For years, trusts have been regarded as the ultimate safeguard – shielding family wealth from creditors, ex-spouses, de facto partners, estate claims, and legal disputes. However, in the past decade the Supreme Court has “looked through” trust structures to bring assets into the relationship property pool. During this time, trusts have faced heavy scrutiny, with headlines such as "Why Rich New Zealanders Can No Longer Hide Wealth From Their Exes" and "Trust Busting: Is This the End of Relationship Property Protection?".  The prevailing narrative suggests that trusts are no longer effective or reliable.

Yet the reality is more complex. The recent decision of the Supreme Court in Cooper v Pinney confirms that such “trust busting” is reserved for exceptional situations. While legal challenges to trusts have evolved, the Supreme Court’s recent rulings reinforce that well-structured and properly managed trusts continue to provide effective protection.
Here are some reasons why a trust might still be the right vehicle to provide protection for you and your loved ones:
1. To protect and manage assets for a beneficiary with special needs: Trusts can be a valuable tool for protecting and managing assets on behalf of beneficiaries who may struggle to manage their finances independently or need extra support in handling their inheritance.  
2. To preserve assets for future generations: Trusts can be useful for long-term wealth accumulation by allowing assets to be held and managed over multiple generations, ensuring that the wealth is preserved and passed down according to the settlor’s wishes.
3. Estate planning and succession: This can be particularly relevant for complex family structures or those looking to minimise the risks of family disputes.
4. To protect assets in blended family situations or to ring-fence separate property from future relationships: A trust can be particularly useful in a blended family situation, especially when entering a relationship later in life, by protecting the inheritance of children from a prior relationship while still considering the financial interests of a current partner. It offers flexibility to allocate assets in a way that ensures both the children’s inheritance and the partner’s needs are met, helping to avoid potential disputes down the line.
5. To protect your assets from creditors: If you are in business or in a profession where you may be personally liable, a trust may afford you some creditor protection subject to any clawback provisions in insolvency legislation (law that allow creditors to reclaim assets transferred to a trust in certain situations).

Final thoughts: Despite the media’s portrayal, trusts continue to be a highly effective and reliable tool for safeguarding assets, providing financial security, and ensuring long-term family protection when structured and managed properly. The Supreme Court’s recent decisions reaffirm this. If you have a trust or are considering setting one up, now is the time to review it with a professional to ensure it meets modern legal standards and continues to serve your intended purpose. Trusts still work – but only if they’re done right.  

Schnauer & Co,
1 Shea Terrace, Takapuna
09 486 0177
schnauer.com