Trust Management




Many family trusts are badly managed. Most of the problems that arise with trusts are not brought about by the way they are established, but by the way they are managed.

 A Trust is just like an insurance policy and it will not cover the risk if you do not manage it well.  To gain the protection sought the trust not only has to be set up properly but also managed well.

This means you have to accept that the assets that are in the trust are not your own. Once you have formed the trust and sold the assets into it, you have transferred the ownership to the trustees and they are no longer your personal property. You may well be one of the beneficiaries, and have a certain measure of control but there will be usually be other trustees and beneficiaries to be considered as well. The Trustees job is to manage the assets and give consideration to the interests of all beneficiaries.  


Many people as trustees intermingle the assets and income of the trust with their own personal property and this is where many of the problems arise. For example, if a legal case arose where a party was attacking the trust they would try to show that in reality the trust is a sham and the assets that produce the income are in effect not trust property but owned personally. 


To do this, they would look for evidence of intermingling and actions that show clients dealing with the assets as if they were their own e.g. always making beneficiary distributions to the same people without considering others, failing to have trustee meetings, not having a seperate trust bank account or even if they do have one using it to meet personal expenses. 


If it can be proven there had never really been any intention to form a trust the clients will be worse off than if they had never formed the trust.

Anybody who is ever likely to attack a trust (IRD, family members, creditors or WINZ) will be looking at how the trust has been run. They are looking for evidence that the assets in the trust are in reality still the property of the settlors.


Basic rules to follow to ensure proper trust management:

   Have regular trustee meetings to involve other trustees in  decision making and record all decisions and have the minutes  signed by all trustees.

     Have a separate trust bank account.

     Keep good records

     Gift every year and record the gifting. 

   Bring in experts when necessary. Trustees have to act as a prudent person, and a prudent person gets advice at times.


     The most important feature is the attitude to the trust. Remember once the assets have been sold to the trust they belong to the trustees. Trust assets should be managed with the attitude that Trustees are looking after someone else's affairs and the trust will be secure.