Articles by Janet Xuccoa

SHOW ME THE MONEY HONEY

women and money

I reckon all women are in the protection business.  Just look around.  They are born Protectors.  They look out for their friends and family and are constantly trying to protect those they love.  They even look out for friends of friends.  Experience has shown me that women are frequently much better than their counterparts in dealing with wealth building and protection issues.  Let me give you a couple of examples.

protecting the family by putting a roof over their heads

For those old enough to remember, you will recall the time when you could capitalise the family benefit the government handed out.  At that time in history I was involved in completing the legal work for a  property building and selling company.  Couples would cash up 5 years worth of family benefits, save a weekly deposit themselves and purchase a home.  Many a kiwi family got their foot on the property home ownership ladder in this manner.  The main driving force behind most of these home purchases was a women.  In fact the salesmen use to say that if the female in the equation wasn’t interested, the sale wasn’t going to go through.  I guess there must be some truth in this sentiment because Real Estate Agents tell me that this is still the position today – if the women doesn’t like the home there isn’t going to be a sale no matter how much her husband likes the place.

keeping the roof over the family’s heads

When I worked for a firm of solicitors that acted for a Bank, I found out that women are very good at stepping up to the plate when trouble is on the horizon.  In this role, my job was to ensure the Bank’s legal documentation was in order so the Bank could sell up a Borrower’s home when they defaulted on their mortgage payments. It was a pretty sole destroying role but I learnt a lot about the law and about human behaviour.  When the money problems came about, they often occurred in those days due to a business failure. Nine times out of ten, it was the husband’s business that had failed and ninety-nine percent of the time, it was the wife that called me to discuss the issue.  The husband could frequently be found engaging in one of two activities; playing ostrich and ignoring all attempts by the Bank to deal with the matter or playing chicken and taking flight, leaving the wife to deal with the mess

tell me why

Because women are generally pretty good at getting and protecting wealth it surprises me that a perception exists that the female sex have trouble looking after and protecting their own affairs.

From what I have seen, it does appear that sometimes women don’t want to get too involved in the topic of money, or at least aren’t as interested in the green stuff as men are. That doesn’t mean however that women aren’t good with money.

This week I was giving a presentation about ‘all things money’ and I noticed that one women was having real trouble with the subject.  I wondered why that was.  Perhaps historically the subject had caused conflict within her own marriage.  Perhaps she found the language of money too confusing.  Perhaps she saw knowing about all things money as unfeminine. Perhaps it was even an historical family thing where money wasn’t openly discussed with her parents.  I’m unsure of the reasons and there are probably plenty.  What I do know however is that not knowing about money definitely puts women on the back foot and unnecessarily so in my view.

The way I look at it is if you are in a relationship and you understand about the green stuff, including what is going on in your Partner’s financial life, then as a couple you will be stronger. Alternatively, if you are on your own, then the buck stops with you so you may as well make each one count and get some understanding how moola is made, lost and protected.

Here’s a really interesting thing to consider.  Women, when they do get an understanding of money, make it, handle it and protect it in far better ways and to much greater degrees than men.  Women have uncanny capabilities and instincts when it comes to money.  Ask any Money Trader.  A women on a ‘Spot Team’ will often write far better deals, with greater consistency then her male team mates.

solution

In my view, if we are going to have to deal with the issue of protecting the family jewels we may as well get armed.   A little knowledge goes a long way and the right person on your Money Team can make an incredible difference.  Find a person who you feel comfortable with who has the education, skills and experience to help you.

Check out a couple of books as well.  Start with the basics.  Budgeting, insurance, risk, diversification, shares, superannuation and property.  Get a working Money Language of terms and definitions behind you.  Then move to understanding how to grow money. 

