Edmonds Judd

Retirement

Issues affecting finance and settlement

Employment, Media, News, Online, Property, Retirement, Rural
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Natural disaster risk and insurance

When you have lending secured by a mortgage on your home, it will be a condition of that lending that you have full replacement insurance for your house. This is a requirement for any new lending (and your lender won’t allow you to draw down the loan without seeing evidence that this in place), and an ongoing requirement with existing lending.

Insurers are now commonly asking whether the local council has recorded that a property could be impacted by any natural hazards (for example, whether it is in a flood zone). If it is noted that the property is potentially impacted by a natural hazard, the insurer may have some follow up questions before deciding on whether it will offer insurance. It may ask whether the local council has completed any remedial work to address the hazard, or whether any specific work has been completed with the property to reduce the impact of the hazard, such as the property being built on piles to elevate it above the anticipated flooding level.

Insurers are also asking questions about whether the property has previously been affected by natural hazard events, such as flooding, earthquakes or landslides/slips.  As above, if it has, an insurer is likely to have follow up questions regarding any remedial work that may have been completed.

Depending on the potential hazards, some insurers may be reluctant to offer insurance cover. If you are considering buying a property that could potentially be impacted by natural hazards, we recommend you confirm you can obtain full replacement insurance before submitting an offer or within the period of your finance condition.

Unconsented works: what can go wrong when selling?

Completing work on your property without obtaining a building consent may seem like a good way to renovate your property without the time delays or cost of your local council involvement. It is, however, likely to lead to significant headaches during your ownership or when you sell your property.

Should you suffer a loss to your property that is caused by non-compliant work, such as installing a wet-area shower without a building consent and the shower room then floods and causes water damage to your property, you may find that your insurer declines your claim. Not only can this mean you will need to fund the cost of repairs yourself, but it can also have implications in obtaining other insurance policies in the future as you will need to disclose that you have previously had a claim denied.

When selling your property, you have an obligation to disclose to buyers any work you have completed but for which you have not obtained the required consent. Additionally, buyers will often review either a Land Information Memorandum or the Property File as part of their due diligence. If the buyer (or their lawyer) notices that there are renovations to the property which required a building consent and it was not obtained, the buyer may not be able to obtain insurance or finance.

Any unconsented works will need to be disclosed to both the insurer and the lender.  Depending on the nature of the work (and the insurer), insurers may decline to cover the property with the unconsented work.

If the buyer can’t obtain full replacement insurance, they will not be able to confirm satisfaction of a finance condition. Even if the buyer can obtain insurance, their lender may not accept the property as security; this means the buyer will be unable to confirm satisfaction of the finance condition.

We recommend you always obtain the required building consent before beginning any building work.

If you have already completed work without a building consent, talk to us about the best way to approach your local council to rectify the issue.

If you aren’t sure whether your next project requires consent, Can I Build It is a good tool which can be used as a guideline; the website can be found here.

Life Stage – Business

Commercial, Media, News, Property, Retirement
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Sally is not happy with Luke for crashing their brand-new Tesla. The car only appears to need minor repairs but was bought for the purpose of having a ‘safe’ vehicle for their baby on the way. Time is of the essence as Sally’s due date is approaching

 

Luckily for Luke, his father Steve owns a car repair business. He gives his father a call and is told he can bring the car in right away.

 

Steve feels terrible when his son brings in the brand new Tesla, which appears to be falling apart at the front. He takes a closer look and is relieved, it really is only a few repairs which are needed. He often gives discounts to his family but decides he will do this for Luke free of charge, seeing as him and Sally have a baby on the way and are under a lot of stress.

 

He has been under a lot of stress himself with work as the lease has just run out on his car repair yard. He has leased the property for the last 5 years without any issues. He was friends with the owners and would often invite them for drinks and barbecues, and had no concerns that he would be able to lease for another term. When he found out that they had sold the property to new owners, Steve had noticed no difference at first, as the lease was still in effect with the current terms.

