The use of family trusts has grown significantly in New Zealand over the last 10 years or so. At the same time, they have become somewhat easier to operate and administer compared with the past when we had estate duties and when in most cases, dual trusts (called mirror trusts or cross trusts) had to be used to enable gifting to take place.
While it has become a bit of a catch-cry these days to simply say "let's form a family trust", it is to be recognised that the creation and operation of a trust are governed by law and by the very deed that creates the trust. Care must be taken to ensure that it is formed and administered correctly. The risk of not doing so is that at some point in the future (usually when some form of dispute arises among settlors and / or beneficiaries) the trust could be deemed to have operated in breach of its rules (the trust deed) or, in the worst case, be deemed to be a sham. The consequences of either could well be a determination that the trust, in effect, never existed in reality thus cancelling out the actions taken in the past to protect family assets.
It is important therefore to discuss the intention to form a family trust with a professional who clearly understands the subject of trusts and who can gain a clear understanding of what the settlors intend by the creation of a trust. It is not simply a matter of purchasing some "off the shelf" product as if that will suffice to meet the requirement of the law and the long term intentions of the settlors. In our practice, we frequently advise clients on the formation and administration of family trusts and have purpose developed computer software to help us in this task.
The involvement of the family solicitor in the creation of a family trust is essential, firstly to attend to the completion of trust and associated documentation (the formation of a trust usually brings with it the need to consider wills, memorandum of wishes of the settlors, powers of attorney and in some cases, relationship property agreements), and second, to provide legal advice on the process. We do not (and legally should not) prepare trust deeds. They are an extremely important legal document and while we have a very detailed understanding of what is required in the formation of family trust, we are not lawyers. Get the deed wrong (more particularly by not including necessary clauses and powers) and in many cases you might as well not have created the trust in the first place.
It is also extremely important that the settlors and trustees have a clear understanding of what trusts are all about. Trusts are not intended to be a fashion statement (as in "that sounds cool; we must have one"). The powers, the administrative procedures, the need for the trust to be treated with integrity, and above all else, the need for the trust not to be treated as the alter ego of its settlors, means that those who operate the trust (the trustees) must understand what trusts are about and in particular, be aware of the contents of their governing trust deed.