Should I be using a trust? When a family trust is the right move?

A decade ago, as Opes Partners' Ed McKnight puts it, "every man and his dog had a trust." That default has quietly collapsed — three regulatory shifts (the Trusts Act 2019, the 39% trustee tax rate, and tighter IRD disclosure) have raised the bar for needing one. But every law-firm page online still answers the same generic question: *what is a trust?* That's almost never what a household actually wants to know. The real question is sharper: **should I be using one, and if so, when?** In this episode, SortMe Founder & CEO Carl Thompson puts that question to three NZ advisory firms who field it every week — Lighthouse Financial, Opes Partners and Naked Finance — and gets the honest answer most law-firm pages won't give you. The panel separates the two motives people conflate (tax efficiency vs asset protection), explains why the 39% trustee rate hasn't actually killed the income-splitting case — *"when you distribute any cash flow out to the beneficiaries of that trust, it is taxed at their marginal rate. So it hasn't changed the advice too much"* (McKnight) — and lays out who genuinely needs a trust in 2026 versus who's just buying expensive paperwork. In this episode: - Why the "every man and his dog had a trust" era is over — and the three regulatory shifts (Trusts Act 2019 disclosure rules, 39% trustee tax rate, tighter IRD disclosure) that raised the bar for needing one - The crucial detail on the 39% rate most articles get wrong — it taxes income *retained* inside the trust, not income *distributed* to adult beneficiaries at their own marginal rate (10.5% up to 39%) - Reason one — tax efficiency: why a trust is a structure property investors usually *graduate into* (typically the third or fourth property, once the portfolio is positive cash flow) rather than start with - Reason two — protection: Lighthouse's Vaishnu Krishnan on shielding inheritances from late-teen/early-twenties relationship breakdowns; McKnight on business owners needing it from property number one; Naked Finance's Jamie on intergenerational wealth — *"$10 million invested… provides an income to the beneficiaries that can be distributed on an annual basis without eating into the capital"* - When it's the wrong tool — Jamie's blunt take: "for mum and dad investors, a trust really is just unnecessary complexity" — and Krishnan's rule of thumb that a simple estate and uncomplicated family dynamics can usually be handled with a Will alone - The pre-legal checklist the panel would run before you book the lawyer — what are you actually trying to achieve, do you really need it, what does your portfolio and risk picture look like, and would simpler structures (will, s21 contracting-out agreement, joint ownership, KiwiSaver nominations) do the job - The biggest misconception clients arrive with — that a trust is a magic shield and the assets are still really "yours" — and how confusing ownership with control can have a trust ruled a "sham" - The "we already have one" question — when a trust set up years ago for a reason that no longer applies is just an annual bill - How SortMe's entity management feature tracks assets, liabilities and tagged transactions across personal name, LTCs, companies and trusts — and turns end-of-financial-year from days of reconstruction into a clean handover to the accountant Read the full article: sortme.com/post/should-i-be-using-a-trust