A trust is a legal structure, bypath a specific legal process. Settlor set up a legal structure (and appoint a Trustee) to take the title of and allocate the assets which once held by the Settlor. The transfer of assets owned by a private individual (Settlor of the trust) to the trust could result in a legal separation of the property's ownership from the Settlor，and could avoid any uncertainties such as marriage, death, litigation, debt and taxes, which may incur impact or loss in the future, by which such property shall be adequately protected. In short, such behaviour as the Settlor entrust his/her assets to a Trustee on his/her specific purpose, and its corresponding legal structure, are what we call trust.

A trust is a virtual entity established by a Settlor. Such entity shall be protected by law and consisted by the Trustee(s) and a Trust Deed which shall be strictly executed by the Trustee, and the Trustee instead of the Settlor shall exercise possession of the assets and take the title of the rights and interests. - The New Zealand law states that trust is not an entity like a corporation, but an obligation affiliated with a Trustee. - Such virtual entity exercises its power on the assets held by the trust strictly according to the Trust Deed as well as the Trust Memorandum and distributes the pre-defined interest to the Beneficiaries designated in the Trust Deed.

As a specific legal structure and ownership management tool, a trust can adequately protect the Settlor's interests and assets. Trust can be used for safeguarding private assets, to insulate against risks, to fulfil the wishes of individuals and organisations, and also for specific tax and financial arrangements.

In the meantime, trusts could also be used for investment, property separation, inheritance, charity, tax planning, or for the avoidance of contingent judicial claims.

YES. The trust is a legal structure and tool which has a long history in Commonwealth countries and its practicality has been testified and proved by hundreds of years of legal practice. It is no exaggeration to say that the concept of trust and the Acts and Law of Trust shall be part of the fundamental and origins of Common Law. In New Zealand, where a large number of British laws have been inherited, the Act of Trust is one of the fundamental Acts of New Zealand's legal system. The rights and interests of the trust are legally recognised and strictly protected.

The Trust originated from its predecessor USE in ancient Europe, as the Knight who was about to go to the battlefield (Feoffor to USE) entrusted his property to the person whom he trusts (Fees to USE) to support and protect his families and offspring. In the thirteenth century, USE was firstly used by England's clergy to counteract the Church's ban on holding property, gradually such behaviour had been accepted by aristocrats and the general public, and used against the monarchy and feudal burdens. In the late 14th century, almost all of the land was held by USE in England. In 1535, King Henry VIII promulgated the "Statute of Uses", the" Positive USE", which was allowed by such law, and was gradually evolved into today's trust. In 1893, Britain issued the first trust law "The Act of Trustees", which defined the trust rights and interests of modern legal significance. As one of the legacies of the Magna Carta, trust rights and interests are recognised as inviolable "private property rights" and are inherited and protected by subsequent laws and regulations of trust.

The Trust Act is one of the cornerstones of New Zealand's legal system. New Zealand's trust law comes from England. The current trust law is the Trust Act 1956 / The Trustee Act 1956, which is the revision and re-enactment of the Trusts Act 1908.

The New Zealand Law Commission started to amend the Act of Trust 1956, which has been in place for nearly 60 years, in 2009 and submitted to Parliament in late 2016. The new “Trusts Act for New Zealand” draft is being discussed and tested and will come into effect soon.

Compare with other countries, in New Zealand trusts take a more critical role in the society and the economy. It’s estimated that there exist around 300,000 to 500,000 Trusts in New Zealand. Due to abundant legal practice, terms of New Zealand's trust law are introduced by many other Commonwealth countries or regions, such as Hong Kong, Jersey, BVI, etc.

The uniqueness of New Zealand Trust Law resides in the flexibility of the Trustee's role in a trust structure. In many other countries and regions, trust laws provide that a Trustee shall be solely entrusted with the custody of assets, take charge of management and investment, and distribute and relocate of assets. While the New Zealand Law allows the obligations of a trust, such as custody of Trust Asset, investment managing, consulting, even the entire trust administration, to split into independent obligations, and then to entrust different agencies or individuals to take charge. For example:

• New Zealand resident and legal entity could be appointed as a custodian Trustee (principal Trustee), and entrusted with the custody of the Trust Fund;
• The Settlor may appoint a Swiss investment company as an investment management Trustee to manage the investment of the Trust Assets;
• The Settlor may also appoint a trustworthy family counsellor as a consultant Trustee to supervise the operation of the trust.
• The Settlor may else designate a professional with senior management experience as a management Trustee to take charge of the trust maintenance and administration job.
• Also, New Zealand's law has introduced a role called Advisory Trustee to enable Settlor to participate into the management of the trust legally, while guaranteeing the trust to be insulated from the juristic claim and ensure the effectiveness of tax planning. Such a role is a realistic judicial practice for Settlors who want to "control" the trust property and hope such “control” will not impact on the trust's legality simultaneously. After conducting the asset management activities regarding the opinions of the advisory Trustee, the other Trustee shall not be liable for the profit and loss of the Trust Assets. All trust management activities, excluding the discretionary power to the Beneficiaries, shall follow the instructions of the advisory Trustee. Such a role is usually assumed by a donor of the Trust Asset where usually the donor is the Settlor.

Another feature of New Zealand's trust law is the law does not recognise "trust" as a "legal entity" as a company but as specific obligations and rights of the Trustee which originated from Trust Deed. In contrast, including the OECD's CRS procedure, laws in most countries of the world consider trust as a "legal entity". Therefore, any trust established in New Zealand will be recognised as a non-investment entity (NFE) as long as the Trustee is not a financial institution or a professional Private Trust Company (PTC), and the trust holds no passive investment instruments or financial assets; such conditions will not meet the CRS " Investment Entity " test (see Standard for Automatic Exchange of Financial Account Information in Tax Matters, Section VIII, A / 6, a & b) thus not require compliance with CRS compliance obligations. In 2016, the New Zealand Inland Revenue requires overseas trusts (Settlor is not a New Zealand Citizen or a permanent resident) established in New Zealand to report Trust Elements to the IRD (with IR607 when setting up and IR900 for annual declaration) from 2017, which is a transparent procedure to the IRD but not a CRS submission.

It should be noticed that in some countries, the concept of "trust" has become controversial and trusts/trust companies have become an investment vehicle and specialised investment financial institution. This is only an application scenario of the concept of trust; such narrow sense should not be used to define the trust and mention making an understanding of trust under Common Law.

The Trustees take the title of the Trust Fund and execute such assets according to the Trust Deed and the Trust Memorandum which entrust them to manage the Trust Assets. The Beneficiaries enjoy the income or profit distribution of the Trust Assets by the Trustees' discretion which empowered by the Trust Deed.

No. Once the Settlor has transferred the asset to the trust, the Settlor no longer takes the title of such assets according to the law, nor should regard and conduct himself/herself as the owner of such assets, even if the Settlor may also be the Trustee and/or Beneficiaries at the same time. Settlor shall strictly comply with the Trust Deed while exercising any rights and obligations, including to deal with the Trust Fund (Trust Property).

Businessman and professionals such as lawyers, accountants, etc., whose activities might incur contingent risks but without limited liability, may choose to transfer their assets into a trust to isolate contingent risks.

For high-net-worth individuals, we recommend to set up a trust to protect their private property, considering uncertainty disputes that may arise as a result of inheritance or distribution real estate, and the indefinite impact on private property that might incur by tax planning and operational liability.

Entrepreneurs, who wish their business, organisation, equity, rights, and interests held by individuals to be continued retaining their original purpose and constitutions after their death or loss of legal capacity. Then, it is a wise choice to transfer the ownership of their enterprise, organisation, equity, rights, and interests to a trust that operates strictly complying with a Trust Deed to fulfil their wishes.

Property Owners who live in such nations with laws unsound, where private properties (refers to funds, shares, securities, precious metals, equity, intellectual property, copyright and other movable property) might be deprived unlawfully, shall achieve protection by transferring their assets to a trust established in a nation where private properties shall be ruled by law and protects private property lawfully. Such properties shall become a Trust Fund and be treated and protected from being deprived as private property owned by the residents or entities of such country.

Placing assets in trusts shall be able to protect the assets against third parties (individuals, institutions, even governments) by the fact that such assets have been legally not owned by the Settlor anymore.

To transfer the assets into a trust shall protect the integrity of the assets such as a company from the affection of the consequence of inheritance, marriage and other relationships. Under the protection of a trust, the integrity of the assets and decentralised interests for the Beneficiaries are no longer opposites.

To place assets in a trust can be employed to lock in the business intentions, principles and purpose of an enterprise and organisation. No matter what happens, such principles and purpose shall be strictly observed and enforced by the trust complying with the Trust Deed and the Trust Memorandum* till the end of the Trust's Vesting Day.

The placement of assets in trusts has also been used to guarantee the property, in most cases, a business or a specific interest, to receive national treatment from the country where the Trustee is located and enjoy the same tax and judicial benefits as the nationals of such country for certain tax and legal planning purposes.

