Articles by Janet Xuccoa

Everyone tells you to put your assets into Trust and they even tell you what benefits a Trust will bestow upon you but very rarely does anyone take the time to explain what a Trust actually is.

Well this blog post is going to do just that!!!

What Actually IS a Family Trust

A Trust can be described as many things and is often thought of as a device, a holding vessel or a protection vehicle. Sometimes it’s helpful to think of a Trust as a concept and if I apply this analogy I would liken a Trust to a ship, travelling over high seas. The Captain and his staff are charged with steering the ship, looking after the passengers and the ship’s cargo. Thus, the Captain and his staff are the Trustees. The passengers are the Beneficiaries and the cargo can be thought of as comprising the assets of the Trust.

But in my view however, a Family Trust is a whole lot more than simply a device or a concept. It’s more a collection of relationships. The person creating the Trust (called the Settlor) has a relationship with the people they put in to run the Trust for them (called the Trustees). The people in charge of running the Trust also have a relationship but their relationship lies predominately with the people the Trust has been set up for (called the Beneficiaries).

So in a Trust a daisy chain effect is occurring. The Settlor places their faith in the Trustees to run the Trust in accordance with the rules they have laid down in the trust deed and the Beneficiaries place their trust in the Trustees to look after the assets of the Trust and to act in their best interests.

For those readers who want to know how a Trust is defined in legal speak, its often been said a Trust comprises a set of equitable obligations with the Trustees owing obligations to look after the property they have control of for the benefit of the Beneficiaries.

How Long Does A Family Trust Go On For?

How long do all these relationships go on for? Well that will depend.

First, the Trustees generally, in the ordinary course of events, will only owe an obligation to a Beneficiary whilst they are actually a Trustee. So as soon as they retire or resign as a Trustee, their obligations cease.

Secondly, all these relationships will come to an end when the Trust ends. When does this occur? In the first instance, it will be within 80 years of the Trust being set up because a Trust cannot exist for more than 80 years at law. But in some cases, a Trust is brought to an early end by the Trustees. This process is called ‘early vesting’ and it simply means bringing the date that is specified in the trust deed forward. So when this happens, all the relationships will cease as well.

Why Would You Even Want A Family Trust?

Lots have been written about the reasons why someone would want to set up a Trust but in the main, there are 4 motivations for creating a Trust:

Reason 1 – Asset Protection

In my view this is probably the primary rationale for setting up a Trust – to move assets into the Trust so they become protected against creditors, WINZ and other parties. But remember, if the documentation isn’t correct and if the transfer documents don’t contain those special Hawkins and entrenchment clauses we so often talk about, asset protection will indeed be threatened.

Reason 2 – Tax Minimisation

I’ve said it often enough – no one wants to pay more pingers to John Keys than what they have to. Trusts, if established correctly, can help you legally minimize your taxation liabilities. A caveat however applies. You must take specialised advice when setting up Trusts and other structures to ensure the structure is tailor made to suit you and your circumstances.

Reason 3 – Asset Testing

I’ve already written a blog about this so there isn’t much of a need to say anything lengthy here expect this – if you need help in the form of a subsidy from the government, such as a rest home subsidy, you will be means tested. If you own nothing, the subsidy will be available immediately. Moving assets to a Trust under the GRA method means you will be asset poor but you will have control over the assets that are held by the Trustees of your Trust. Remember the GRA motto – own nothing but control everything!!!

Reason 4 – Provision for Future Generations

Often a family will acquire assets and will want to ensure future generations can enjoy those assets. For example, Mum and Dad might buy a Kiwi Bach and want their children and their grandchildren to be able to enjoy it for years to come. One way of ensuring the asset is protected for future generations to use and enjoy is by putting it in a Trust with specific trust deed provisions so that the Trustees cannot sell the asset in future times.

SUMMARY

From reading this article you might already know how I think a Family Trust can be explained. Simply put, I believe it’s a whole set of relationships which help you lose your tie and keep your shirt. Those relationships help you relax because by their very existence they protect your hard earned assets now and in the future for you and your family.

So ... if you want a bit of peace of mind and if you are serious about protecting what’s yours, please contact me me to discuss establishing a Trust. Alternatively, if you already have a Trust in place and want to ensure you get the very best out of it, call me and I will help you travel those high seas safely.

