Have you run out of jobs to do around the house yet? How about tidying up the plans for your personal assets?
I have been isolating at level 4 with my two teenagers, which is pretty great because they are my favourite two humans in the world. I’ve been lucky though and also have my sister in my bubble. Let’s face it there are times when I don’t want to have a conversation about TikTok and need to talk about my fears for the economy and concerns for older family members. While the teens are fully aware and informed about what’s going on, I’m still their mum and I still want to protect them. That is what prompted me to write this.
Protecting them now (while I know where they are every second of the day) is actually quite easy. But have I also done everything I can to protect them in the future, particularly if I’m not around? Four main things come to mind when thinking about asset planning. I’ll share my thoughts on each one over the next few weeks.
I’ll start with this one because initially, I thought my family trust was in really good shape. I manage it well and keep good records. You might be thinking it’s easy for me because it’s what I do for a job, but just like mechanics and their cars or builders and their houses, when I really thought about it, there are a few trust areas I’m not doing so well with.
Before I get into it, some of you won’t have a trust and will be wondering if you need one. Read my previous article which works through this for you. If after reading it you are still not sure if you need a trust, that’s ok, give me a call or send me an email and we can chat about your particular circumstances. Some of you will have a trust and wonder if you still need it (or in fact if you ever needed it). Again, it’s probably best if we look at your situation specifically. If you realise that you probably should have a trust, let’s get that underway.
Trusts Act 2019- what do you need to think about?
For those of you that have a trust and need that trust, what kind of shape is your trust in? There are a couple of things I thought of in relation to my own trust, the first is the Trusts Act 2019 which comes into force early next year. Read my colleague, Monique Mackie’s article on this and we’ve got some more information coming out to our clients soon. My trust deed is still the same as the day I signed it. Even though it’s not that old, things have changed since then. It’s definitely time for a review. There are probably a few beneficiaries in there that I don’t want to provide information about my trust to – to those people, sorry, but it’s time to go!
Meetings – do you need to have them?
If you have a professional trustee it’s a really good idea to have regular meetings. Depending on the assets in the trust, they might not need to be annual but they still should happen. It’s difficult to claim all trustees are aware of what’s going on with the trust when the trustees haven’t been in a room together since the trust was established. If AlexanderDorrington is your professional trustee, we should definitely have a meeting – do you still need us as a professional trustee? And if you do, how can we help make your trust run more smoothly? Have a think about who your trustees are. Are they still the right people for the job? Tidying up trustees comes at a cost but spending the money now can save money and hassle in the future. My “professional trustee” is my dad. I think in a post-lockdown world we might have more regular trustee meetings. Nobody said there can’t be wine involved!
Gifting – do you have a debt to forgive?
I can give myself a pat on the back for this one. However, a lot of people spent years diligently gifting then never decided what to do with the balance when gift duty was abolished (nine years ago). Tidying up an old debt is often the most important thing you can do to obtain the best protection from your trust. For those of you who set up your trusts after October 2011 you can probably ignore this paragraph (lucky you!).
Memorandum of wishes – what should you put in yours?
I’m sure you know what you would like to happen with your trust if something happens to you. But do other people? A good memorandum of wishes is invaluable to the people who would become trustees if something happened to you. This is especially true if you have young children. The great thing about a memorandum of wishes is that there is no set format to it. We can give you some guidance on things to include and language to use. Ultimately it is your chance to pass along any wishes you have, big or small.
- If you have investment property, it could continue to provide an income if retained. Alternatively, you might like trustees to sell it to provide a lump sum to draw on.
- You can take the opportunity to convey your wishes in relation to more personal things, like what schools you would like your children to attend.
- Would you like the trust to fund overseas holidays or first cars or first homes?
My kids are older, so I asked them if something happened to me, what would they want to happen to our house? On reflection, a discussion about my demise in the middle of a pandemic is perhaps not the best parenting move. However, both agreed they would want to sell and move somewhere else. My daughter doesn’t want to live here without me (aw, that’s nice). My son is sick of having to mow the lawns (not so nice, but fair enough). I can still remember the glorious day when it became his job and not mine.
Next up I’m going to discuss wills. Ever wondered why you should pay for a professional will when you can buy a $50 will kit online? I’ll let you know next week.
Stay safe. Be kind. Stay home. Save lives.