What is a family Trust?

A family trust is a legal way to hold and protect your assets for you and your family both now and into the future.

History of the family trust

Trusts go all the way back to England in the 12th century and the time of the Crusades. The husband and father would go off to fight the war in southern Europe and leave his family and transfer the ownership of his lands to a neighbour or friend or relative to manage the estate and pay and receive feudal dues on the understanding that it would be conveyed back to him as the 'true' owner on his return.

    However, on their return they often found that the 'legal' owner has no intention of returning the lands. To make it worse English law did not recognise this arrangement so the disgruntled Crusader would then petition the King who in turn referred it to the Lord Chancellor.

    The Lord Chancellor would then decide the case according to his conscience and so the principle of equity was born. The Lord Chancellor would consider it "unconscionable" that the legal owner could go back on his word and deny the claims of the Crusader (the "true" owner) and return the land to the Crusader. Over time it became known that the Lord Chancellor's court would continually recognise the claim of a returning Crusader and that the legal owner would hold the land for the benefit of the original owner, who would be compelled to convey it back when requested. The Crusader was the "beneficiary" and the neighbour/ friend or relative the "trustee". The term "use of land" was coined, and in time developed into what we know now as a "trust".

Circa 1250, A crusader is shot by a Muslim warrior during the Crusades. Hulton Archive / Getty Images

Why might you need a Trust
in 2018?

• Helps protect your family assets if there is a relationship breakup or business problems.
• Helps to make sure your assets are passed on as you wish them to be to your beneficiaries - mostly commonly your children.

However, there are annual compliance requirements for trusts yet it is estimated that about 75% of family trusts in New Zealand are non-compliant and so may fail to achieve the very thing that they were intended to provide when they were set up.

Belvedere Law

      PO Box 317-001, Hobsonville, Auckland 0664