Best wishes,

Professional Trustee Services
Gilligan Rowe + Associates Ltd
Chartered Accountants

Learn more about Janet
Email: jx@gra.co.nz
Ph: +64 9 522 7955

P.S. Did you like this article? Go ahead and sign up to our free newsletter and receive tips, updates and useful information to help you protect your assets and grow your net worth.  GRA are accountants who provide expert accountant advice both in NZ and offshore.

P.P.S.  Check out our sister website, www.familytrusts.co.nz for more family trust information.

Many people ask me what is a professional trustee is, what they do, and what value they can bring to a trust. Often, these people are considering how they want to structure their asset holdings and what sort of return they want to make from them.

The simple answer is that a professional trustee who does their job keeps you out of trouble and usually, out of expensive trouble that you wouldn’t have seen coming.

We’re like the Family Trust Police.

What is a Professional Trustee?

A professional trustee is a person (or a company) who acts as a trustee of a trust. That person (or company) has no interest in the assets of the trust – that is they are not a beneficiary of the trust and are not entitled to share in the assets of the trust.

What does a professional trustee do?

Generally speaking, a professional trustee’s function is to work with the other trustees of the trust in looking after the beneficiaries, the trust assets and in administering the trust. The difference is that a professional trustee is trained to understand what has to be done when running a trust.

Some of the functions professional trustees carry out are:

• arranging meetings with the other trustees to discuss transactions the trust is going to undertake, such as buying property, purchasing shares, obtaining loans, etc;

• making unanimous decisions with the other trustees;

• considering the existing investment policies of the trust and discussing with the other trustees whether these policies should be changed;

• signing appropriate documents with the other trustees such as agreements for sale and purchase and loan documents;

• Ensuring all the decisions the trustees make and the affairs of the trust are correctly recorded in minutes and in deeds;

• checking gifting is completed;

• other miscellaneous matters such as checking insurance policies are up to date.

Ultimately, a professional trustee’s role is to check that the interests of the beneficiaries are considered, the assets of the trust are protected for those beneficiaries, and the trust is running correctly.

Why Should you Have a Professional Trustee?

It is important to remember that trusts are set up for a variety of reasons such as protection against means testing (eg: aged care fees), a defence mechanism from property relationship claims, and for asset protection.

However, a trust will only protect assets if the trustees carry out their functions correctly: This includes administering a trust properly. If trustees don’t meet their duties, allegations can be made that the trust is a sham and if those allegations are substantiated, asset protection can be lost. Ultimately, this can result in the trust assets being made available to satisfy claims, for example claims by creditors.

As noted above, professional trustees assist other trustees by ensuring all of them meet their legal duties and responsibilities. For instance, a professional trustee can make certain the trustees meet regularly and record all the transactions the trust undertakes.

Additionally, the presence of a professional trustee who does their job right can demonstrate that the trust is real. Assuming the professional trustee carries out their functions properly, the chances of a successful allegation of sham trust should be minimised.

Professional trustee fees

Professional trustees usually charge fees, on the basis of holding the position of trustee. It is a small amount of money for the security received.  For more information on our Professional Trustee fees, please contact us.

Professional trustees will take out insurance policies in respect of their functions and there is a cost to this. Also, professional trustees may charge for the work they do on behalf of their co-trustees and on behalf of the trust.

For example, a professional trustee can charge a fee for preparing minutes and executing documents.

Recently, in a couple of cases, the courts favoured the appointment of professional trustees. These cases showed that having a professional trustee gave credence to the existence of the trusts and the transactions undertaken by the trusts. So, despite the fees that may be charged, serious consideration should be given to appointing a professional trustee.

So in Summary:

Having a professional trustee is not legally necessary, but it can be an enormous advantage. Professional trustees are usually well acquainted with trustee duties and what action has to be taken to satisfy those legal responsibilities.

By a professional trustee assisting in all trustees meeting their obligations, such as having meetings, making decisions, looking after trust assets and correctly documenting and administering trust affairs, the chances of successful allegations of sham trust are decreased.

Whilst a mechanic isn’t legally required to carry out all car repairs, most people want to ensure their car is safe and so usually have a mechanic do repairs.