 

As the expiry date was approaching, Steve had gone to the new owners and advised he would like to continue the lease for another term of 5 years. The new owners advised Steve that he had no right of renewal and the lease had expired, but they would provide him with a new lease to sign on their terms. Steve received the new lease and read through it, but he did not like the terms as they were fundamentally different to the original lease.

 

This left Steve with the following options, and just as many concerns:

  1. Accept the new terms and sign the lease – Steve had signed the original lease five years ago without properly looking through it, or understanding it. He had been friends with the landlords and hadn’t anticipated them selling. He should have ensured he had options to renew so he would have more security of this property.
  2. Find a new premises – This is not ideal for Steve. His current premises is right in town and only a five-minute drive from home. However, he is aware that he has not even looked at what other opportunities may exist. His business has expanded a lot in the last few years and this could give him an opportunity to find a property with more room and potentially grow his business even more
  3. Negotiate with the new landlords. If they are unable to find other tenants while Steve is able to find more premises, he will have more bargaining power.

 

Steve sighs as he begins fixing the Tesla. He will search online tonight for available commercially leased properties. He vows to take any new lease to his solicitor before signing to avoid future stress.

Macayla Brdanovic

A loved one has lost capacity, now what?

Employment, Estate, First Job, House, Kids, Media, News, Property, Relationships, Retirement
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What happens if your loved one loses mental capacity due to illness or accident?  Who will make decisions about whether they need to go into care?  Who can manage their finances to pay for their medical costs and living costs?

 

Hopefully your loved one has enduring powers of attorney in place appointing people to make decisions about their welfare and property.  But what if there are no enduring powers of attorney?

 

In that case, you will need to apply to the Family Court for orders under the Protection of Personal and Property Rights Act 1988 (PPPR).  There are various types of court orders that can be made appointing one or more people to manage someone else’s affairs.  Deciding which court orders to apply for depends on the circumstances and needs of the person who has lost capacity.

 

Before applying to the court, you should be aware of the strict legal obligations and responsibilities you will have if appointed, and that the court will have ongoing oversight to ensure affairs are being managed appropriately.

 

While it may cost a few hundred dollars to get enduring powers of attorney while someone is healthy, it can cost a few thousand dollars to get court orders if  they lose capacity there are no enduring powers of attorney in place.  So, it is a good idea to encourage your loved ones to get enduring powers of attorney while they are still healthy.

Kerry Bowler, Solicitor Kerry Bowler

Why should I look at my will?

Estate, Kids, Property, Relationships, Retirement
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Review at life’s milestones

You should review and update your will regularly. It is not something that, once done, you should just stick in a drawer and forget about. There are many significant milestones in life when you should think about whether your will is still appropriate for your unique circumstances.

 

If you don’t often review your will, particularly after important life milestones, you may discover (or worse, your family may discover after your death) that your will does not leave everything the way you intended. This means that certain people or causes may miss out on an inheritance or a gift in your will. Also, out-of-date wills can cause significant complications for the people involved in the management and distribution of your estate.

 

With the summer holidays coming up and some time away from the treadmill of daily life, this is an ideal time to review your will.

 

Buying a home is a milestone

Many people make a will when buying their first home. Although there is no reason why you cannot make a will before then, this is often the trigger when it feels like you have something significant to leave in your will. If you buy your home with someone else, usually you will want to leave the house to that person when you die. However, this is not always the case, particularly if you are not in a romantic relationship with that person.

 

If you have children from a previous relationship, you may want to ensure your partner can continue living in the house when you die but, ultimately, you want your children to inherit your share of the house. You may have borrowed money from other family members to help with the purchase that you need to repay first. Your will should be carefully drafted to make sure it truly reflects your intentions.

 

Joint ownership vs tenants in common: The ownership structure of your home, or any asset for that matter, is also very important to understand. ‘Jointly owned’ assets pass to the surviving owner/s when one owner dies. Assets which are owned as ‘tenants in common’ remain part of a person’s estate when they die and will be distributed under that person’s will.

