Uptown | Mount Eden Legal

WILLS - DO WE ALL NEED ONE?

Benjamin Franklin coined the phrase "In this world, nothing can be said to be certain, except death and taxes." Therefore, with this inevitable certainty, who wants to leave things in doubt for your family to unravel (and perhaps fight over)?

Mahesh says everyone should have a will. It makes it far easier for your family to deal with your affairs and assets if you have a written will in place. Without one, Mahesh says, you are leaving the door open for dispute. Wills are an essential part of your wider estate planning.

ESTATE PLANNING - WHAT IS IT?

Estate planning is setting up the legal provisions to cater for the protection and distribution of your assets when you either become infirm due to old age, or pass away.

The process includes giving due consideration to what you want to do with your assets and obtain legal advice about it. Then it's a matter of the legal work-wills, trusts and enduring Powers of Attorney of which there are two types: one for property (finances, assets) and one for personal care and welfare (health, living arrangements). Mahesh advises that everyone should have legal

documentation in place that reflects their wishes, in order to avoid the disputes that can arise over a person's estate, particularly where there are children or stepchildren, and if a stepparent is still alive.

TRUSTS - HOW CAN THEY HELP?

Mahesh says the three main reasons to form a trust in NZ are:

1. Asset protection for your major assets - especially if you own a business or are in a profession where negligence claims are common.

2. Rest home subsidies - property placed in trust can be discounted by WINZ in a rest home means-testing application, if moved to a trust within an acceptable time frame before applying (we are talking decades here!).

3. Inheritance protection - property left in a trust can be used by your children and will not be available to their spouses or other parties after you have passed away, and/or if they go through a subsequent separation/divorce themselves.

ARE THEY EXPENSIVE TO MAINTAIN?

Since the removal of gift duty, there is no ongoing legal cost to administer a trust. Trustee meetings should be completed annually, and you may have tax returns to file, but only if the Trust has any income.

Mahesh says his clients place their family home in the Trust and once that transaction is completed, they require no further legal work. Unless of course, changes are made to the trust e.g. a change of trustee or beneficiary etc. Mahesh believes the cost is definitely worth the benefit, especially if your home increases in value over time.

WHAT ABOUT A TRUST'S TAX?

Tax rules only apply to income that a trust earns, so it's always prudent to chat to an accountant if you think your trust may have income. Most family trusts are 'passive' and only hold the major family asset, with no income if the family is living there. In this scenario, there is no tax issue.

WHAT ARE THE COMMON PITFALLS WITH TRUSTS?

Disputes between trustees and beneficiaries can arise from tax issues, if the trust income is not declared correctly. With the Trusts Act 2019 coming into force, there are more disclosure requirements on trustees to inform the beneficiaries about what the trust owns, what it is worth and any other financial information about the trust.

WHAT'S THE BEST WAY TO SET UP A BUSINESS?

Mahesh says it's important to get the right structure for your business and to understand your tax obligations of the structure. The most common examples are sole traders, companies, partnerships and limited partnerships. Once that is established by an accountant, Mahesh can advise on things like shareholder agreements, company constitutions, partnership agreements, leases and bank finance documentation.

Mahesh says it's really important to consider how partners in a business will manage the day to day - and the business partners' relationship. If one shareholder or partner wants to exit, how will that work? Thinking through all these issues at the outset can avoid disputes and big financial consequences later.

WHAT ARE COMMON BUSINESS ISSUES?

Mahesh has seen people pay a large amount to buy a business that they cannot run well enough to pay their debts as they fall due. He says the best process when purchasing a business is to speak to your own business lawyer or consultant who can provide independent (and possibly not so rosy) suggestions about whether a business venture looks like a good fit. Business brokers are often selling a dream, so it's imperative to get your own advice.

WHAT'S THE BEST PART OF BEING A LAWYER?

Mahesh says he loves helping people through what is often the biggest financial decision process of their lives. "When we do the job really well and they are pleased with our work, they often express their gratitude, and we tend to form lasting professional relationships. That's the best part!"

Call Mahesh for property conveyancing services and assistance with residential property developments, trust formations, wills and estates. Mt Eden Legal acts for business clients on commercial leases, business sales and purchases and all types of banking and lending requirements.

Mt Eden Legal 5/27 Mount Eden Road

Phone: (09) 627 4313

Email: mahesh@melegal.co.nz

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