Not using a mechanic might save a few dollars but ultimately, could result in some nasty consequences. Having a professional trustee who carries out their functions is much the same – the benefits can far out weight any costs involved.

Individual trustees are often busy people, leaving little time to administer the trust under their control.

Additionally, just like many of us don’t know how a car engine works and wouldn’t know how to carry out car repairs, many people don’t know how to meet their trustee duties and how to administer a trust.

Remember, trustees are personally liable to all the beneficiaries of a trust and unfortunately, ignorance of their duties is no excuse in the eyes of the law.

Thus, DIY trust administration practice is not dissimilar to undertaking car repairs – savings on professional trustee fees may seem a great idea initially but those savings can be outweighed by the costs faced when a trust structure fails through DIY practice. Cheap can be expensive in the long run.

We have now just completed the end of the financial year and this is an ideal time for trustees to ensure trust administration has been done correctly.

It is also a good time to consider whether appointing a professional trustee is warranted.

Check out our Family Trust as well as our Professional Trustee section of this website for more information, or if you have a question or would like to speak us, please contact us now.  We're here to help.

Professional Trustee Services
Gilligan Rowe + Associates Ltd
Chartered Accountants

Learn more about Janet
Email: jx@gra.co.nz
Ph: +64 9 522 7955

P.S. Did you like this article? Go ahead and sign up to our free newsletter and receive tips, updates and useful information to help you protect your assets and grow your net worth.  GRA are accountants who provide expert accountant advice both in NZ and offshore.

P.P.S.  Check out our sister website, www.familytrusts.co.nz for more family trust information.

Hello Everyone,

This week I had an interesting conversation with two individuals who had received some really poor advice from their advisors. This advice has cost them dearly in terms of the assets they are about to lose. But the rot doesn’t stop there as the loss of their assets will have a long term effect – it will most definitely deprive their children of their inheritance.

[By the way the lessons from this story will be covered in my next upcoming Auckland seminar entitled "Family Trusts Tips & Traps" ].

The story goes something like this ...

Mr and Mrs Smith were offered a business opportunity which they decide to take up. Before they did so, they approach their advisor who told them to set up a Trust and move their family home into the Trust. This would of course bestow asset protection upon the home the Smith’s were told. And the Smiths being sensible individuals relied on that advice.

A Trust was duly set up and the Smiths sold their family home to that Trust. Because the Trust did not have any money to pay the Smiths for the home, the Trustees gave the Smiths an IOU – a Deed of Acknowledgment of Debt in legal speak.

At this point the first error was committed. There was no Hawkins or Entrenchment clauses in the IOU and we all know what that means. Just in case you don’t however, don’t worry. We are going to tell you because this would be one of the largest mistakes we see when Trusts are set up and IOU’s are given out.

The Smiths were then told to enter into a gifting programme and to forgive $27,000 of the debt each and every year that was owed to them by the Trust. Again, the Smiths being the sensible individuals they were, relied on that advice. They were also under the impression that their advisor would take care of preparing the gifting documents for them on an annual basis. After all, it was the advisors job to do this.

At this point the second error was committed. The advisor didn’t run a computerised gifting programme. That advisor simply ran a paper spreadsheet. Unfortunately, the other member of their staff, who was also responsible for completing Trust work, also ran a manual paper spreadsheet. Neither the advisor nor the staff member had regular Trust Department meetings so neither of the spreadsheets were ever checked to ensure that all clients actually got put on to a spreadsheet. Truly a recipe for disaster!!! As it turns out, clients gifting was often missed because they were never noted on either of the manual spreadsheets.

If the above two errors weren’t bad enough a third error was committed. It was this error that was truly fatal for the Smiths.

The Smiths business venture was really going well so they decided to sell their house and get a bigger one. This did mean they would have to take on a bigger mortgage but because the business was prospering, the thought of a larger loan didn’t bother them. So they instructed their advisor to attend to the conveyancing of the property. Once the house was sold, the sale proceeds were placed in the Smith’s personal bank account. We all know the danger of this, but just in case you don’t worry. We will tell you and we’ll do this because this is another very, very common mistake we see.

After the house was sold, another business opportunity came up in connection with their existing business. This opportunity however would require the Smiths to move overseas for a couple of years. They decided to take up this new business venture, so delayed buying another house. They were unsure about what they should do with their Trust so they called their advisor.

