WILLS
 
Important Terms
 
Estate:The asset of a deceased person.
 
Executor/& Trustee/s: The person/s or organisation you appoint in your Will to carry out your instructions concerning the disposal of your assets and the management of your estate.
 
Beneficiary: A person who benefits under the terms of your Will.
 
Why make a will? A Will enables you to provide for the needs of those you leave behind who depend on you, as well as giving you the opportunity to nominate who you would like to benefit from the assets you have worked so hard to accumulate during your lifetime.
 
What happens if you do not make a will? If you die without making a Will you are said to have died intestate. When this happens your possessions and assets will be divided accordingly to the law. This does not mean they automatically go the Government, but it could mean the people that you really want to receive a part of your estate may get nothing at all. The Administration Act determines who are the legal next of kin entitled to share in the estate of a person who has died intestate.
 
Who can and should make a will? Any person over the age of 18, or any person who has married, regardless of their age. Any person aged between 16 and 18 and unmarried can still make a Will with the consent of the Court.
 
Choosing your Executor and Trustee One of the most important decisions when making your Will is choosing your Executor and Trustee. Your Executor and Trustee is responsible for carrying out the terms of your Will. These duties are completed when the assets of the estate are distributed to the beneficiaries named in the Will. If the estate assets need to be held under the terms of the Will for children, or other beneficiaries, then there is in effect a trust created under the Will.  It is the trustee’s responsibility to continue to administer the assets of the trust for the nominated beneficiaries. The appointment of your Executor and Trustee is entirely your decision and you need to consider the duties they will have to perform and the experience that will be required. This will depend on the manner in which your overall future plan has been structured.
 
Your Future Plan and your Will A Will is an integral part of your future plan and it is necessary to cover gifting to your trusts. What we recommend as the ideal situation is that your Will only dispose of a small part of your assets, primarily personal items that have been kept outside of your trusts. Your Will would also forgive to your trusts any loans still owing to you and the terms of your trusts would handle the transfer of your assets to those you have nominated as beneficiaries in the trust deeds. There are distinct financial advantages to you in managing your assets in the this way. The administration of a Will is an expensive business. The cost can virtually be eliminated by using an integrated future planning process.
 

 

TRUST SPECIAL REPORTS

Trustees have special responsibilities when investing for a trust. Download our special report on INVESTMENT GUIDELINES FOR TRUSTEES so you can understand your obligations.

 

The popular website SORTED has a discussion page on trusts you may find interesting which you can locate here.

 

What are the reasons for setting up a trust? Do you need one and why? A special report on GUIDELINES FOR SETTLORS is available for download.

 

CONTACT US for a a quotation on setting up a family trust or to answer any questions you may have on estate planning.

 

 

 

INHERITANCE TRUSTS

 
In February 2002 the Property (Relationships) Act was passed and this has changed forever the way we need to look at the transfer of assets from one generation to the next.
 
If any of the following apply to you, this Act has created a potential problem for you and your family:
 
·         You are in a relationship or marriage of more than three years
·         You own your own house, farm or other assets
·         You want to protect your assets from ‘outsiders’
·         You want to protect your children’s legacy from possible relationship problems
 
Changes to the Act have significantly altered the rules relating to the sharing of property when a relationship ends. The act deals with not only the division of property on the break-up of a marriage or relationship but also how property is shared when one of a couple die.
 
The Act states that the surviving spouse of a partnership has 6 months from the date of death to decide if they will take what is left to them under the will or 50% of the relationship property.
 
Generally we have always considered a de facto relationship to be one where a couple (man and woman) were living together as man and wife but were not legally married. This simple definition is no longer valid when looking at this act. A de facto relationship for the purposes of the act is one between two persons, (whether a man and woman, or a man and a man or a woman and a woman, who are both aged 18 years or older, who live together as a couple, and who are not married to each other.
 
In deciding whether two people live together as a couple, a court will consider all the relevant circumstances, including:
 
·         The duration of the relationship
·         The extent to which the couple share a home
·         Whether theirs is also a sexual relationship
·         Their financial arrangements
·         Their mutual commitment to a shared life
·         The care and support of children
·         Who does the housework and other household duties
·         The reputation and public aspects of the relationship, eg are the partners known to family, friends, colleagues and in the community as a ‘couple’?
 
The presence or absence of some of these factors does not necessarily mean that a relationship exists. The Act states that the court is entitled to have regard to such matters and to attach such weight to any matter, as may seem appropriate to the court in the circumstances of the case.
 
So having now read a little more about the law changes you will appreciate that you need to take some action to prevent the provision of the act potentially having an adverse affect on you and your family.
 
A couple of statements and a question for you to consider
·         It is almost certain that one of you will die before the other and there is a strong possibility that the one of you that is left will form another relationship
·         It is highly likely your children will form relationships/marry. The statistics show the failure rate of the relationships of more than three years duration to be approximately 30%
·         Do you want your child’s partner to get half of what you have left to your child?
 
 
We have a solution – INHERITANCE TRUSTS
The days of a couple leaving their assets to each other by way of Will and the last surviving one then leaving them equally to the children are gone.
 
Take the situation of Bill and Betty Brown and their son Peter and their daughter Sally. Let’s assume Bill dies first and then Betty becomes involved in another relationship, the trust Bill and Betty set up (BROWN FAMILY TRUST), keeps the family assets safe during the remainder of Betty’s life. When Betty dies the assets are resettled into Peter and Sally’s Inheritance Trusts.
 
The Structure detailed below gives you the protection from future partners and also protects your children from any relationship problems they may have in the future.
 
  
If Peter or Sally wants funds from their trusts they take them as a loan/mortgage and thereby protect them from becoming relationship property. Then in the event of their relationships failing the funds will be repayable to their trust.
 
Simple but effective. The legal opinion we have dealing with trusts and the new act states “Assets which are transferred into a trust will not be relationship property if subsequently a relationship develops unless the assets are distributed and merged into the family assets of the couple”.
 
Costs
The fee structure for these is quite simple. For each trust deed there is a fee of $300.00 plus GST with a maximum cost per family of $1500 plus GST.
 
As these trusts in the effect remain dormant until such time as they are funded, usually after the parents have passed away, there are no other costs involved and no ongoing costs until the trusts become active.
 
You may well ask the following questions:
WHY INHERITANCE TRUSTS WHEN THE LAW HAS ALWAYS PROVIDED FOR AN INHERITANCE TO BE SEPARATE PROPERTY?
Yes an inheritance is treated as separate property provided it is not INTERMINGLED. Just imagine this situation;
·         Peter is married, owns a house jointly with his wife and has a mortgage of $100,000
·         Peter inherits $100,000 from his parents
 
If he pays off the mortgage he has intermingled the inheritance and its status as separate property is lost.
How does he tell his wife he is going to keep the $100,000 separate so as is to protect it from any relationship property claims she may bring against him if their marriage fails?”
 
An Inheritance Trust set up by Peter’s parents solves the problem
WHY NOT JUST CONTRACT OUT OF THE PROVISIONS OF THE ACT WITH A PRENUPTUAL/PROPERTY SHARING AGREEMENT?
For those of you who are couples and decide to do nothing other than to enter an agreement that says that the act will not apply to your relationship I urge you to consider the following statement made by one of the Law Commissioners:
”As the law stands there is no contracting out method that can be guaranteed to survive the tinkering urge of a Family Court Judge”.
 
You owe it to yourself and your family to find out more about the options available to you. Please call your adviser without delay to arrange an appointment to discuss your family circumstances.