September is Wills Month.

Have you considered what will happen to your loved ones and the causes you care about after you’re gone? Did you know, you can direct gifts and distributions to your family whilst still making provision for charities you care about in your Will? In this way, your Will is much more than just a legal document, it is a way to protect and provide for your loved ones, and to leave a lasting impact. Why having a Will matters Having a Will is essential, as it ensures your wishes are carried out after you pass away. Your Will provides instructions on how your property, assets, and belongings should be distributed, making it easier for your loved ones and legal representatives to manage your estate. If you pass away without a Will (known as \"dying intestate\") and have assets worth more than $15,000, your estate will be distributed according to the Administration Act 1969. This means your assets may not be distributed how you intended and the process can be more costly and time-consuming for your loved ones. Creating a Will helps minimise stress, legal complications, and unnecessary expenses for your loved ones. Key Components of a Will The following should be covered in your Will: At least one executor, preferably two, who live in New Zealand. Executors are responsible for ensuring your wishes are carried out and handle the legal and financial matters, like ensuring your debts are paid and assets are distributed according to your instructions. Instructions for paying debts and liabilities. Adequate provisions for your partner and children. Clear instructions on who will inherit your property and possessions. Guardianship arrangements for any minor children (if applicable). Funeral wishes (not legally binding but should be considered by the executors). Bequests or gifts to charity. Leaving a Gift to Charity If you have regularly supported a cause during your lifetime then you may want to continue that generosity by leaving a gift to charity in your Will. Regardless of the amount, your gift can make a lasting impact. However, there are a few important considerations: Types of Charitable Bequests Residuary Bequest - A percentage of your remaining estate after other gifts and expenses have been completed. Pecuniary Bequest - A fixed sum of money or cash gift. Choosing Between a Fixed Amount or a Percentage of Your Estate Percentage-based bequest:  This is the recommended approach for charitable giving, as it ensures the gift remains proportional as the value of your estate might change over time, maintaining fairness among beneficiaries and prevents unintended financial imbalances. Fixed amount bequest:  This is a set amount of money you wish to donate. However, changes in your estate\'s value over time could result in the amount being larger or smaller than originally intended. If choosing this option, consider setting the funds aside in a separate bank account to prevent potential disputes or the money passing by survivorship if you currently have joint accounts with another person. Balancing charitable giving with family needs While charitable giving is admirable, it is crucial to ensure your estate can still provide for your loved ones. Leaving an excessive gift could lead to legal challenges under the Family Protection Act 1955, which allows family members to contest a Will if they believe they have not been adequately provided for. Additionally, it is important to assess whether the amount you plan to donate will be financially feasible as an unrealistic or excessive gift may fail and could create legal complications for your loved ones. Seeking legal advice can help you balance your wishes with your family\'s financial security. Ensuring your gift reaches the right charity To prevent confusion and ensure your gift goes to the right place: Confirm the charity’s full legal name and registration number through the Charities Register. This helps verify the charity’s legitimacy and ensures your gift is directed correctly. Consider including a discretionary substitution clause in your Will, which allows your executor or trustee to redirect your gift to a similar charity if your charity no longer exists, has changed its name or has merged with another charity.  This ensures your gift remains aligned with your intentions. Keeping your Will updated Your circumstances may change over time, potentially affecting the validity of your Will. You will need to review and update your Will from time to time, especially around key life events such as: Marriage, civil union, or separation/divorce. Changes in your financial circumstances. The birth or death of family members. Buying or selling significant assets, such as property which might be listed in your Will. Seeking professional advice To ensure the validity of your Will and that your charitable bequest is properly structured, consult with a legal professional. A well-drafted Will reduces the risk of disputes and ensures your bequest benefits both your loved ones and the causes you support.

A Power of Attorney is a legal document appointing a person or people to act on your behalf should you become unable to make decisions for yourself. There are two types of powers, “standard” and “enduring”. Standard Powers of Attorney (“PA”) A standard Power of Attorney is required when someone is unable to sign a document themselves.  A person may be unable to sign due to unavailability (out of the country or unwell), or physical impediment.  PAs are frequently used when there is a need for documents to be signed efficiently on behalf of someone else (ie. a business arrangement).  The PA can give broad signing powers to the Attorney, or can restrict those powers to only certain matters (ie. signing a particular contract). A standard PA is best used for temporary purposes, (eg. the duration of an overseas trip), and ceases immediately upon revocation, death, or when the person loses mental capacity. Enduring Powers of Attorney (Property) (“EPA (Property)”) An EPA (Property) provides your appointed attorney with the power to make decisions relating to your money and property, and “endures” after you lose mental capacity.  You may appoint more than one attorney to act at one time, including a trustee corporation.  An EPA (Property) can be effected immediately, or used only when you lose mental capacity.  An EPA (Property) continues in effect until you revoke your Attorney’s power, or you pass away. Enduring Powers of Attorney (Personal Care & Welfare) (“EPA (Personal Care)”) An EPA (Personal Care) provides your appointed Attorney with the ability to make decisions relating to your health and welfare, such as choosing a rest home or medical treatment.  While only a single private individual can be appointed at any given time, you may appoint successor attorneys.  An EPA (Personal Care) will only come into effect when you have lost the required mental capacity to make decisions surrounding your personal care and welfare. Enduring Powers of Attorney and Trusts An EPA cannot be used to make trustee decisions or deal with Trust property.  Trust property is not the personal property of the trustee, and therefore a trustee does not make decisions in their personal capacity. However, EPAs may become useful when an incapacitated trustee needs to be removed from a Trust, and there are no continuing trustees who are able to appoint a replacement.  In these instances, the person holding the EPA for the incapacitated trustee may remove the incapacitated trustee and appoint a new one. Why do you need Enduring Powers of Attorney? If you lose your mental capacity, and therefore your ability to make your own decisions, no one, not even your spouse, will be allowed to manage your affairs on your behalf unless authorised by you via an EPA.  Without an EPA, you may not be able to sell your house, manage your bank accounts or make important decisions concerning your health, living arrangements or related care decisions. If you lose mental capacity without an EPA in place, your family or next of kin will need to apply to the Family Court for orders under the Protection of Personal and Property Rights Act 1988 to appoint a property manager and a welfare guardian to make these decisions for you.  This process is both more costly and time consuming as it involves ongoing obligations and continued review of orders. Having EPAs prepared now will ensure that you have full power over the appointment of your Attorneys, and will save your loved ones from the stress and additional cost of applying to the Family Court. How do I get an EPA? You will need to contact a lawyer to prepare your EPAs, who will guide you through the process.  They will ask you for the following information: Who you want your Attorney to be. Select the Attorney carefully and consider whether you would like anybody else to have oversight of your Attorney’s decisions.  It is vital that the person you select is one that you trust to understand and respect your wishes, and make important decisions that will affect you. Any conditions to your EPA, provided these are practical and realistic (eg. whether you want back-up Attorneys, and the scope of the decisions your Attorney can make). In order for your EPAs to be valid, a lawyer must advise you on the full document and witness your signature. To get the process started, get in touch with Holland Beckett and our EPA experts will assist you.

