September is Wills Month.

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.

Many people question, what is an independent trustee, what do they do and what value do they bring to my trust? What is an independent trustee? An independent trustee is a person or entity who act as a trustee of a Trust where that person or entity has no interest in the assets of the Trust - meaning they are not a beneficiary of the Trust and are not entitled to share in the assets of the Trust. An independent trustee is often a ‘professional trustee’ such as a lawyer or an accountant. However, a trustee does not have to be a ‘professional’ to be independent, they just have to be a person who is not a beneficiary of the Trust. Why should you have an independent trustee? Having an independent trustee is not a legal requirement under the Trust Act 2019, however is recommended for the following reasons: More credibility for the Trust and is less likely to be susceptible to any successful legal challenge in the future; Adds an element of transparency to the Trust, so if any third party is looking at the Trust they can see that there is an independent person who is moderating the decisions of the trustees and ensuring the Trust is not regarded as a ‘Sham Trust’ and therefore losing any protection the Trust was intended to provide; Assists in the better management and administration of the Trust. As outlined above, often the independent trustee is a solicitor or accountant who is familiar with trust legislation and can ensure that the Trust is complying with the Trusts Act 2019. They also may have an ongoing relationship with the family which supports an understanding of the underlying reasons for the Trust; and Some trust deeds require the Trust to have at least one independent trustee. Having a Trust to protect assets will only work if the trustees carry out their functions correctly, which includes administering the Trust properly. This is where an independent trustee can assist the other trustees by ensuring the Trust and trustees meet their legal duties and responsibilities. The implementation of the Trusts Act 2019 has increased the scrutiny on Trusts, trustees’ duties and increased potential liability. These changes require independent trustee(s) and independent trustee companies to be more active in the administration of and record keeping for your Trust. As a result, there are a number of independent trustees who are either resigning, declining to take on new Trusts, or are charging an annual fee on the basis of the independent trustee services. Now is as good a time as any to consider whether an independent trustee is required for your Trust, and to review your trust deed and individual situation to make sure your Trust is fit for purpose and complying with current requirements under the Trusts Act 2019.