Finally, have a bit of a look at how you go about protecting money and those assets you purchase with the gold you’ve made.  My book ‘Family Trusts 101’ can help you on this score. I’m not Dan Brown and I haven’t written the Da Vinci Code but ‘Family Trusts 101’ is on the way to being a best seller.  It was only released in July of this year and we’ve sold thousands of copies so far.  It’s a small investment in your money future considering its cost is only $30.  You can obtain a copy by emailing or calling me. 

If along the way you have any questions about money or Trusts, let me know.  I’d be happy to help answer them.  If I’m not out and about presenting, you’re find me having fun with the team at Gilligan Rowe & Associates, Newmarket, Auckland.  My email address there is jx@gra.co.nz and my telephone number is (09) 522 7955.  Until I hear from you, happy travelling everyone with building your financial future and protecting what you grow. Ciao. 

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.

Money is a jealous mistress

One night last week, in a city away from my home, I found myself at a bit of a loose end.  Not a personality to skulk around, I used the time to see a movie I wanted to enjoy.  ‘Money Never Sleeps’ was my choice.  Not a bad movie as far as movies go.  Quiet realistic in parts although in my view, not as punchy as Michael Douglas’ first movie ‘Wall Street’. 

The following day I mulled over the script.  It struck me the main theme centred around the idea of making money.  The concept of actually protecting the money once the green stuff had been made, wasn’t really explored.  That I found particularly interesting because we all know money is a jealous mistress.  If you don’t pay attention to it, and that surely includes taking time out to look after it, you can wake up in the morning and find it gone.  Michael Douglas certainly knows this as it was one of his lines in the movie.  All this thinking of course has lead me to write this article.

the protection business

Undoubtedly one of the most sensible ways of protecting money and other assets such as your personal home, is to put those assets into a Trust.  Asset protection isn’t the only reason however for someone to use Trust.  Ensuring assets are available for the next generation is also a fairly popular rationale for Trust usage.  Additionally, the existence of government means testing provides a major motivating factor for establishing a Trust.  On this point, it’s my personal belief that means testing is highly likely to be brought into law in the future with respect to New Zealand superannuation.  Hence it wouldn’t surprise me one little bit if Trust usage increases for this reason alone.

means testing in the future

In the last 5 days, I’ve completed 16 presentations on the Budget Changes coming through.  One of those changes involves aligning the top marginal income tax rate with the tax rate Trusts pay.  According to the budgetary commentary that was posted, this alignment is being introduced so that New Zealanders wouldn’t spend time sheltering their income in Trusts.  Great line but I’m not buying it for one single minute.

Put three thoughts in your mind.  First, the Government has known for years that it will have trouble paying out superannuation in the future if no action is taken.  Secondly, when you move assets into a Trust, you are moving them from your personal name and identity into the names and legal possession of the Trustees of a Trust.  Thirdly, means testing is well and truly alive and operating here in the land of the long white cloud.

To assist in filling its coffers, the Government introduced Kiwisaver.  Initially this was optional to join.  Later it became compulsory but Kiwis had the ability to opt out on certain conditions.  In other words, the rules got changed.

Telling New Zealanders not to move their assets, including their income, into Trusts, just gives the Government the ability to means test Kiwis in the future.

Imagine this.  In about 15 years time, Mr Smith rocks up to the powers that be and asks for his fortnightly government superannuation payments.  The Government clerk requests he fill out an asset and liability schedule which establishes that Mr Smith owns his own home, bach, shares, a little cash and his own Kiwisaver fund all with a grand asset total of $1.2m.  Now on the basis that the entitlement to government superannuation is means tested, do you think Mr Smith will get his regular superannuation payments in full?

If you think I am wrong consider this.  Right now to get a rest home subsidy from WINZ you generally can have only $200K worth of assets in your own name and that includes the family home.  More than this and you are told to either sell down your assets and use your own money or a charge is put against your home.  Which means that when you die and/or the home is sold, the Government is paid back what they have been paying out up to certain limits.  Whatever is left over (which could be as little as $200,000 based on today’s figures) is then distributed to your heirs.