 

Many people are not sure, or forget what type of ownership they have, especially if their house was bought many years ago. If you are unsure, or the ownership structure of your asset/s changes, you should review your will to make sure that everything will still be distributed as you want after your death. You should also review the ownership structure at the same time.

 

Marriage, separation and divorce

Getting married, separated or divorced are all events that have a significant effect on how your will might operate when you die. If you have a will and subsequently get married or enter into a civil union, your will is automatically revoked, unless your will is specifically worded as being in contemplation of that marriage or civil union. If it is not, you could effectively be left without a valid will, even though you have made one in the past.

 

In the case of a separation order or divorce, your existing will is not revoked but the law states that your spouse or partner is treated as having died immediately before you. This means any gifts to them will be void and, instead, any backup provisions in your will would come into effect. You should update your will after a separation or divorce to ensure that it will operate as you intend.

 

It is also important to know that the simple act of ‘breaking up’ with someone is not enough to have gifts to that person automatically voided. You should take the additional steps of obtaining a formal separation order or an order dissolving the marriage, and reviewing your will. If not, you could be left in the awkward situation of leaving everything in your will to your ex-spouse or partner – which may be a very unpalatable idea for some!

 

Birth or adoption of children

There’s a lot to think about when welcoming a child into your family and a review of your will may not be high up on the to do list. Your will should, however, assign guardianship of your children and account for their future needs, particularly if your child has special needs requiring a higher level of assistance. If there is a significant age gap between your children or you have children from different relationships, your will may need to be tailored to account for this.

 

Death of an executor, beneficiary or guardian

Executors are the people you name in your will to manage and distribute your estate when you die. A will-maker will often appoint a family member or someone to whom they are very close to carry out this role. It is important to have an executor who you trust who will do a good job.

The death of an executor, beneficiary or a guardian of your young children means your will may not work as intended or could create confusion. Do review your will if this happens or should your executor’s circumstances or health change.

 

Significant changes in financial position

Receiving a large inheritance or a significant capital gain on, say, property or business assets (or perhaps winning Lotto!) can significantly alter how you want your estate to be distributed when you die. You may decide to include additional beneficiaries – perhaps more distant family members or friends, or leave a gift to a charity that you care passionately about.

Although it’s not always the case, estates of relatively higher value are often more complex and require greater planning to ensure that everything runs smoothly when you die.

 

What if I don’t have a will?

If you die without a will (called an ‘intestacy’), your assets will be distributed according to the default rules established by law. Depending on your circumstances and who survives you, your assets would usually go to some combination of your spouse or de facto partner, children, parents and siblings. Even if some family members are estranged from you, they could still receive something from your estate under the default rules.

 

Other milestones

The milestones we have noted above for reviewing your will are not exhaustive. Starting a business, having a KiwiSaver account, moving countries, changes in your health and amendments to the law are all good reasons to look at updating your will.

 

If it’s been a while since you’ve looked at your will, we hope this article gives you the impetus to pull it out of that drawer and dust it off. Better yet, talk with us about it so you can have peace of mind knowing that, when you die, your loved ones will be taken care of as you wish.

 

 

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Wait! Before you sign that pre-nup! Step 1 – Independent Lawyers

Relationships, Retirement, Trusts
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In the first article of this series, we introduced the 3 key steps you must take before signing the contracting out agreement for it to be valid:

  1. Independent lawyers
  2. Disclosure
  3. Advice

 

In this article we will look more closely at Step 1 – Independent lawyers.

 

Does that mean we just get two different lawyers?

Not only does this mean you each need separate lawyers for the contracting out agreement, but those lawyers should also be at separate firms.  And it goes even further, the lawyer advising you should not have previously acted for your partner either.  This ensures that the lawyer who is advising you does not owe any ongoing duties to your partner as a client that would conflict with the lawyer’s duties to you as a client.  In some circumstances the lawyer may still be able to act for you, if you and your partner give fully informed consent.

