GUY GRAHAM: ESTATE PLANNING

Estate planning is a topic that no one wants to think about or discuss, let alone plan for.

None of us know when our time on earth may be up, or be unexpectedly cut short, but having a formalised plan and documented set of wishes/instructions can help your loved ones navigate your passing.

Do you have a plan for your family when your time is up? How can you ensure that a fair and equitable distribution of assets to beneficiaries will occur?

Have you sat down with your family and discussed yours/ their wishes for the family assets/business?

What should you consider in your estate plan?

A Will – “Last Will & Testament”

A will is a legal document that allows you to state how to distribute your personal property and assets on your passing. While many of us now have our assets held via trusts, with few assets held privately other than personal chattels, a will is a critical part of your estate plan as it gives the executor instructions on how to settle your estate.

Without a will, New Zealand legislation dictates who gets what and how much of what you leave behind. It’s a very specific formula, so depending on your situation your assets may not end up where you might think. On top of this, the cost of administering this can increase significantly and take a long time to resolve.

Having a will, will allow you to settle your estate, name a guardian for your children, express your funeral wishes, leave your personal assets to those you wish, or donate to charities.

The personal asset distribution process (wills) are very different from assets held/owned in trust. Many people have trusts, and in our opinion they are typically misunderstood.

A trust may continue until the “final vesting date” as stated in the trust deed, which when reached will result in the transfer of the trust assets to the named beneficiaries.

A trust has three elements: trustees are the people who manage the trust, · the settlor is the person who creates the trusts and, beneficiaries are those who benefit from the trust.

The trust deed outlines those involved and the instructions on how the trust will be managed. Depending on the instructions of the trust deed you could still use the assets within the trust, you just wouldn’t own them under your sole name.

Similar to a will, you can prepare a “memorandum of wishes” relating to the trust. This records your wishes of what you want to happen to the assets in the trust, which the surviving trustees must consider. This may include your wish for certain assets to be distributed to a named beneficiary, or the final vesting date to be brought forward and the assets transferred earlier.

This is more of a legal matter and not so much a technical piece of accounting advice but is closely related and ties into the ability for a named person to act (or sign) on your behalf. Powers of attorney (EPA) is a legal document that nominates someone that you choose the ability to act on our behalf. You might consider getting an EPA if you want to give someone else the ability to make a decision for you in the case that you are incapable or unavailable to make the decision yourself.

There are two types of EPAs: A property EPA enables decision making on financial matters such as money and property, bank accounts, paying bills, and buying/selling property.

· A personal care and welfare EPA enables decisions about your health and wellbeing and can only take effect once a qualified health practitioner has confirmed that you’re not sound to make decisions yourself.

You can appoint the same person for both, however the authority must be appointed separately. An EPA has to be done when you’re still mentally capable.

Disclaimer – While all care has been taken, Johnston Associates Chartered Accountants Ltd and its staff accept no liability for the content of this article; always see your professional advisor before taking any action that you are unsure about.