The advisor told the Smiths to put the sale proceeds they got from their home on term deposit and that there wasn’t any further need to gift as they were now heading overseas. Therein lies the nail in the Smiths coffin unfortunately but the Smiths, holding the view that their advisor knew what he was talking about, relied on that advice. They did indeed put the sale proceeds in a term deposit account held in their personal names and they did indeed stop their gifting programme.

All went well in the lives of the Smiths for about two years. But then the market turned. Their business overseas went into liquidation. They returned to New Zealand to find the manager they had left in charge was not coping and to make matters worse, the market in New Zealand had also changed. What was once a profitable business, was now in the red. Rather than producing money each and every month, all it produced was more debt.

The New Zealand business duly went into liquidation, leaving a sizeable debt owed to the Bank. At the time when the Smiths originally purchased their New Zealand business they gave a personal guarantee to the Bank. But don’t worry – the Bank got paid in full!!! How? Easy. The sale proceeds on term deposit were held in the individuals personal names so the Bank simply applied the guarantee against those proceeds and took them, crediting those monies against the monies the New Zealand business owed them. We’ve told everybody for years how to handle the Banks. Don’t worry if you are unsure about this point. We’ll gladly tell you because this is probably one of the largest traps people fall into.

How could all of this been avoided? What does this have to do with stopping the gifting programme? How do you handle the Banks?

To find out the answers to these questions and the ones we’ve highlighted above, simply come to my next seminar called “Family Trusts Tips and Traps”.

Go on - Register Now. It could save your assets – even if you don’t go into business!!!

All the best, Janet.

Professional Trustee Services
Gilligan Rowe + Associates Ltd
Chartered Accountants

Learn more about Janet
Email: jx@gra.co.nz
Ph: +64 9 522 7955

P.S. Did you like this article? Go ahead and sign up to our free newsletter and receive tips, updates and useful information to help you protect your assets and grow your net worth.  GRA are accountants who provide expert accountant advice both in NZ and offshore.

You’ve worked hard for what you have and to ensure your assets are protected, you’ve gone to the trouble of putting them in a Family Trust. Now those assets are protected for you and your loved ones – for the Beneficiaries of the Trust.

But what happens when the Beneficiaries want the assets? Can your children or say other Beneficiaries, such as your siblings, get access to those assets? Can they find out what’s in the Trust and what they’re entitled to? Are they entitled to know all about the Trust and its affairs?

Unfortunately, human nature being what it is, this issue comes up more than most people would like. Usually, like all human being issues, feelings of suspicion, distrust and jealousy underline the problem. And just like a lot of issues, responding to the problem in either a confrontational manner or limiting the communication between Trustees and Beneficiaries doesn’t help.

What is helpful is understanding what information Beneficiaries are entitled to and then, having an open dialogue with an aim of improving matters – maybe even improving the relationship which is frequently at stake.

The Courts Decide

Traditionally, what a Beneficiary could and couldn’t see was based on whether they were a Fixed or a Discretionary Beneficiary. Fixed Beneficiaries had an entitlement to the assets of the Trust and so had a right to view all Trust documents, including financial accounts. Discretionary Beneficiaries on the other hand, had only an entitlement to be considered by the Trustees when those Trustees were handing out cash, capital and assets. As such, Discretionary Beneficiaries had no entitlement to view Trust documents.

Thankfully, we moved from that position. Now it doesn’t matter if a person is a Fixed or a Discretionary Beneficiary because now, it is up to the Courts to determine what documents a Beneficiary is entitled to see.

Under the ‘inherent jurisdiction’ approach a Court says it has the ability to supervise and if necessary, to administer a Trust and therefore, a Beneficiary has a right to approach them to seek disclosure of Trust documents. Ultimately this means that it is up to the Court’s to determine what a Beneficiary can and cannot see.

Courts are mindful creatures. They implicitly understand human relationships – after all they deal with human issues every single day. With this understanding, they exercise their discretion and engage in a bit of a balancing exercise. They weigh up the competing interests of different parties (eg: trustees and beneficiaries and third parties) and consider a myriad of issues including personal and commercial confidentiality, parties privacy, consequences of disclosure, etc.