 

So how does it benefit you?

The RPA states that the agreement is void unless you receive advice from an independent lawyer.

 

Your legal interests in protecting certain assets against a relationship property claim will often differ from your partner’s legal interests on separation.  Having an independent lawyer protects you and ensures the advice you receive is about how the agreement will affect your rights and what the implications are for you, independently of your partner’s interests in contracting out.  It can help ensure the agreement is future proofed, reducing your legal costs for updating the agreement as your relationship develops, and significantly reduces the risks of having the agreement overturned by a Court for being seriously unjust.

 

Next time Step 2 – Disclosure (and a hot tip on how to reduce your legal costs!)

 

Kerry Bowler, SolicitorKerry Bowler, solicitor

Resting in peace? Where your Will might fall short

Estate, Health Issues, Kids, Retirement
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No one likes to contemplate their death. If we do think about the unthinkable, we like to hope that we will go as peacefully as possible with nothing left to worry about. Adequate estate planning can save your loved ones a great deal of time, money and stress while they are grieving you.

Part of your estate planning might include deciding what you want to happen to your remains after death. You may wish for your body to be interred in a family plot, have your ashes scattered somewhere special or have your remains disposed of in accordance with your cultural practices.

It may come as some shock then, that while your Will can contain instructions regarding your remains, these instructions are not necessarily binding. This can be a problem when your executors and members of your family are at odds as to what to do with your remains.

In New Zealand, the executor has both the right and the duty to make decisions about the remains of the deceased. However, there are a range of different factors that the executor needs to consider when making their decision, including cultural, religious and spiritual practices as well as the views of immediate and wider family. If it can be shown that the executor did not take all relevant considerations into account, then there may be grounds for the executor’s decision to be challenged in court.

Your wishes are of course relevant, but your executor may (and is entitled to) weigh your wishes up against any other factors that your wider family raises.

To hopefully avoid any disagreements and potential litigation after you have passed, you may wish to have a conversation with your executors and your loved ones now. This helps ensure everyone is on the same page about what should happen following your death and increases the likelihood that the wishes you record in your Will will be followed.

Edmonds Judd can assist you with this by drafting your Will and providing advice about your estate planning.

Jamie Graham, Law Clerk

Providing for your family in your will

Estate, Kids, Property, Relationships, Retirement
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You have some legal obligations

We all want to look after our families – both during our lives and after we die. One way you can make sure that your family is looked after when you die is by leaving behind a clear, well-drafted will.

 

In New Zealand, we have considerable ‘testamentary freedom,’ meaning we can generally choose how we want to distribute our personal assets after our deaths. Testamentary freedom has been a fundamental feature of New Zealand law for many years. There are, however, limits to testamentary freedom. We see these limits in action when claims are made against a family member’s estate.

 

Claims against an estate

Claims against estates can be made under the Family Protection Act 1955 which provides that you have  a moral duty to provide adequate maintenance and support for certain family members after your death. They include your spouse, children and sometimes grandchildren. Even if you have family members with whom you have had a poor relationship during your lifetime, if you do not adequately provide for their maintenance and support in your will, there is a risk they could make a claim against your estate.

 

If you want to leave unequal shares of your estate to your family members, or leave a close family member out of your will entirely, it is important to state this expressly in your will and to provide your reasons for doing so. This can reduce the likelihood of a successful claim being made against your estate.

 

Protecting beneficiaries from their own folly

If you are concerned about how a particular family member (a beneficiary) may use (or misuse) their share of your estate, you should discuss this with us before your will is drafted. Leaving your family members with a significant lump-sum of cash is not the only way to provide them with their share of your estate. There are options such as establishing a protective trust for their share or appointing trustees to manage money on their behalf. These options may ease your concerns.

 

Family members having different needs

If your family members have different needs, you may want to consider adjusting their share of your estate. With family members who have significant health issues or support needs, your obligation to provide for them may be greater.

