What Makes a Trust Legal in New Zealand? Understanding the Requirements

Trusts are a valuable tool for asset protection, estate planning, and financial management. However, to be legally recognized and effective in New Zealand, a Trust must meet specific legal requirements. Understanding these requirements ensures that your trust is valid and operates as intended.

What is a Trust?

A Trust is a legal arrangement where a settlor transfers assets to trustees, who then manage those assets for the benefit of beneficiaries. Trusts can be used for a variety of purposes, including protecting family wealth, managing business assets, and ensuring financial security for future generations.

Understanding Trustees and Beneficiaries

• Trustees: These are individuals or entities appointed to manage the Trust's assets in accordance with the trust deed. Trustees have a fiduciary duty to act in the best interests of the beneficiaries and must follow the terms outlined in the Trust deed.

• Beneficiaries: These are the individuals or groups who benefit from the Trust. Beneficiaries can receive income, assets, or other benefits as specified in the Trust deed. They may have different rights depending on the type of Trust established.

Key Legal Requirements of a Trust in New Zealand

1. The Three Certainties
   A valid Trust must meet the three certainties:

   • Certainty of Intention – The settlor must clearly express an intention to create a Trust.

   • Certainty of Subject Matter – The assets or property being placed into the trust must be clearly defined.

   • Certainty of Objects – The beneficiaries of the Trust must be identifiable or ascertainable.

2. Proper Trust Documentation
   A Trust must be documented with a formal Trust deed that outlines:

   • The purpose of the Trust

   • The role and responsibilities of Trustees

   • The rights of beneficiaries

   • The rules governing the management of Trust assets

3. Appointment of Trustees
   Trustees are responsible for administering the Trust in the best interests of the beneficiaries. They must:

   • Act with honesty and integrity

   • Follow the terms of the Trust deed

   • Keep proper financial records

   • Act impartially between beneficiaries

4. Compliance with the Trusts Act 2019
   New Zealand’s Trusts Act 2019 introduced key legal obligations, including:

   • Trustees must provide basic trust information to beneficiaries

   • Trustees have mandatory duties such as acting in good faith and keeping proper records

   • Trusts should be reviewed periodically to ensure compliance

5. Separation of Trust Assets
   Trust assets must be kept separate from personal assets of the Trustees to maintain the integrity of the Trust.

6. Genuine Trust Purpose
   A Trust must not be established for fraudulent or improper purposes. It must serve a legitimate legal function, such as protecting assets or estate planning.

Why Seek Professional Advice?

Setting up and managing a Trust involves legal complexities, and failing to meet legal requirements can result in unintended consequences, including loss of asset protection. Consulting a Trust expert ensures compliance and efficiency in Trust management.

Final Thoughts

A legally sound Trust can provide financial security and peace of mind for you and your beneficiaries. By understanding and adhering to New Zealand’s trust laws, you can ensure your trust operates effectively and achieves its intended purpose.

At New Vision Financial Services, we help individuals and families establish and manage trusts that align with their financial goals. Contact us today to learn more about how a trust can benefit you.

Nimalka Perera
Business Development Manager
New Vision Financial Services

Plan your future and let us help you have peace of mind along the way.