically-worded trust can help to reduce or eliminate; inheritance tax or estate duty liabilities arising on the death of the settlor, but also income or capital gains tax liabilities of the settlor and/or beneficiaries during their lifetime.

Protection against loss of assets:
Assets can be protected from loss which could result from an unsuitable marriage or other relationship; in particular persons or classes of person can be excluded from benefiting from the trust.

Protection against creditor claims:
A properly established trust will protect assets from personal claims against the settlor or his estate provided that such trusts were established in good order.

Avoidance of forced heirship:
Assets held in a New Zealand trust are subject to New Zealand law which has no forced heirship provisions.

Protecting the interests of family members (minors or vulnerable dependants):
Assets placed in a trust for the benefits of minors or other vulnerable dependents, can be kept separate from those of the settlor and/or other interested parties.

WHAT ASSETS CAN BE HELD IN A TRUST?
. Bank accounts
. Stocks and shares (including private companies)
. Insurance or Assurance policies
. Real and/or intellectual property

NZ FOREIGN TRUST OVERVIEW
A New Zealand trust is derived from and is similar to a UK trust. A New Zealand trust, which is settled by a non-resident Settlor and which has no New Zealand sourced income, is not liable for tax in New Zealand. Neither the settlor, nor the trustee, nor beneficiaries (providing the beneficiaries are non residents) are liable for New Zealand tax. If New Zealand sourced income is received, then tax is due only on this New Zealand portion of income. A New Zealand registered Corporate Trustee is formed to act as the sole trustee for the trust. World trading will provide tax free income and New Zealand.

The Corporate Trustee, has a different function from a trading company or corporation, which is the commonly used structure in other jurisdictions. The Corporate Trustee owns assets and operates the business in a trustee role on behalf of the trust and its beneficiaries. This trust can in turn own the shares or business assets in any existing or newly formed offshore companies, or own the assets directly.

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