 

Earlier this year, the High Court made a decision in a case,[1] upholding an earlier decision of the Family Court. That decision increased the proportion of a father’s estate that was awarded to his unwell son by a small amount. His son had been unable to work for several years due to his illness, and incurred costs associated with managing his illness. When his father awarded him a smaller share of his estate than his sister, the court decided this had breached his father’s duty to him. The duty to provide adequately for maintenance and support applied, even though the relationship with his father had been strained and dysfunctional over several years before his father’s death.

 

Repercussions of not providing for your family

If any of your family members have been left out of your will or have not been adequately provided for, they could make a claim against your estate.

 

When such a claim is made, the court can review the circumstances and make an award from the estate to remedy failure to provide adequate maintenance and support. This is why it’s important to talk with us about the drafting of your will. We can help you adjust your will to minimise the possibility of a successful claim against your estate.

 

Estate claims can cause increased distress, conflict and delays during an already challenging time for your family. The legal costs associated with defending such a claim can also significantly reduce the value of your estate.

 

Important to think this through

If you’re tempted to write your wayward son, estranged daughter or irresponsible spouse out of your will, it’s well worth getting advice first. This may spare your family a claim against your estate, and the stress and expense that goes along with such claims.

 

 

[1] Emeny v Mattsen [2024] NZHC 291.

 

 

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Do I still need a trust?

Commercial, Estate, House, Property, Retirement, Rural, Trusts, Your Own Business
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Thousands of Kiwis have, over the years, established family trusts for a variety of reasons. However, it’s well worth considering whether those reasons are still relevant today and evaluating whether your trust may have outlived its usefulness.

You may have established your family trust for:

  1. Avoiding estate duty: before 1992 it was common for high value assets (such as farms) to be transferred to a trust so your personal estate would not have to pay estate duty
  2. Eligibility for the residential care subsidy: trusts were often settled to increase the likelihood of being eligible for the residential care subsidy; the Ministry of Social Development (MSD) only considered assets you owned personally when considering eligibility for the subsidy
  3. Minimising tax: Fluctuating tax rates over the years have sometimes provided a lower tax rate for trusts than the highest rate of personal tax
  4. Creditor protection: Transferring your personal assets to trust ownership means that your personal creditors may have more difficulty accessing those assets to recover personal debts you owe
  5. Estate planning: Children may make claims against their parents’ estates where they believe their parents have made no, or inadequate, provision for them. Transferring assets to a trust during one’s lifetime leaves little or nothing for children to claim against on your death. Trusts also allow assets to be ring-fenced to help with the care of differently abled children
  6. Relationship property: settling a trust, either before your relationship is ‘in contemplation’ or afterwards (provided a contracting out agreement is also signed), is one way to help remove assets from the potential pool of relationship property that would be available for division if your relationship ends.

Things have changed

These days, however, estate (and gift) duty is no more, the top personal tax rates will soon be realigned with trust tax rates, and MSD takes a closer look at trusts when considering residential care subsidy applications. There has also been increasing court action on trusts where it is believed they may have been used to avoid creditors, claims by children and relationship property claims.

In addition, there are further consequences in settling trusts in New Zealand if you are an American citizen, from the UK (even though you may be tax resident in New Zealand), or if you are tax resident in Australia.

Notwithstanding the above, trusts are still very useful vehicles, particularly for creditor protection, estate planning and relationship property purposes.

Trust deeds, however, should be carefully drafted and have the correct documentation in place around them. Excellent legal, accounting and tax advice is needed to ensure that your trust will do the job you want it to.

If you have a family trust that may no longer be fit for purpose, or you think you need an asset protection plan, please talk with us about the options available to you.

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Who is responsible for managing someone’s affairs?

Estate, Health Issues, House, Kids, Property, Relationships, Retirement
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Enduring powers of attorney and the transition from attorney to executor upon death

Enduring powers of attorney are legal documents that allow individuals to appoint someone to make decisions on their behalf in case they become incapacitated.

