Is your family trust still worth keeping? A practical New Zealand review

A family trust is worth keeping when it still serves a clear purpose and its benefits justify the duties, administration and costs. Review the trust deed, assets, beneficiaries, tax position and estate plan together. Keeping, changing or winding up a New Zealand trust each requires advice on the consequences.

What is your trust meant to achieve today?

Ask what a trust is intended to do for the people involved. That might include managing assets for several generations, supporting a vulnerable beneficiary or providing continuity where family and business interests overlap.

Then test that purpose against reality. Does the trust own significant assets? Are the intended beneficiaries still appropriate? Are trustees able to make informed decisions? Does the trust deed allow the arrangements the family now needs?

Our family trusts and asset-protection services can help examine those questions alongside your personal circumstances.

What duties must family trustees meet?

The Trusts Act 2019 sets mandatory duties, including knowing and following the trust’s terms, acting honestly and in good faith, acting for beneficiaries or a permitted purpose, and using powers for a proper purpose. These duties cannot simply be excluded by a trust deed.

The Act also addresses record keeping and beneficiary information. The information provisions involve presumptions and specified considerations, rather than a blanket rule that every beneficiary automatically receives every document. A review should consider which duties apply and how trustees are meeting them.

Practical warning signs include missing deeds, outdated trustee details, undocumented decisions, mixed personal and trust funds, or trustees who cannot explain the trust’s assets and obligations.

What tax rate applies to trustee income?

Trust tax settings changed from 1 April 2024. Inland Revenue’s current guidance says retained trustee income is generally taxed at 39% where the relevant annual income exceeds $10,000. A 33% rate generally applies at or below that threshold, subject to the applicable rules; specific exceptions also exist.

Beneficiary income has its own rules. A trust therefore does not automatically create a tax saving, and a distribution should not be planned from the headline rate alone. Review the actual income, beneficiaries and reporting requirements with your accountant and lawyer. See Inland Revenue’s trustee-income guidance.

Does a family trust guarantee asset protection?

Holding an asset in a trust does not answer every question about creditor claims, relationship property or residential-care support. The timing and nature of transfers, the trust terms and the rights of other parties require individual assessment. Avoid making a transfer because someone has suggested that a trust will put the asset beyond all claims.

Work and Income specifically asks about transfers to trusts and involvement as settlor, trustee or beneficiary when assessing residential-care support. Gifting and income rules can affect the outcome. It is unsafe to assume that a home held in trust will be ignored in a means assessment.

Should you keep, change or wind up your trust?

A trust review may lead to better administration, different trustees or advice on whether changes are available under the deed and law. Winding up may be an option in some cases, but it is not simply moving money into a personal account.

Before any distribution or transfer, consider trustee authority, beneficiaries’ rights, lender requirements, tax and what the recipient’s ownership position would become. For example, transferring a family home out of trust may affect the estate plan that was built around it.

Review the trust together with your Will, Enduring Powers of Attorney and business interests. Our estate-planning services can help bring those arrangements together.

What should you bring to a family-trust review?

Bring these documents so your lawyer can assess the trust’s purpose and current position:

• The trust deed and all amendments.
• Trustee appointment documents and resolutions.
• Recent accounts and details of assets and debts.
• Relevant Wills and agreements.
• A summary of what has changed and what you want to achieve.

Contact Canterbury Legal in Christchurch to review whether your family trust still fits your circumstances. The aim is a clear purpose and workable arrangements, rather than keeping a structure simply because it already exists.

What other questions do people ask?

Does a family trust automatically save tax?

No. Retained trustee income is generally taxed at 39% where the relevant annual income exceeds $10,000. Different rules and exceptions can apply, including to beneficiary income. Review the actual position with your accountant and lawyer.

Will a home in a trust be ignored for residential-care support?

Do not assume it will. Work and Income asks about trust involvement and transfers, and gifting and income rules can affect the assessment.

Can trustees simply transfer the assets out and close the trust?

Winding up requires consideration of trustee authority, beneficiaries’ rights, lender requirements, tax and the recipient’s ownership position. Obtain advice before any distribution or transfer.

Which official sources explain these rules?

• Trusts Act 2019: trustee duties, records and beneficiary information
• Inland Revenue: trustee income tax rates
• Work and Income: Residential Care Subsidy and trust information

Information checked on 27 October 2026. This article provides general information about New Zealand law and is not a substitute for advice about your circumstances.