Additionally, they are aware that Trustees do not have to disclose to Beneficiaries their reasons for exercising their discretionary powers. This point is particularly important because it can have an effect on what the Court’s ultimate decision is – what the Court will decide a Beneficiary can and cannot see.

Sometimes, at the end of this balancing exercise, the Courts decide that disclosure should be limited and safeguards should be put in place. Often this is to protect the relationships within the family.

Look What The Beneficiary Found

In the past, the Courts have said the types of information listed below should be disclosed to Beneficiaries. Remember, each case is decided on its own merits so the items noted on this list are not set in concrete.

* Deeds of Trust;
* Deeds of Variation of Trust Deed provisions;
* Deeds of Changing of Trustees;
* Deeds of Resettlement;
* Legal opinions relating to the interpretation of a Trust Deed’s provisions;
* Legal opinions with respect to a Beneficiary’s rights;
* Valuations of assets of the Trust; and
* Financial accounts of the Trust.

Some Secrets are Better Left Just That – Secret

Historically, under case law, Courts have said that Beneficiaries do not have a right to the types of information I have noted below. Read this list with the above Caveat – Courts can decide something different depending upon the facts of the case before them.

* Letters from Settlors to Trustees;
* Notes from Settlors to Trustees;
* Memorandum of Wishes made by Settlors;
* Notes made by Trustees setting out their reasons for the decisions they have made; and
* Statements which show the motives of Trustees.

Raiding the Trust

So the big question is now that the Beneficiaries have the financial accounts in their hands, what can they do with that information? Well, one common tactic is they can apply to the Courts for an Order, which would state that monies due and owing to them are in fact, paid to them. For this reason, it’s important to deal with the allocation of Trust income each and every year.

Any income that has been allocated to a Beneficiary and shown as such in the financial accounts may be called by that Beneficiary to be paid to them upon them becoming adults. A Court Order can also require this. Hence, in my view, only income that is to be spent on a Beneficiary should be allocated to them in the Trust’s financial accounts. Failure to allocate income in this manner may result in a Beneficiary requiring a Trustee to pay them the surplus income that appears as a credit in their Beneficiary account shown in the financial accounts of the Trust.

Summary

Like all human problems throughout time, good dialogue can solve the insurmountable. This is because open communication fosters goodwill and trust between people. If goodwill and trust exists, there is less of an opportunity for secrecy and distrust to creep in.

Trustees and Beneficiaries are human beings and human beings respond positively to people being honest and clear with them. So the order of the day is to seek opportunities to promote positive communication between each other.

In my view, it is really irrelevant whether a Trustee has to legally show a Beneficiary a Trust document or not. If a Beneficiary has had to approach a Court to get an Order to see the Trust documents, the relationship between the Beneficiary and the Trustee is in trouble and that is where the real problem exists.

Being clear and honest with Beneficiaries when they ask about a Trust’s affairs is a sensible thing to do as it preserves the relationship. Failure to do so will simply create suspicion and exacerbate tension. Remember ... a Trust, is about relationships and about looking after assets for the future. So in the name of Trust, taking time to care for relationships and teaching Beneficiaries about money, assets and protection will ultimately ensure the future that you are working hard to provide for is kept secure.

Professional Trustee Services
Gilligan Rowe + Associates Ltd
Chartered Accountants

Learn more about Janet
Email: jx@gra.co.nz
Ph: +64 9 522 7955

P.S. Did you like this article? Go ahead and sign up to our free newsletter and receive tips, updates and useful information to help you protect your assets and grow your net worth.  GRA are accountants who provide expert accountant advice both in NZ and offshore.

P.P.S.  Check out our sister website, www.familytrusts.co.nz for more family trust information.

Dear reader,

Thinking about and planning for our death is understandably a subject that most people prefer not to think about.

It comes as no surprise to us, because we see it every day, that many people just simply do not plan for what happens to their assets and estate when they die.

With a bit of thought and a small financial and time investment, we all have the ability to save enormous amounts of pain and money from being inflicted on the people we love after we’re gone.

Here are four estate planning issues to consider if protecting your future is important to you:

Don’t leave your residual estates to your spouses personally.

If your Will directs that your residual estate is bequeathed to your spouse you are in effect, adding to their asset base. This places assets at risk and also prolongs gifting programmes.