Medical science now keeps us alive for longer even if quality of life isn’t what it used to be.  So you can spend years in a rest home.  At an average weekly rate of $900 + GST for rest home care, the bill can really mount up.

I can hear some people out there saying Government superannuation will never be means tested.  Well if they can change the Kiwisaver rules they can certainly change the entitlement to Government superannuation.

If I’m wrong and you’ve put your assets in Trust all you suffer is great asset protection along the way.  If I’m right and your assets are in Trust, when you are means tested you will be able to state you own nothing and then will be entitled to collect your Government superannuation payments.

other reasons why you need asset protection

Its not just means testing we need to worry about.  We can lose our assets through a myriad of other ways such as a business failing or a personal relationship demising.  I’ve already written about these events in my free e-book so I won’t go into any detail here in this blog.  What I will say is that often it is outside your power to control events.  What you can frequently have however, is a large degree of influence over the consequences these type of events bring about. Download a free copy of my e-book to get the low down on this.

fear and control

There are lots of fears about moving assets to a Trust.  Probably the most common one is that people think they will lose control.  Not possible of course if the Trust is created correctly but the fear exists nevertheless.  So let’s put this worry to bed. 

When you create a Trust, you are creating a vessel.  This vessel like all containers will hold something, namely assets such as money, shares, homes, bachs, jewellery, artworks, etc.  Predominately anything that increases in value and that you want protected.

There are two very important people involved in a Trust.  These are Appointors and Trustees. The Appointor hires and fires the Trustees so they have ultimate control over the Trustees.  The Trustees’ job is to decide a variety of things including what assets the Trust will hold, buy and sell and who they will allow to use the Trust’s assets.  Clearly, if you are an Appointor and a Trustee you have great control over the actions of the Trustees and the assets of the Trust.

managing the trust

Not all Trusts are created equal and not all Trust documents ensure you get the benefits a Trust can bestow.  To demonstrate, let me tell you about Mr Smith.  He sets up a trust and puts his home into it.  At the time of transferring the home to the Trust, the Trustees give Mr Smith an IOU for the value of the home.  A couple of years later, Mr Smith incurs a large business debt and through no fault of his own, is unable to pay the money he owes his creditor.  The creditor subsequently sues Mr Smith and forces Mr Smith to call up the IOU.  This in turn, forces the Trust to sell the house.  The sale proceeds go to the creditor.  So, at the very time Mr Smith needed the Trust to protect his assets, it failed.  This sorry ending could have been avoided if the IOU had contained appropriate asset protection clauses.

The moral of this story is simply ... setting up a Trust and moving an asset into it, is not enough to ensure asset protection.  Documentation must be correct.  In particular, vital asset protection clauses need to be in the documents at the time the IOU is given.  Your GRA Professional Trustee can assist you with this.

Of course not only does a Trust’s documentation need to be in tip top shape but the Trust actually has to be managed.  This bit needlessly trips up a lot of people.  The golden rule is contained in what I have called the ‘Trust Commandments’ and it’s called the ‘3D Rule’.  Succinctly put, ensure you discuss, decide and document all the affairs of the Trust with all of the Trustees.  The discussing and deciding exercise is usually the easy part to complying with the 3D Rule.  It’s the documentation part that causes big problems.  Documenting what the Trustees have decided, why they have made their decisions and the basis of their decisions is vital and it’s crucial to get the wording of documents correct.  Failure to adhere to the 3D Rule can mean the Trust can be challenged as a Sham and all the benefits that the Trust bestows, such as asset protection, can be lost.  That’s not where the bad news stops however if a Sham Trust is found to exist.  Next comes along ugly tax consequences.  Big headaches in other words that no one needs.

smart people lead to smart solutions

An easy way to avoid all of the problems associated with managing a Trust is to put a smart independent professional trustee on your ‘A Team’.  These creatures are usually pedantic in nature.  They lie awake at night and worry about the little details in life that cause migraines if they aren’t attended to. 

