Types of Trusts and their benefits There are many types of trusts that can be tailored to achieve a specific purpose. The general purpose of a trust is to protect your assets and provide for desired succession planning for future generations. A trust is created by a trust deed whereby a person (the settlor) transfers property to the trustees of the trust. The trustees control the property in accordance with the trust deed for the benefit of the beneficiaries (which can include the settlor). This article focuses on four types of trusts that are commonly used within New Zealand. These include family trusts, inheritance trusts, business trusts and charitable trusts. Family trusts A family trust is generally set up by a couple that have combined assets such as a family home, investments, etc. for the benefit of the next generation. This type of trust can provide income and capital benefits to its beneficiaries who can be (including but not limited to) the settlor(s) themselves, their children, grandchildren, parents or other trusts. The benefits of a family trust are: to assist in protecting family or a family business from potential relationship property claims or someone contesting a will;ensuring assets are retained for family members who may need rest home care;to manage assets of someone who may not be able to manage their own affairs; maintaining separation between business and personal assets; and maximising tax efficiency for the beneficiaries. Inheritance trusts An inheritance trust is generally created by parents for their children. It not only benefits children when their parents pass away, but also during their parents’ lifetime. The benefits of an inheritance trust are: allowing parents to ensure that their children’s inheritance is protected from future relationships, business partners or creditors; andprotecting separate property from relationship funds if you are expecting to inherit significant assets. Business trusts A business trust generally holds assets that are separate from family and personal assets to protect you from a business failure or major loss. It also protects your personal or family assets from potential creditors. A common scenario is to have your business trust own shares in your private company, which allows dividends to flow through the business trust and to the beneficiaries. A business trust provides for succession planning if a business partner dies or becomes incapacitated, and also may result in tax advantages. Charitable trusts A charitable trust as the name implies, is a formal arrangement set up for a charitable purpose. This can relate to relieving poverty, advancing education, religion or any other matter that benefits the community. The benefit of a charitable trust is that as a donor, you can provide long-lasting contributions that continue after your lifetime. Furthermore, registering a charitable trust with the Charities Commission can provide tax advantages. Whether a trust is suitable for your needs is best determined by a lawyer. This article is simply an overview of the more general points about the common trust structures. Each case is different as it depends on the purpose of the trust. It is advisable to discuss your overall asset planning goals, financial and relationship situations with your lawyer who can also liaise with your accountant (if applicable) to determine the best course of action for you.