There are over 200,000 family trusts in New Zealand. While not everyone needs a trust, for many people, the advantages of having one far outweigh the disadvantages. They are extremely personalised – a family trust in Auckland will not be the same as a trust made in Wellington. Every family has their own unique needs that have to be addressed individually.
The goals of the trust are to protect the financial future of your children. It is important to hire a trustworthy accountant and a family lawyer so that you can minimise the risk of making a mistake during the process. To secure your child’s future, here are some of the things to avoid:
Assigning the Wrong Trustee
A trustee is someone who manages your trust on the behalf of your children. A common choice for a trustee is one of your siblings – though your brother or sister is a respectable choice, they may not be the best option. Even if they have the best interest of your children in mind, they may not have the financial know-how to manage large sums of money.
A safe alternative would be to appoint multiple co-trustees instead. Along with your sibling, you can ask a bank to be your trustee as well. This ensures that there is proper check and balance on the ones managing your money.
Too Much, Too Soon
A trust is there to safeguard your children’s future. Though many trusts give your children access to the money by the time they are 21 to 25 years old, it may be better to leave the larger portions of the trust for later. Wait until your children are older and have more control of how to spend their inheritance. You can also set up a trust so that they have a limited amount of money available for certain investments, such as purchasing a property.
A trust is there to secure your child’s future. You have to set it up in such a way that you can prevent them from making unwise financial decisions.