Professional trustees need to have accounting and law degrees, skills, education and experience in pertinent areas to do their job well.  They need to understand a myriad of issues including business, insurance, finance, tax, accounting, equity and contract law to name but a few topics.  Chose your professional trustee well as the Trust and its affairs will be run only as well as your professional trustee’s capabilities expand to.  Another client war story will show you the point I’m making.

Mr and Mrs P landed around 500 pages of correspondence on my desk one Friday morning telling me they wanted to purchase a property that afternoon.  According to them, I had no need to read any of the correspondence or documents because their solicitor had already looked over the papers and was happy with everything.  Now my job as an independent professional trustee is to keep the assets of a Trust safe and in ship shape condition so there was no way I was going to sign a legal document without reading it first. 

Once I’d read the 500 pages I explained to Mr and Mrs P that I could not sign the legal papers.  I explained why as well but they were absolutely determined to proceed.  So quite simply, I dragged the chain.  I did all I could to delay matters. 

Sometimes you have to have big shoulders as a professional trustee. You have to stand behind, next to and if necessary, right in front of your clients.  That’s your job – protecting all assets.  It’s not always an easy role either, especially if your clients are giving you a difficult time.

I offered to resign as their professional trustee but told them that this would take about a week to sort out.  You see we needed a week to get the story to the media.  We knew once this happened, Mr and Mrs P would have cooled down and would not want to do this deal.

This story has a happy ending.  The newspapers picked up the story the following day.  One week later, I received an email from Mr and Mrs P.  It simply said “Thank You”.  We had just saved these clients around $500,000 and the transaction I’m talking about was buying a Blue Chip apartment.

It is true professional trustees do render fees.  We do.  Our fee is $250 a year.  I think you’ll agree however that’s a small price to pay in light of the financial disaster Mr and Mrs P were about to create with their Trust.  So you do need to be aware of fees but don’t ever be someone who knows the cost of everything and understands the value of nothing. 

summary

Michael Douglas was right – money doesn’t ever sleep.  Whilst it is awake and working however, it needs protecting.  There are 24 hours in a day, 7 days in a week and 365 days in most years.  That means protecting money is well and truly a full time job, one that a Trust is best equipped to deal with in my book.  Talking of books, if you have any questions about Trusts, let me know.  I’d be happy to help answer them.  You might also consider purchasing my book.  It’s called ‘Family Trusts 101’.  To be sure I’m not Dan Brown and I haven’t written the Da Vinci Code but ‘Family Trusts 101’ is on the way to being a best seller.  It was only released in July of this year and we’ve sold thousands of copies so far.  It’s a small investment in your money future considering its’ cost is only $30.  You can obtain a copy clicking HERE.  If I’m not out and about presenting, you’re find me having fun with the team at Gilligan Rowe & Associates, Newmarket, Auckland.  My email address there is jx@gra.co.nz and my telephone number is (09) 522 7955.  Until I hear from you, happy travelling everyone with building your financial future and protecting what you grow.  Ciao. 

I’M TELLING ALL !

After plenty of anxious moments and sleepless nights, I’ve done it. Yes, I have written a Book. “Family Trusts 101” has finally been born.

Trusts are never easy creatures to understand but I think this Book should help all New Zealanders comprehend the creation and administration of Family Trusts. In a way, it’s a ‘go to’ Book.

If you’ve ever been confused or frustrated about how a Trust is supposed to operate or if you’ve ever wanted to know the in’s and out’s of a Trust, then this book is a must read for you.

I’ve spent many days and months using my little grey cells to bring you a Book written in plain English. It’s an easy read, packed with great examples which will demonstrate the points I’m making.

You won’t need any previous knowledge to understand this Book as I’ve made a massive effort to ensure it won’t bamboozle you with legal jargon. So a word of warning should be given. If you are looking for a concise legal text on equitable structures, coupled with judicial dictum and ratio decidendi, then this Book is not for you!

