What is a Sham Trust?

Accounting services for clubs,societies & Not for profit Auckland

Trust busting is process where statutory provisions exist or person like liquidators, creditors, ex-partners and others apply to the court to have the trust “busted” so that they access the assets the assets of the trust. Trust busting is becoming a more common in use as interested parties seek to recover losses from trusts.

Trust busting legislation exists in the area of property relationship matters but that does not mean that trusts are not capable of protecting property when relationships go wrong. Isolating pre-relationship assets into a trust before entering into a new relationship has been shown to be capable of protecting those assets.

What a is Sham Trust?

A trust that is not validly created, i.e. the three certainties are not satisfied results in the express trust never being created in the first place. The three certainties are the intention to create a trust, the certainty of subject matter, there must be property settled on the trust and the certainty of object, the settlor must have clearly set out the purpose of the trust or the beneficiary(s) and the extent of the benefit.

A sham trust occurs when the settlor’s intention and sometimes the trustees intention in agreement with the settlor was to create the appearance of a legitimate trust, but there was no intention to effect the rights and obligations of the relevant parties in the way that a valid trust would and results in concealing of the true nature of a transaction or transactions. In simple words there is an intention to mislead.

An example of what may determine whether or not a trust is a sham is the amount of control exerted over the trust by a person who is not entitled to control or direct the trust. This may indicate the required intention was not present.

If a trust is found to be a sham, it is invalidated, and the trust’s assets are available to claimants.

The Benefits of Using Norrie & Daughters



  • We can help you by explaining the limits on control over a trust a settlor has and what mechanisms can be used to provide that control.
  • We can help you by preparing your Trust Deed and Memorandum of Wishes.
  • We can assist you by advising you on asset planning matters.
  • We can facilitate the transfer of property into the trust.
  • We can provide an independent trustee.
  • We can help with trust administration and accounting, providing the rigour necessary to ensure the trust is not declared a sham trust.


  • As a boutique accounting firm, Norrie & Daughters has a unique, holistic approach to how we deliver our services that allows us to provide a bespoke service to business owners, managers, individuals, and decision-makers in many industry sectors. We know that one size certainly does not fit all in New Zealand’s dynamic business landscape.
  • At Norrie & Daughters all of our team’s experiences and credentials blend to create a wealth of knowledge, understanding and personality. We work as a team to achieve our goal of providing our clients with an entrepreneurial style and practical approach to delivering what you require.
  • Our client-centered approach is instilled in every aspect of our own firm’s culture at every level, from directors to the administrative support staff.
Sham trusts services Auckland

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