In New Zealand today it is very hard to make a lot of money and it is even harder to hang onto it. We therefore find that people from all walks of life become concerned about protecting their assets. This is particularly so today with people having saved what little assets they can then faced with, yet again, a change in government and a change in policy. For anyone trying to predict changes in the law is like trying to predict the weather - you usually get it wrong! The main however to remember is that asset protection planning usually has a time horizon of 15 to 50 years.
Too many people take the short-sighted view that asset protection is all about avoiding liability for taxes, rest home subsidies etc. This is not correct. Often with the assistance of skilled advice these can be added bonuses but if the sole purpose of asset planning and protection is concentrated on these areas, which can be very easily changed, by changes in government, is really to miss the whole purpose of asset protection.
Asset protection planning is to ensure that what assets you have been able to accumulate are protected in the best and most effective way possible from all the vagaries of life. You need to be sure that:
1. You will have enough assets to have a secure retirement.
2. The family is properly educated and provided for while they grow up.
3. To help the family acquire farms, homes and general assistance.
4. An inheritance after death.
The threats to all these are unexpected events such as a claim for damages, a matrimonial break-up or business failure, not to mention changes in government.
A family trust will almost always protect against these events. The Retirement Commission tells us to start early in providing for our financial security, so to it is never too early to start with asset protection. You will never know if you will need a family trust but if you know that you need one it is too late.
The problem then arises is whether you have one of the "old mirror trusts" or "a joint trust" or "parallel or dual trusts".
What about "an appointer"? Is an independent trustee required?
In recent times the administration of trusts have created concern. Claims have even been made against trustees for poor administration.
Setting up a trust and forgetting about it is one of the best ways to head for a disaster. However, using it with the skilled professional advice of your lawyer, accountant and investment advisor should ensure that no matter what changes occur in our tax laws, your trust can change and adapt so that they will continue to serve the original purpose for which they were brought into existence. Trusts have been around for many centuries with the aim of protecting assets for successive generations.