Estate Planning including Tax Planning

Estate planning is about having your affairs in place before you die. This is so your dependents are adequately provided for in a straight forward manner.

This is always a difficult time for those that are left without you. A well thought out plan, will assist in the transfer of your assets to your successors (those folk who will inherit your worldly possessions)and provide appropriate Tax Planning procedures

Estate planning may also be structured to reduce the impacts of inheritance, succession or gift taxes or duties. Not all jurisdiction have these types of taxes, so it is important your tax plan reflects the laws of the land where you live. It is advisable to seek professional advice from a Solicitor / Attorney.

Priorities that need to be thought of to structure the transfer of your assets to your estate are:

..... the lifetime needs of a partner or spouse

..... the lifetime needs of any dependents, which can vary considerable depending on their age

..... the disposal/transfer of all assets that are held in your own name.

..... final tax liabilities, funeral expenses and associated costs

The key documents of your Plan are:

The Will

A will is a written document which express your wishes.

In the New Zealand jurisdiction, if you die with out a will, you are said to die intestate, and the state will appoint an administrator to finalise your affairs. This may not always end up how you had intended, so if you have any assets it is most important you have a will.

A will can be set up by yourself, however it is usual to be drafted and witnessed by a Solicitor, or a Public Trust Company. With many blended families today, a will gives the opportunity to consider all children and connections. The will is a foundation for all Estate Plans.

Enduring Power of Attorney

An enduring power of attorney is a legal document that enables you to appoint one or more persons to manage your affairs (financial, property or health and wellbeing). This document has become important with the extended lives we are now living, and the occurrence of mental difficulties older folk can sometimes develop.

The Enduring Power of Attorney (EPA), allows you to decide who can make future decisions for you, should you not be able to do so for yourself. These documents are also drafted and witnessed by a solicitor or a Public Trust Office and a key component of the Estate Plan.

Trusts

Trusts have become popular and widely talked about today. Their origin goes back to seafaring days when the likes of a ships captain, would entrust the welfare and ongoing care for his wife and family to a trusted friend. All the assets would be held in a Trust and the trusted friend would help make the decisions so the wishes of the captain were carried out and the family looked after in an appropriate manner.

Today, Trusts are formed in a similar way. They are used as a tool to transfer all your personal assets into a different ownership. With a trustee, like the trusted friend making the decisions according to the wishes of the original owner.

This is often done to protect the assets from business dealings, to make provision for children with special needs or as a tax planning tool. Although you may still have use of the assets, eg. your home - you and can live in your home as you always have, you may not own the home yourself, it is owned by the trust. You are like a tenant in your home.

Solicitors and Trust Specialist can set up a trust for your specific purposes. There are legal reporting and administration requirements at the set up and as the assets are settled into the trust. Depending on your country of origin, there are different gifting rules and tax liabilities which you would need professional advice,regarding your own specific circumstances.

Other issues to watch for:

Estate and Tax Planning is an ongoing process as we journey through life. Prior to purchasing an asset eg your first home, seek advice on the best structure for holding the ownership. This can save a lot of heartache latter on and is a step towards your estate plan.

Blended families have made the transfer of assets more complex. The article on Tenants in Common may be of interest to you if this topic is relevant. Understanding ownership of assets is a key concept for effective Estate Planning

Besides the 3 key documents for Estate Planning, New Zealanders should also be mindful of the Property (Relationships) Amendment Act 2001. This act can affect the division of assets at the end of a relationship. In certain circumstances the assets could be split 50/50. There are special documents that can be signed prior to a relationship forming to clarify the situation of the couple. It is recommended that advice is sort from a Solicitor at the start of a relationship to protect each partners financial status.

As mentioned Estate planning is a work in progress and needs to be reviewed on a regular basis to make sure it is appropriate for your needs and situation today.

Do not put off starting this process until tomorrow, if you are on the highway tonight driving home you are at risk and need to have these documents in place for those that could be left behind.

Feed back regarding this section would be appreciated. Are there areas of interest that we could include in the newsletter for you ?

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