Spring is the season for clearing out cobwebs, weeding the garden, and sorting through what’s worth keeping. But it’s not just the garage or the wardrobe that may need a tidy-up – your family trust could probably do with a spring clean too.
Take the case of Brian and Moana*. Twenty years ago, they set up a family trust to protect their assets from business risks. At the time, it was the done thing. Their accountant said it might save tax, and they liked the idea of keeping the family home “safe” for their children. Fast forward to today, and things look a little different. The rules have changed (in 2021), the paperwork has piled up and costs have increased, and Brian and Moana are asking the question many others are: does our trust still serve the purpose it was set up for?
That’s the first thing to ask yourself. If your trust no longer meets its original purpose, does it serve a new one – perhaps giving flexibility for estate planning? And do the benefits outweigh the effort and cost of maintaining it? For some families, the answer is yes. For others, the annual admin is more hassle than it’s worth.
Winding up a trust isn’t always straightforward, though. For Brian and Moana, they discovered that transferring their property from up the trust right now might come with unexpected tax bills, so they’ve decided to hold onto it for the time being – a little like keeping an old shed in the garden because pulling it down will be more expensive than leaving it standing.
Another common reason people hold onto trusts is the hope that it will help them qualify for a Residential Care Subsidy (RCS) when they go into a rest home. Brian’s neighbour, Mary, is in this boat. She gifted her house to her trust years ago, thinking it would shield her assets. But the rules around residential care subsidies can (and do) change often. When her application was assessed, every bit of gifting to the trust was scrutinised, and whether she qualified for the subsidy or not was dependent on many factors including whether she had a partner, whether her partner continued living in their home and the assets and terms of the Trust. For some people, a trust helps – for others, it can actually be detrimental to their application.
There’s also the issue of flexibility. Imagine Moana’s cousin Hana, who has children living overseas. A trust might give her useful estate planning options here in New Zealand, but it could leave her overseas beneficiaries paying more tax than if they inherited directly from her personal estate. What works in one situation can be a real headache in another.
If you haven’t looked at your trust since the Trusts Act 2019 came into force in January 2021, then now – while the daffodils are up and the lawns are growing again – is the time. Trusts are not set-and-forget. They need regular reviews, and sometimes pruning or reshaping.
Whether you keep your trust, wind it up, or vary it to simplify things, the decision should be based on your unique circumstances and those of your beneficiaries. There’s no one-size-fits-all answer. But like a good spring clean, taking the time now can save you a lot of headaches down the track.
*Names used in this article are not those of WRMK Lawyer’s actual clients, but these are common scenarios encountered with family Trusts.
How can we help?
If you’d like to discuss whether your family trust is set up in the best way for your current situation, WRMK Lawyer’s experienced trust lawyers will be happy to help. Please give one of us a call or contact your usual WRMK lawyer for advice.
This article was first published in October 2025 in the Kaipara Lifestyler.
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