A better approach is to bequeath the residual assets of your estate to a Trust. Bequests under a Trust are free of gift duty restrictions meaning that the assets lie within the Trust without the need for them to be gifted.

The surviving spouse is then not burdened with the additional gifting programmes.

Not forgiving any ungifted loan balances.

If you have a Trust and you are conducting a gifting programme you need to make sure your Wills “tie in” with the Trust. This means that Wills should forgive any ungifted loan balance owed to you by the Trust. This brings gifting programmes to an end and prevents the surviving spouse from being burdened with extra gifting.

There is however an important proviso to this:

Make sure you have two Deeds of Acknowledgement of Debt – if you are to forgive any ungifted loan balance in your Will you need to make sure that you have separate Deeds of Acknowledgement of Debt.

One of the pitfalls we often see is joint Deeds of Acknowledgement of Debt. Where a Trust recognises a debt to two spouses jointly, on the death of the first spouse the survivor inherits the full gifting programme.

This is obviously not ideal and can be avoided if you have two separate Deeds of Acknowledgement of Debt and separately provide to forgive those under your Will.

Not thinking about the succession of your Trusts.

We often see Trusts established with the Power of Appointorship passing to a person nominated under their current Appointor’s Wills or to the executors of their estate.

Then we find that no such nomination is made in the Wills or our clients are unaware of the fact that their executors of their estates will assume this important power in respect of the Trust.

Therefore it is very important from an estate planning perspective to understand who holds the Power of Appointorship and how it is passed on. In our view the best practise is to have the Trust Deeds make it clear that a successor to holding the Power of Appointorship can be named in your Wills and name them there.

If you would like your situation reviewed, you can contact us and arrange an interview. It costs nothing to take the first step. We’ll make recommendations that will be easy to understand. And when set up, these structures will ensure that any surviving spouse or family members will not be unduly hurt.

To get personal help you can Request an Interview right now.

Congratulations!  You’ve scrimped, scraped and struggled. But you’ve managed it! Yes, you’ve got your foot on the first rung of the property ladder. Finally, you have a place of your own.

Just like a game of snakes and ladders though, you can easily slip down and even fall off that property ladder.

So ... here’s some tips on how to play the game – how to avoid the snakes that might just pull you down.

Step 1:  Fail in Business

One of the most common ways to lose your home is through business failure. This happens when a person borrows money to start or even purchase the business.

The lender (eg: the Bank) happily lends the money to the business owner but in return, requires security. Usually the borrower will put up their home as security.

When the business goes ‘bust’ and the borrowers can’t meet the repayment to the lender, the lender forecloses and takes the home.

Often this can be avoided. How? By simply getting good professional advice before buying the business.

Take for example Karen. She found a great retail clothing business in Auckland. Karen thought the business would do well and that she’d enjoy selling clothes. Trouble was, Karen didn’t have enough money to buy the business so she approached her Bank. The Bank lent Karen $90,000 and took her home a security.

After 4 months in business, Karen was at her wits end. It seemed to her that the more stock she sold the more money she lost. Worse still, she couldn’t afford to make her monthly repayments to the Bank. The Bank finally lost patience and repossessed her home.

Her friend suggested she approach a good Accountant and get some advice. When the Accountant looked at Karen’s financial data he found all sorts of problems, including the fact that Karen had purchased the business and all its stock at retail prices and was selling the stock at retail prices. No wonder Karen wasn’t making any money.

There were lots of other issues as well that was dragging the business down – issues that all business owners need to consider.

The moral of the story here is pretty simple. Get some good solid professional advice on the financial health of the business before you buy it. Sure a couple of hours of Accountant’s time might cost you a few dollars but that cost is nothing compared with paying over the top prices for a business and losing your home in the process of trying to make a dying business profitable..

Step 2:  Get Divorced or Separated

Samantha hadn’t had an easy time of it lately. Both her parents had died in the last couple of years and she felt quite alone. The only silver lining in the black cloud was that she no longer had to worry about money. Her parents had left her their house and their life insurance had paid off the mortgage so she had a pretty good start in life.

Black clouds don’t last forever. Samantha finally met the love of her life and she felt like the luckiest girl in the world when David asked her to marry him. Things went well over the next few years for them. They had two lovely children and sold Samantha’s old family home and bought a new one for them all to live in.