If however you want a guide on Trusts, which covers the following points, then you should seriously consider buying this Book:

• How Trusts came to exist;
• What a Trust can do for you;
• Steps to take to place your assets into a Trust;
• What a gifting programme is;
• How Trustees should act;
• What a Professional Trustee can and should do for a Trust;
• Whether you need a Bank account;
• If financial statements should be prepared for the Trust;

And so much more.

I really hope you love reading this Book as much as I loved writing it.

Of course, this is the first of many Books so any feedback you wish to give me would be much appreciated.

The cost of this Book is $29.95 + GST + postage. To order your Book NOW please CLICK HERE.

To else see me talk more about my book on TV One's Breakfast Show Click Here

Happy reading everyone.

GREMLINS IN THE TRUST DEED
As you can imagine, we see lots of different types of Trust Deeds here at GRA. Despite there being a variety of Deeds around, there are some common provisions we like in all our clients’ Deeds of Trust. One of these provisions relates to decision making. I’ve been talking about this particular issue for about two decades now. Some people have commented I’m seeing Gremlins where there aren’t any but now, finally, we have a High Court case to prove this particular point. Gremlins can exist and when they come home to play, they can cost you big money. Read on to ensure you and your Trust don’t fall into this situation.

THE CASE
I won’t recite all the facts but the bare bones of the case are as follows. A Trust decided it wanted to purchase and develop some land. To complete the purchase, it needed to borrow funds so it approached a lender. The loan was duly granted and the legal papers were sent to the solicitor who was acting for the Trust. The solicitor called the Trustees together to sign the legal loan papers.

This Trust had 5 Trustees in total but only three of the Trustees actually turned up at the solicitor’s office.

The solicitor put before the Trustees the loan papers and gave them an explanation of the documents. It seems from the evidence given that none of the Trustees really fully understood what documents they were signing. They certainly didn’t appreciate the fact that they would incur personal liability for the loan. One of the three Trustees even went so far as to say that he just ‘assumed’ the documents must be ‘all right’ because his co-Trustees were signing them.

The loan was duly taken out and the land was purchased by the Trust. Of course there wouldn’t be a case if everything remained okay. But like a lot of things in life, things didn’t pan out as planned. The loan repayments weren’t kept up and the lender ended up suing the Trustees. This is where things got really interesting.

THE JUDGMENT
Remember I told you there were five Trustees in this Trust but only three Trustees turned up at the solicitor’s office and signed the loan papers? Seems the other two Trustees didn’t ever sign those loan papers. But that didn’t make them any less liable. Why? Because of the Gremlins in the Trust Deed.

GREMLINS AT PLAY
At the beginning of this article I said there were certain provisions we like all Deeds of Trust to have. One of those provisions is Unanimous Decision Making. What does this mean? Simply this. All Trustees, yes every single one of them, have to agree to a transaction before it can go ahead. If agreement cannot be reached, the transaction cannot proceed. Most importantly, one or the majority of Trustees cannot bind all Trustees, including the Trustee/s that don’t agree with the proposed transactions.

Why is having a Unanimous Decision Making provision so important in a Trust Deed? Well in the words of Associate Judge Doogue “... if a majority makes a decision, it must be the case that the minority are bound by it in all respects. Otherwise ... those dealing with the Trust could be confronted with a situation where some of the owners of the Trust property would agree to executing securities affecting their properties ... but the minority could defeat the contractual objectives of the parties by declining to co-operate.”


In other words, where there is a Majority Decision Making provision in a Trust Deed, enabling the majority of Trustees to bind all Trustees, including the minority, those that dissent must expect to be bound. The minority Trustees will be contractually bound and legally liable as if they had agreed and had signed the legal loan documents.

GETTING RID OF THE GREMLINS
What can you do to ensure you don’t have a Gremlin in your Deed of Trust? Try calling us to start with. Then let us review your Trust Deed. If you are not one of our existing clients and you bring in your Deed of Trust, we will often see you free of charge.