 

There are two types of enduring powers of attorney that someone can put in place:

 

  1. Property: this grants authority over financial and property matters including managing assets, paying bills, and making financial decisions. A person could appoint more than one attorney to act jointly and/or severally and direct that the powers of attorney can immediately come into effect so that the attorney can manage their property while they have mental capacity and continue to act once they become incapacitated. They can appoint a successor attorney to act in the event the first attorney is unable or unwilling to act.

 

  1. Personal care and welfare: this delegates authority over personal matters like health care and consent to treatments. A person can only appoint one attorney at a time, and it can only come into effect when they have lost their mental capacity. A successor attorney can also be appointed.

 

Specific requirements and restrictions can be put on the attorney such as a requirement to consult with or provide information to another person or to only act in relation to specific property matters. The attorney can only act in accordance with the powers given by the enduring power of attorney document. These powers are only to be used when the person who appointed the attorney is still alive.

 

When a person dies, their enduring power of attorney comes to an end, shifting the responsibility of managing their estate to the appointed executors named in their will.

 

Although an attorney may have been appointed to manage the deceased’s affairs when they were alive, the same person may not be appointed as the executor of the deceased’s estate upon their death. It is essential for individuals to understand the transition of responsibilities from enduring powers of attorney to executors upon their death. The attorney will cease to act, and the executors named in the will or appointed by the court step in to manage the deceased person’s estate. This includes handling the distribution of assets, paying off any debts, and ensuring that the deceased’s wishes are carried out according to their will.

 

You should speak to your lawyer to ensure that your affairs are managed how you intend in the event you die or become incapacitated.

New Year – New Will

Estate, Health Issues, House, Kids, Property, Relationships, Retirement
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The new year is an opportunity to reflect on your life and your wishes for the future, including how you want to provide for your loved ones when you pass away.

 

The most important aspects of your will include the people in charge of your estate (your executors), what happens to your assets, the guardian of your children and your funeral/burial wishes. If you do not have a will or a valid will, then you do not get to decide these aspects for yourself.

 

Having a will is particularly important for parents and those with assets worth $15,000 or more (including Kiwisaver).

 

If you have a will, you should review it regularly to ensure your will is practical, up to date and valid.

 

Is my will valid? Common traps

 

Marriage or Civil Union

Ordinarily, a will is automatically revoked when you marry or enter into a civil union. If you have a will but have since married or entered into a civil union (or intend to in the near future), then you should review or update your will to ensure it is still valid.

 

Divorce or Separation

A separation does not automatically revoke your will. If you have separated and your ex-partner is still in your will, any gifts to them will remain valid unless you have a separation order or a court order dissolving the marriage or civil union.

 

For this reason, your will should be updated as soon as possible post-separation.

 

Witnessing Requirements

There are strict requirements for a will, one of which is having two adult independent witnesses. To be independent, the witnesses cannot benefit under the will or be a spouse, civil union or de facto partner of a person who will benefit under the will.

 

For example, Jane has a will that leaves everything to her son and daughter. Jane prepares her will at home and has her friend and her son’s wife witness her will. Unfortunately, her son’s wife is not independent and therefore the gift to Jane’s son will be void.

 

Circumstances that should trigger a will review

 

If one or more of the following apply to you, it’s time to review your will:

 

  • Family births or deaths;
  • Aging – contemplating the possibility of residential care;
  • Family members moving overseas (especially if they are your executor, as this can add cost and complication to your estate administration);
  • Creation of a family trust;
  • Winding up of a family trust;
  • Buying a property;
  • Change in assets or financial status;
  • Change in relationship status;
  • Change in family dynamics (e.g. estrangement); and/or
  • Simply a change of wishes.

 

Most people will have multiple wills during their lifetime, simply because life is full of change. If you don’t have a will, it’s been a while since you’ve reviewed your will or you’ve had a change in circumstance, we encourage you to speak with your lawyer about your will.