Then events started to unravel. First, David lost his job. Then when he got another job he seemed to work really long hours. Things became strained between them. Finally, David told Samantha he was leaving. If that wasn’t bad enough, David wanted the house sold and half the sale proceeds so he could purchase a home for himself.

Samantha didn’t think this was fair. The home they now had was mainly paid for by the sale proceeds she’d got when she sold her parent’s old home. David didn’t see it that way and the battle between the lawyers began.

Eventually, Samantha and David settled their differences in Court. The Judge ruled their home had to be sold and the sale proceeds had to be split 50 / 50. The Judge said that Samantha had ‘intermingled’ the sale proceeds she’d got from her parent’s old home to the point where those proceeds had become ‘relationship property’, which was to be split evenly between them.

The result of this sorry story was Samantha not only lost her marriage but in effect lost her matrimonial home and her inheritance from her parents.

How could this awful outcome have been avoided?

Well we aren’t in the business of marriage guidance but we do know that taking good asset protection advice and putting in steps to protect her parents’ home and the resulting sale proceeds would have saved Samantha’s inheritance.

Everyone who wants to protect their inheritenances should think about asset protection and the steps they need to take. And those steps need to be taken before trouble is on the horizon

Step 3:  Pay Rest Home Fees

Bruce and Julie had worked all their lives to build up their assets. They’d paid their taxes and tried to contribute to society. Bruce frequently helped his neighbours out doing odd jobs for them and Julie worked as a volunteer for the Blind Institute. They’d based their life on a simple philosophy – look after family and friends and help our where you can.

During their lives they’d done pretty well for themselves considering where they’d started from, which was ground zero. They had a nice house and were feeling comfortable with their lot. They’d been blessed with two children and now they even had grandchildren which they loved dearly.

At the age of 60 however, tragedy struck. Julie had a heart attack and died. The family rallied around and helped Bruce as much as they could. Two years later the family suffered another blow – Bruce got diagnosed with Alzheimer’s disease.

It was awful for everyone to watch as slowly Bruce forgot who they were. Eventually, the family had no choice but to put Bruce in a rest-home where he could get the care and support he needed 24 hours a day. Trouble was, rest home care was expensive – really expensive. $850 per week was what the rest home wanted and that didn’t include any extras such as taking Bruce out for day trips.

The family approached the Ministry of Social Development and requested a residential care subsidy be granted to Bruce. The Ministry told them that before Bruce was eligible for a subsidy, he had to use his own assets as they only granted subsidies to people who had less than $180,000 worth of assets.

This threshold of assets was a real problem. Bruce owned the house he had been living in and it was worth around $310,000. After much discussion, things were worked out. The subsidy would be granted the Ministry said. The downside to the solution was the subsidy would be treated like a loan. So when Bruce finally died, the house would be sold and the loan would have to be repaid back to the Ministry.

Bruce lived for another 6 years in the rest home. The total amount of his rest home care came to $265,200. By the time real estate agents fees were paid and the loan was paid back to the Ministry there wasn’t much left. – only around $35,000.

The sad part about this story is that Bruce and Julie would have wanted the house to have gone to their children. They’d worked hard to create a life and leave their children an inheritance and that had all been lost to the Government.

What could have been done to protect the children’s inheritances?

Well, taking some sound professional asset planning advice wouldn’t have gone astray. Putting the home into a Trust before Bruce needed care would have definitely have helped.

Anyone wanting to protect their assets and the inheritances they want to leave their children should take steps to implement an asset protection programme.

Summary:  What can you do?

Business failure, divorce and going into a rest home are common place events that happen in our lives. And these events are often beyond our control.

What we can have some influence over however is the effect these events bring about. Can we take steps to protect our assets and stop us losing our houses and inheritances?

In the words of President Barack Obama, “Yes We Can”. The very first step is to Request an Interview.  Getting some good advice and that advice is just one click away.

Janet Xuccoa BCom, LLB
Professional Trustee Services

Learn More about Janet
Contact Janet at jx@gra.co.nz or call
+64 9 522 7955

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P.P.S.  Did you know you can learn more about Family Trusts and Watch Video on this subject?  Help Yourself.