When we review your Deed of Trust, we will look for other provisions that we think should be in the Trust Deed. Provisions that will protect you and the assets of the Trust.

Most importantly, we’ll be on the look out for the Gremlins we know can lurk in a Deed of Trust. Gremlins that can cause havoc amongst Trustees and Beneficiaries.

We all know prevention is usually easier that cure. Prevention frequently saves us emotional heartaches and most importantly, money. So take some time now and send us an email or call us and let us check your Trust Deed.

All the best.

Janet Xuccoa BCom, LLB
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.

© Gilligan Rowe & Associates Ltd
Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.

Life has a great way of teaching us lessons and one big lesson I’ve learned is this - if you get the right people on the bus, sitting in the right seats, life just flows a whole lot easier.  So, what’s this lesson got to do with Trusts?  Well simple really.  If you are going to set up a Trust, then you should do it once and do it right.  Usually this means calling in the specialists who can give you appropriate advice, pertinent to your particular circumstances.

 
In my book a task that a specialist will always have is to ensure their knowledge is up to date.  After all, you don’t build a rocket ship using old technology so why would you help a client build a foundation for their financial affairs, working from outdated knowledge?
 

Lots of professionals forget this and they fail to do their bedtime reading much to the detriment of their poor clients. Sure we are all busy but we need to keep up to date and if that takes us a few hours reading a week then so be it.

 
Which brings me to the whole point of this blog.  A court decision was released early this year.  Since its release there has been substantial debate and much written about what the decision means in the legal beagle world.

One particular point from this case however seems to have been overlooked and I think this point is really crucial to all those who have Trusts.

The Facts

 
Mr R was the Settlor of a Family Trust.  Mr W and Mr H were the Trustees.  The Trust purchased a property which we will call the 1st Property.  In order to be able to afford to buy this property, the Trust borrowed from the Bank and Mr R gave the Bank a personal guarantee for the borrowings.  A little while later the Trust sold the 1st Property to Mr R. Mr R then entered into an Agreement on behalf of the Trust to purchase another property for the Trust.  We’ll call this the 2nd property.  In order to buy this property, the Trust would have to borrow very heavily.  Mr R then decided to sell the 1st Property but he didn’t manage to achieve a sale until after the Trust had completed the purchase of the 2nd Property and until after he had been declared bankrupt.

The sale proceeds derived from the sale of the 1st Property went towards satisfying the Bank borrowings which had been raised in order to purchase the 2nd Property.

The Argument

Before we start on the legal argument, I need to tell you about someone called an Official Assignee or “OA” for short.  This is a person who legally steps into your shoes if you are declared bankrupt.  They will be entitled to run your affairs, sell your assets and pay off your liabilities.  There are some strict rules about what assets they can sell and what liabilities they can pay.  Overall, the main aim of their game is to liquidate assets to repay creditors.  In my view, anyone facing the prospect of bankruptcy should immediately seek professional advice,  before they visit an OA’s office.

Back to the argument of this particular case.  The OA said the Trust had not been well administered and was a sham or was the altered ego of Mr R.  Of course what the OA wanted was the 2nd Property, which consequently was the only asset the Trust owned.  If they could prove the Trust was a sham and the 2nd Property really belonged to Mr R, then they would be able to seize the property, sell it and apply the sale proceeds to repay the creditors.

The Legal Decision

The case was initially heard by the High Court who dismissed the OA’s claim.  Then the OA appealed to the Court of Appeal who also dismissed the appeal.  In other words, the OA plain ran into a brick wall with its claim that the Trust was a sham or the altered ego of Mr R.

Lessons For Us To Learn

Irrespective of the great specialists sitting on your bus, no one wants their bus to have to travel to Court.  Going to Court is an expensive exercise and I don’t just mean in monetary terms.  Litigation is emotionally draining and because it can take a couple of years to get through a case like this, it can really take its toll on not only the bank balance but also the human relationships you are involved with.  So as my old grandmother use to say ... an ounce of prevention is worth a pound of cure. 

