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Running your own business, or being involved in senior management, is an exciting opportunity.
Of course, there are always some risks involved, not least of which is the potential for a claim against the company, or you personally as a director or senior manager. Without protection, your personal or family assets, for example your home, your shares and investment properties, may be vulnerable.
Asset planning as business strategy
When a business is set up, or a person moves up the ladder into senior management, it is easy to be consumed by the day-to-day tasks.
Our time may be taken up with building a business strategy, planning, and getting products or services to market. Part of any business strategy should also be considering how to protect your personal assets and mitigate any risk of loss to those assets.
Trusts as asset protection
One of the tools used to help protect personal assets is a Trust. While a Trust is not a foolproof means of protection, a well-managed Trust can offer some strong protection for those in business, particularly when combined with other liability limitation measures.
When you establish a Trust, rather than owning assets in your personal name, you are setting up a separate entity to hold and manage your assets.
The trustees maintain the assets for the benefit of the beneficiaries of the Trust, which usually includes you. You can still be involved in the management of the assets by appointing yourself as a trustee, so you are not losing control.
Even if you have been in business for some time, it’s never too late to set up a Trust, but it is important to note that, for it to be effective, it must be well run.
Changes to Trust law
You may already have a Trust. If you do, make sure you take the time to review it, as the New Zealand Government is about to make significant changes to Trust legislation, which will become effective from January 2021.
As we are still in the transition period, there is no certainty as to how the changes will affect Trusts on a day to day basis, however the changes do reinforce the need for transparency and diligence in managing your Trust.
In this regard mandatory and default duties for trustees will be set out in the new Act, and it is important you become familiar with these and comply with them.
Trustees will also have a duty to notify beneficiaries of basic trust information, and of the fact that they are a beneficiary.
You may therefore want to consider who the beneficiaries of your Trust are, whether they are still appropriate, and whether you are comfortable that they may be receiving information that you would prefer to keep private.
