The Pros & Cons of setting up a Trust

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The basic idea of setting up a family trust is to protect assets and funds.  There are a few things to consider to determine whether setting up a trust is the right choice for you.

The Pros

There are many advantages to setting up a family trust. It may help to:

  • Protect selected assets against claims and creditors – for example, to protect a family home from the potential failure of a business venture
  • Set aside money for special reasons, such as a child’s education fund
  • Ensure children, not their partners, keep their inheritances
  • Manage the risk of unwanted claims on your estate after your death

The Cons

  • Ongoing legal and accounting fees – getting professional advice before setting up a trust is crucial to ensure it is to everyone’s benefit and ongoing management is required to comply with legal obligations
  • If the trust has a complex structure the time involvement to manage it can be quite considerable
  • Once you put your assets into a trust, you no longer personally own them. Ownership passes to the appointed trustees, who must act under the terms of the trust deed in the best interests of the beneficiaries
  • Issues among family members can be expensive to resolve: There have been cases of family members suing the trustees if there is a breach of the trust’s provisions

 

The bottom line

If a trust it set up for the right reasons and managed well, it can have some great advantages. On the other hand, if this is done without expert advice a trust can cause considerable inconvenience and cost for all parties involved.

 

Are you thinking of setting up a family trust?

Please book in a time with us to discuss your options:

accounting@ebp.co.nz or 09 470 1840

Ean Brown https://www.linkedin.com/in/ean-brown/

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