What this means for us is that we need to take steps to avoid accusations that our Trusts are shams.  And we don’t just take steps to avoid sham trust allegations so that the Trust assets stay safe.  We take these steps to avoid personal liability.  Remember ... Trustees are personally liable and you don’t want other Beneficiaries suing you if you lose the assets of the Trust.

So what specific steps can we take to avoid sham trust allegations?  Well here’s 9 things you can do to ensure your Trust is ship shape and up to date:

1.       Review financial statements prepared for the Trust against the Minutes, Resolutions, Deeds and Agreements you are holding on the file you have for the Trust.  If you don’t have financial statements, get them.  They are the backbone to any Trust and are surprisingly inexpensive for Family Trusts.

2.       Make a list of any Resolutions that are required and complete these.  Usually you will at the very least have year end resolutions to prepare and execute.

3.       Ensure all loans made by yourself to the Trust and those made by other parties to the Trust are evidenced in Deeds of Acknowledgement of Debt and Variable Interest Loan Agreements.  It goes without saying the Deeds need to have Hawkins and Entrenchment clauses in them to protect these loans from being called up by say a Creditor or the OA..

4.       If the Trust has made a loan to you, look to see if a Deed of Offset is appropriate, offsetting what the Trust owes you against what you owe the Trust.  This could help for example in reducing the balance the Trust owes you personally, consequently reducing the number of years it takes for you to gift.

5.       Check to see if your gifting is up to date and that you are gifting off of current balances.  Look at the financial statements in this latter respect.

6.       Ensure all the Trust Registers are current.  This includes the Registers for Professional Contacts, Assets and Liabilities, Beneficiaries, etc.

7.       Go over the Estate Plan.  Is the Memorandum of Wishes and Wills up to date given your present circumstances?  Does it have all the necessary clauses?  Look at my previous blogs or talk to me about this is you have any doubts.

8.       Have a look at insurances.  Is your life insurance policy assigned to the Trust?  If not, get hold of your broker and get it sorted.  Is there enough insurance in place?  If not, talk to a broker about your needs.

9.       Write a Plan For Death – see my previous blog on this particular subject for guidelines. 

Get A Professional Trustee On The Bus

Sometimes, despite our best intentions, we just don’t get round to doing the things we know need to be done.  Even if we have the time, some work is better done by the specialists.  So, if you need a hand putting into effect the above 9 steps, now is the time to put a Professional Trustee on your Bus.  And if you already have a Professional Trustee sitting on your bus, now is the time to put them to work.

As always, if this Professional Trustee can help you, please contact me.  Have a great month and enjoy the build up to Christmas.

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.

Last week a friend of mine unexpectedly passed away.

His passing left behind many family members and friends in great pain. It also resulted in quite a nightmare when it came down to dealing with his business and his personal assets.

Since this is a personal matter, you may be asking...Why am I writing this blog post and sharing this with you? Well I’m hoping that by telling this story, you will put in place the steps to ensure your affairs are in order - to ensure continuity for the people left behind when you die.

You see when someone dies, its hard enough having to deal with the loss. Having to try and take action to protect assets and run a business at the same time just makes a bad situation even worse.

Within two hours of death all Gilligan Rowe & Associates Partners had gathered and pledged help. The deceased was my friend, not a GRA client. But when a Partner at GRA needs help, all GRA partners stand together (that’s the wonderful thing about this firm).

Within 4 hours I had visited my friend’s business and spoke with his staff. Every staff member was in shock but every one of them agreed they’d help.

The Game Plan

The first job was to secure the technology in the business. This was not easy. No one in the business had any idea of the passwords the deceased used. This of course made our second job harder.