Safeguarding your Legacy Trust structures have been a cornerstone of asset protection for centuries, particularly for those wishing to safeguard valuable assets like investment portfolios. However, the legal and tax landscape is constantly in flux. To ensure these structures remain effective, individuals seeking asset protection should follow four key steps on their informed decision-making journey: First, it is crucial to grasp the basic concept of a Trust after the new Trusts Act 2019 which came into force on the 30th January 2021. This involves knowing how a Trust works and the roles of parties such as the settlors, trustees, and beneficiaries. Establishing a Trust involves thoughtful steps, including choosing an independent trustee who is not a beneficiary. The independent trustee’s role is to act in the beneficiaries’ best interests, avoiding or managing any conflicts. Understanding the purpose of the Trust is essential. This involves considering any specific needs or long-term goals for asset protection and aligning the Trust\'s structure and provisions to the desired outcomes. Finally, ongoing administration by the chosen trustees is vital to safeguard the best interests of the beneficiaries over time. Regular reviews ensure that the Trust complies with evolving regulations and effectively fulfils its intended purpose. Trustees Being a trustee comes with significant responsibility, given its fiduciary position. Understanding the Trust Deed thoroughly and adhering strictly to its terms is crucial. Trustees must exercise care, diligence, and act in the best interests of beneficiaries when making investment decisions. Delegating duties is not sufficient; active participation is essential. Trustees should maintain accurate  records and disclose information appropriately to beneficiaries. Additionally, addressing health and safety risks related to the Trust assets is part of their duty. Unanimous decision-making among trustees is mandatory unless the Trust Deed specifies otherwise. Tax Effective 1st April 2024, the tax rate for Trust income has increased from 33% to 39%, aligning with New Zealand’s top personal income tax rate. This change aims to create a more balanced system. However, there are exceptions: Trusts earning less than $10,000 annually will maintain the old 33% tax rate. Estates will benefit from a lower 33% tax rate in the year of death and the subsequent three years before transitioning to the new 39% rate. Trusts specifically supporting disabled beneficiaries, energy consumers, and legacy retirement funds will continue to be taxed at the lower 33% rate. With the recent increase in Trust tax rates, trustees have shown concerns about their ordinary actions being misconstrued as tax avoidance. To address this, Inland Revenue has issued guidance on permissible actions that, when devoid of artificial or planned elements, are unlikely to be construed as tax avoidance. These actions include: Adjusting a Trust-owned company’s dividend pay-out policy (for example, distributing retained earnings before the new rate or reducing dividends afterward). Directly distributing income to beneficiaries in lower tax brackets. Incorporating companies within the Trust for asset transfers at the 28% company tax rate. Investing in Portfolio Investment Entities (PIEs) with a 28% tax rate as a tax-efficient alternative to investments subject to the full 39% trustee tax rate. Winding up the Trust as a valid option in all these potential scenarios. Seeking ongoing legal, financial and tax advice in this respect is crucial. AML Effective 1st June 2024, New Zealand\'s Anti-Money Laundering and Countering Financing of Terrorism (AML/CFT) regulations introduce stricter Trust verification procedures. The key changes affect customer due diligence (CDD) requirements. Reporting entities must now obtain and verify specific details related to trusts: The Trust\'s legal structure and proof of existence (i.e. The Trust Deed). Ownership and control structure (identifying who ultimately controls the Trust). Governing powers that bind and regulate the Trust. Identity of the settlor(s) (person who established the Trust) and protector(s) (if applicable). It is important to note that, for AML/CFT purposes, the Trust itself is considered the \"customer\", not the individual trustees. Despite this, a Trust is legally classified as an “arrangement,” not a “person.” Consequently, CDD requirements also apply to the individuals who ultimately control the Trust—the beneficial owners. These individuals, including trustees, hold significant direct or indirect ownership or control over the Trust. While a settlor creates a Trust, they qualify as a beneficial owner only if they maintain substantial control, such as the power to appoint trustees amongst others. Key Conclusion Trust structures serve as powerful tools for managing wealth across generations. Generally, they offer significant advantages, including asset protection from creditors and streamlined wealth transfer to future generations. However, it is essential to weigh the costs, complexities and benefits. A thorough analysis of your specific circumstances will help determine whether a Trust remains the best approach, especially considering the changing tax landscape and increased administrative burden. Our team at Holland Beckett specialises in estate planning and trust matters and is ready to assist you.