Five Years On: Do trusts still have a place in NZ?

The end of January 2026 marked five years since the Trusts Act 2019 came fully into force. For many New Zealanders with family trusts, that anniversary has arrived quietly, without any corresponding review of whether their trust is still fit for purpose.

Instead, reassessment is often being triggered by something else: increased administration, the buying or selling of real estate, higher professional costs, requests for information from beneficiaries, banks, or accountants, and a growing sense that trusts are more regulated than they once were.

For many trustees, the question that needs to be asked is: what does this trust still do that justifies the effort involved in running it?

A more regulated environment for trusts

The Trusts Act is only part of the picture.

Over the past few years, trustees have also had to adjust to:

• disclosure of basic trust information obligations, which could include obscure beneficiaries that were never intended to benefit from the trust's funds

• expanded anti-money laundering and countering financing of terrorism (AML/CFT) obligations, particularly when dealing with banks, lawyers, and accountants

• IRD trust disclosure rules introduced from the 2022 income year, requiring detailed information about settlors, trustees, beneficiaries, financial statements, and transactions taking place within the trust

• a general shift towards greater scrutiny of ownership, control, and source of funds

Taken together, these changes mean that trusts now sit in a far more transparent environment than when many were first established.

For trustees who expected trusts to operate quickly and quietly in the background, this has required a change in mindset.

Why the cost and effort now feel disproportionate

Many people are surprised by the ongoing cost of maintaining a trust. That surprise is often not because the trust is unusually complex, but because earlier expectations were based on a different regulatory landscape, or understanding of how trusts really should have been working.

Trustees are now expected to:

• understand their legal duties

• keep records that explain decisions

• meet disclosure obligations

• provide information to advisers and government agencies

These are not optional extras. They are part of operating a trust since January 2021 (some would say many of these obligations existed previously, they just weren't well known).

Where a trust’s purpose is unclear or outdated, this level of administration can feel difficult, if not frustrating, to justify.

What trusts are still used for in practice

Despite the increased compliance burden, trusts continue to be used for specific and practical reasons.

Common examples include:

• Creditor protection
  Where individuals are exposed to business risk, professional liability, or guarantees, a trust can still separate personal risk from asset ownership. This protection is not absolute and depends on timing and conduct, but it remains a legitimate planning consideration.

• Protecting vulnerable beneficiaries
  Trusts remain one of the most effective ways to hold assets for people who cannot manage them independently, whether due to age, disability, illness, addiction, or long-term support needs.

• Residential Care Subsidy planning
  Trusts are frequently described as ineffective for care subsidy purposes. That is an oversimplification. While scrutiny has increased and gifting histories matter, a trust that has been properly established and administered over time can still play a role in structuring asset ownership.

• Managing family complexity
  Blended families, unequal contributions, and situations where lifetime flexibility is needed are still areas where trusts can operate more effectively than personal ownership or a will alone.

In each case, the trust is being used to manage risk, control, or long-term decision-making in a way that other structures do not always replicate.

Why many trusts now feel uncomfortable rather than useful

Where trustees are questioning the value of their trust, the issue is often not that trusts no longer work, but that:

• the trust’s original purpose was never clearly defined

• circumstances have changed and the trust has not been reviewed

• the trust is being administered out of habit rather than intention

• compliance obligations are being met without a clear sense of benefit 

A trust that is no longer doing a defined job will feel burdensome in a more regulated environment.  Worst case, a trust that has not been reviewed and updated can end up costing a significant portion of the trust's value (especially when there are Australian resident trustees or beneficiaries involved in the NZ trust, as is not so uncommon with the current braindrain). 

When winding up is the right response

It is also important to say that winding up a trust can be an appropriate and sensible outcome.

If the trust no longer addresses a current risk, family arrangement, or planning objective, retaining it can add complexity without corresponding benefit. Any decision to wind up needs to consider tax, relationship property, and succession implications, but it is not an admission that the trust was a mistake.  The legal landscape and benefits in setting up a trust at the turn of this century, or last century, has vastly changed.

Looking at trusts alongside everything else

Trusts do not exist in isolation. They usually sit alongside:

• personal assets

• wills

• Relationship Property Agreement (contracting out or "pre-nup" agreements)

• Enduring Powers of Attorney

• control and appointment powers (that allows a settlor to hire and fire trustees)

Assessing a trust on its own often leads to a distorted conclusion. Understanding how it fits within the wider asset and estate planning structure usually produces a clearer answer.

Where this leaves trust owners in 2026

The relevant question families with trusts need to ask is whether the trust is still serving a clear purpose in an environment that demands more transparency, more administration, and more understanding than it once did.

For many people, that assessment has simply been deferred for too long.

Get in touch if you want to discuss your family trust.