The staff (all 58 of them) had to be paid the following day. So now we had a situation where we had no access to money because we had no access to technology. If things weren’t bad enough, word was spreading within the industry and we had staff asking us what was going on, were they still employed, should they still go to their jobs tomorrow and would they get paid.

We had to come up with a solution quickly. We scrambled and managed to deal with the computer issue but it was pretty stressful at the time.

The next issue we had to deal with was the staff. All human beings like some semblance of order and continuity of staff was a question on everyone's mind. So we called a staff meeting and amongst tears, told all the staff it was business as usual.

A serious issue that we had to deal with was how to protect the deceased’s business. One of the competitors was already visiting the businesses clients and offering his services. We dealt with this by putting in a temporary CEO and getting that CEO and the lead salesman in the business out visiting the clients, assuring them that despite the awful set of circumstances before us, the business would go on.

The last really urgent issue we tackled was trying to ascertain what assets the deceased actually had. Turns out he had a Trust, but that Trust contained both his personal assets and his business assets, and debt was completely cross-secured. Our investigation revealed that there was life insurance.  We were all thankful for this because that would at least take care of some of the debt.

On closer checking however our hopes were dashed... The deceased had cancelled his life insurance because he was in the midst of taking out new policies with another insurance provider. We looked at this issue and decided to brief his lawyers on what we felt had to be done.

At that point, we all thought we’d done what we could, so we returned to our own company and got down to the business of dealing with our own clients’ affairs.

Lessons Learned and Checklist

A couple of days later all three Gilligan Rowe & Associates Partners discussed what could have been done differently. You see, we often look at situations in an attempt to improve the services we offer to our clients. We came up a few points and think that if these things had been done, dealing with this death would have been so much easier.

1.  Write down somewhere the name of your bank account numbers and passwords. Keep this document secret. Put it with your lawyer or your accountant or better still, both professionals. Stipulate that the document is only to be opened and read upon your death.

2.  Write a note to either your spouse, your lawyer or your accountant. Tell them what steps should be taken on your death. For example, does someone owe you some money which hasn’t been recorded in say your financial statements but which you want collected on your death? Do you want to be an organ donor? Write your wishes down so they are clear. Again, stipulate that the document should only be opened and read upon your death.

3.  Ensure you have a current Will and that your lawyer, accountant and your spouse have a copy of that Will. Let me help you if you do not have one or need it updated.

4.  Never cancel a life insurance policy without having another one in place.

5.  Keep a copy of your life insurance policy with your lawyer, accountant or spouse.

6.  Ensure the life insurance policy is in the names of the Trustees of your Family Trust.

7.  Have a Trust but make sure personal and business assets aren’t mixed up. For example, put personal assets such as your family home in your Family Trust and keep your business assets, such as the shares in your business in your Trading Trust.

8.  Have a current Memorandum of Wishes for each of your Trusts. Tell your surviving Trustees in your Memorandum of Wishes exactly what you want done with the assets of the Trust when you die.

9.  Leave a copy of your current Memorandum of Wishes with your lawyer, accountant and survivor.

10.  Have a game plan for your business. What exactly should happen on your death? Who should be put in the driving seat until your Trustees or your Executors can handle things? Write this down in detail, because if you have a thriving business, this plan is going to be absolutely invaluable in ensuring your business survives after your death.

11.  Leave a set of house keys, business keys, etc with a friend so that someone has access to your business and your home to feed your pets and water your pot plants. You might have passed on but your pets and plants are still here and still need care.

I’m sure that there are many more tips we could follow. The above isn’t meant to be a comprehensive list. It’s just a list of suggestions to make life a little easier for those left behind so that we can get on with the business of grieving.

Of course we at Gilligam Rowe can help with any or all of the items on this checklist.  For a confidential and no-obligation discussion on any of these points including trusts, wills, insurance or asset planning advice, please contact us.

Professional Trustee Services
Gilligan Rowe + Associates Ltd
Chartered Accountants

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

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