Protecting Vulnerable Beneficiaries with Trusts
13 April 2025

Trusts are a powerful tool for safeguarding the financial well-being of your vulnerable family members. Whether you have loved ones with disabilities, those in need of long-term care, or other special circumstances, establishing a trust can provide the necessary protection and support. Here's how trusts can help protect your vulnerable beneficiaries: 

 

What Is a Trust? 

A Trust is a legal entity where one party, known as the trustee, holds and manages assets on behalf of another party, known as the beneficiary. Trusts can be individually tailored to meet specific needs and provide a range of benefits for your vulnerable family members. 

 

Types of Trusts for Vulnerable Beneficiaries 

There are several types of trusts designed to protect vulnerable beneficiaries, including: 

 

  • Special Needs Trusts: These trusts are specifically created to benefit individuals with disabilities without affecting their eligibility for government benefits such as New Zealand Superannuation and the Disability Allowance. Special needs trusts ensure that the beneficiary's financial needs are met without jeopardising their access to essential services and support. 
  • Discretionary Trusts: In a discretionary trust, the trustee has the authority to decide how and when to distribute trust assets to the beneficiary. This type of trust is particularly useful for beneficiaries who may not be able to manage their own finances due to age, illness, or other factors. The trustee can make decisions based on the beneficiary's needs and circumstances. 
  • Protective Trusts: Protective trusts are designed to shield assets from creditors or potential legal claims. These trusts can be particularly beneficial for beneficiaries who may be at risk of financial exploitation or who have a history of financial mismanagement. 


Benefits of Trusts for Vulnerable Beneficiaries 

Establishing a trust for a vulnerable beneficiary offers several advantages: 

 

  • Financial security: Trusts provide a structured way to manage and distribute assets, ensuring that the beneficiary's financial needs are met over the long term. 
  • Access to Government benefits: Special needs trusts, in particular, allow beneficiaries to receive financial support without affecting their eligibility for government benefits. This ensures that they have access to essential services and support. 
  • Protection from exploitation: Trusts can protect vulnerable beneficiaries from financial exploitation by placing assets under the control of a trusted trustee. This reduces the risk of beneficiaries being taken advantage of or mismanaging their finances. 
  • Customised support: Trusts can be tailored to meet the specific needs and circumstances of the beneficiary. This allows for a personalised approach to asset management and distribution. 

 

Considerations for setting up a Trust 

When establishing a trust for a vulnerable beneficiary, it's important to consider the following: 

 

  • Choosing the right Trustee(s): The trustee plays a crucial role in managing the trust and making decisions on behalf of the beneficiary. It is important to choose someone who is trustworthy, knowledgeable, and capable of handling the responsibilities. 

 

  • Drafting the Trust Deed: The Trust Deed should clearly outline the terms and conditions of the trust, including the extent of the Trustee's powers and responsibilities, the beneficiary's rights, and the distribution of assets. Working with a legal professional can ensure that the document is properly drafted and legally sound. 

 

  • Regular Reviews: Trusts should be reviewed regularly to ensure that they continue to meet the beneficiary's needs and comply with any changes in laws or regulations. This helps to ensure that the trust remains effective and relevant over time. 

 

Trusts are a valuable tool for protecting your vulnerable beneficiaries and ensuring their financial well-being. By providing a structured and secure way to manage and distribute assets, trusts offer peace of mind for both beneficiaries and their families. It is important to speak with a trusted legal professional to ensure that a Trust is the most effective vehicle for protection (ie compared to Enduring Powers of Attorney or other legal arrangements). 

 

If you have a vulnerable family member in need of financial protection, consider establishing a trust to safeguard their future. Contact us today to discuss how we can help you set up a trust that meets your family's unique needs. 

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