Edmonds Judd

estate planning

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

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