Not for sure. In some cases, if the litigant is also a Settlor, a Beneficiary, or under a marriage (including cohabitation) with the Settlor, there exists New Zealand Law ( RPA Act) allowing such litigant to proceed actions on their assignable portion of the Trust Fund.

Besides, if the authorities have found any evidence indicating that the assets have not been legally delivered into the trust (e.g., the Settlor manipulates the Trust Assets without the Trustee's consent, which in violation of the Trust Deed), like a false trust, the law shall support the litigant’s juristic claim and action on such Trust Property. If there is evidence indicating that the trust is controlled by the Settlor, for instance, the Settlor, the Trustee, and the Beneficiary are highly overlapped, such trust shall be judged as a false trust and lose the protection of the law.

Also, if there is no specific preventive arrangement in the Trust Deed, the Beneficiaries, after being sued, might have some or all of the "assigned assets that to be distributed from the trust" to be claimed and deprived by the support of the court.

Finally, if the Settlor has been already insolvent when transferring his/her assets to the trust, the claim shall be supported by New Zealand law as long as the obligee has evidenced that the Settlor's conduct is "evade debt maliciously", and such transferring will be sentenced invalid.

To protect the Trust Fund from being claimed, we recommend our clients to transfer their assets into trusts and designate suitable third-party Beneficiaries, such as lineal descendants, the Settlor's disability insurance and pension insurance, or third-party funds, e.g. education funds for descendants, charitable funds, etc., before any litigant claims on such assets, and assesses indicates there are contingent risks.

In New Zealand's legal practice, the assets that have been transferred to a trust/Trustee for more than three years as of the time of the Settlor's insolvency shall be in great probability presumed to be the Trust Fund and protected, unless the litigant could provide even more solid evidence against that.

Trust Assets shall not become part of the legacy, and the Trust Fund shall still be maintained and distributed complying with the Trust Deed and Trust Memorandum.

As a universal situation, in a trust, the Trustee follows the Trust Deed to distribute the trust's income and interest to the Beneficiaries of the trust. If there is no specific stipulation in such deed, for example, if the Trust Fund has become insufficient to distribute; if the Trustee needs to be changed when the Settlor has died or lost civil capacity; if the Beneficiaries have also passed away or lost their capacity for civil conduct, the mentioned Trust Memorandum shall be followed, the circumstances shall be assessed complying with the memorandum's principles, and the appropriate action shall be decided.

According to New Zealand law, the maximum duration of trust is 80 years, and the coming soon new act expands such period up to 125 years. When any person transfers his/her asset that is legally achieved into a newly created trust, the ownership of the asset changes immediately, and the ownership shall remain unchanged throughout the next 80 (125) years, even if the Settlor passed away. Of course, Settlor can set a desired trust Vesting Day not exceeding the limits mentioned above.

In New Zealand, which nation was founded upon the treaty of Waitangi, the legislation not only emphasises protecting private property but also has predictability. The stability of the legal system of a country is an essential consideration for those trusts that need to survive for a long period, and New Zealand has a unique advantage over the rest of the world in this regard. New Zealand has a long history and well-established laws of trust. The longest surviving trust in the world today exists in New Zealand. As private property, the Trust Fund (Assets held by the trust) is well protected by New Zealand law. Thereby trusts are pervasive in the nation's economy, and the cost of establishing trust and the subsequent administration is relatively affordable.

It is noteworthy that New Zealand law allows foreigners to set up private trusts in New Zealand for up to 80 years, (and the coming soon new trust act to be implemented increased such period till 125 years), and protects the oversea Trust Assets on a par with New Zealand citizens.

Considering the legal environment and tax planning, New Zealand's unique sovereignty structure (the Cook Islands and Niue are sovereign states with free association with New Zealand, and economy linked with a series of Commonwealth countries in the Pacific region), provide enough flexibility and probability for building various trusts and legal structures to meet the diverse needs of clients from all over the world.

In addition, in case there is a potential dispute over the Trust Deed, aside from the New Zealand Supreme Court, litigants can take advantage of the Cook Islands‘ jurisdiction and appeal to the Judicial Committee of the Privy Council (United Kingdom) as the Court of Final Appeal, thereby be availed the Equity law. Equity is world widely recognised as the fairest and effective legislation to resolve international commercial disputes. Its unique remedies, such as using specific performance to enforce the Deed fulfilled by litigants as equitable remedies, have important practical significance for protecting the Innocents against breaches of trust.