There are three parties involved in the formation of a trust:

The Settlor

In this explanation we will assume that the settlor is you. If you
have formed a trust, you are said to have "settled" it. This is a
technical way of saying that you have passed assets over to the trust.

The Trustees

These are the people that you appoint to own the assets legally but
who must look after them for the beneficiaries. They decide what
particular assets the trust will own and who will benefit under the
trust. The way they do that is normally written in the trust deed.
Often, the trustees are the settlor and a professional (lawyer,
accountant or trustee corporation). A company owned by you or your family can be the trustee, even the sole trustee.

The Beneficiaries

These are the people who really “own” the assets of the trust even
though their names are not on the title. They will receive
distributions of either income or capital from the trust. In a typical
New Zealand family trust, the beneficiaries are the settlor’s children,
grandchildren, other family members or charities. Under New Zealand
law, the settlor may also be a beneficiary. Again, all this will be set
out in the trust deed.

How the trust is established

The trust is established by the settlor who gives the trustees a
small amount of money (perhaps only $20) and asks them to hold this
money and anything else that goes into the trust for the beneficiaries.
This request and how the assets of the trust should be looked after and
distributed are recorded in the trust deed that is signed by the
settlor and the trustees.

However, although this handing over of $20 and signing of the trust
deed have got the trust started, it has got you no further towards the
aim of owning less (or even nothing at all).

So, more valuable assets need to go into the trust – things like investments, the family home, a business etc. See Asset transfer for how this happens.

Content provided by sorted.org.nz, Your Independent Money Guide.