Kerikeri, New Zealand

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October 2016


Farm succession issue - Thu, 27 October 2016

Farming succession is one of the most problematic areas of estate planning. I have written in the past about the issue on my blog, and have written in local farming papers as well.

I saw an interesting article on the stuff website today:

http://www.stuff.co.nz/business/farming/85503942/siblings-fight-over-millions-in-farming-family-stoush

 

This was the classic case of a claim under the Family Protection Act, by an adult child who believed they were entitled to something, or perhaps felt they had been excluded, by the parents.

The applicant and her sister had inherited a little over 1 million dollars each. But the parents wanted the 4 million dollar farm to go to the brother. The daughter’s claim was dismissed because the Court found she was not in financial need and the 1 million dollar inheritance was sufficient.

The parents had in that case taken advice about what to do, and their estate plan had succeeded – albeit following litigation.

You will appreciate that there is not a one size fits all situation available. The best advice to give is to simply take the time to talk to your accountant or lawyer about the issues. What works for one family (with money) may not work for another. Or, what worked here (1 million) may not be enough for a family with extensive wealth. Your lawyer is the best person to advise you about these particular issues, but as above this should be in consultation with your accountant in case there are tax issues arising from (say) gifts or loans during your life.

If you need assistance or wish to discuss these matters generally, you can email me: Graham@lawnorth.co.nz

Law North Lawyer Kerikeri


Lottery legal problems: are you a winner? - Tue, 18 October 2016

Legal news stories relating to lotto wins is a topic I enjoy. There have been some great cases in the past, in NZ and elsewhere. Couples fighting (did we pay for the ticket or just me?), families fighting (people pooling funds and then arguing about the payments). The list goes on.

 

I saw in the paper today another great story from the Lotto archives, this time from Australia.

You can read the full story here: http://www.nzherald.co.nz/world/news/article.cfm?c_id=2&objectid=11731202

The headline was great: Man shut out of $40m Powerball win told to 'go and see a f***ing lawyer' court hears

In this good Australian case we have factory co-workers who have – apparently – purchased tickets as co-workers “for years”. Yet when one, specific, power ball was being drawn, members of the syndicate says they formed a “one off” group, and that other members of the ‘regular’ syndicate were not included in that new group.

Of course the group proceeded to win AUD$40,000,000.00.

This argument has now gone to Court.

It may seem ‘over the top’ but it seems like the best way to avoid these issues is to draw up and sign an agreement. All the contributes could sign and the agreement could record whether it was in respect of every lotto draw, or only particular draws, and if ‘super draws’ were excluded. The agreement could also detail how people would pay into the fund. Ideally this should be by automatic payment. If a person fails to pay into a fund and has agreed that they will, then the agreement should record that they will not receive a share.

It goes without saying that if such an agreement was drawn up properly there would be a little cost involved for each party, but depending on the size of the group it could be tiny. Especially when you now consider that the member’s share was $2,700,000.00 and that now that the case is in Court quite a few thousands of dollars will be spent in arguments.

It may sound like an odd sales pitch, but if you want assistance with anything like this, we would be happy to assist.

 


Contracting out agreements - looking after the kids - insurance for the kids - Tue, 11 October 2016

 

I’ve written a few short pieces on the different scenarios to get a contracting out agreement (known in most of the western world as the dreaded ‘pre-nup’). Perhaps the most common claim clients make (and to be honest I believe it), is that that want an agreement to protect their kids – to ensure that if they break up the property they have won’t be ‘taken’ by the new partner, so that their children can benefit in the future. These are always cases where the client has had a previous relationship and has children from that first relationship. So let’s have a few case studies (names have been made up).

 

First of all we have Tina and Tommy – a couple of Northland locals. The two T’s both have children from their previous relationships. Tina and Tommy both came out of the prior relationships with some cash – Tina has $300,000.00 and Tommy has $100,000.00. They enter into an agreement which records that this property shall remain separate. They also agree that their bank accounts, future income, vehicles etc shall remain separate. Five years into their relationship they purchase a house. They put their separate property into the house and have a small mortgage. The agreement protects them – the equity in the house is separate property - $100,000.00 for Tommy and $3000,000.00 for Tina. The $100,000.00 mortgage is a joint debt. Five years later they separate. They sell the house, Tommy takes his $100,000.00, Tina takes her $300,000.00, the mortgage is repaid and the rest is split. Their relationship ends and their capital is protected.

 

Now we have Billy and Bobby, another couple of locals from Northland. Again, the two B’s have children from their previous relationships. They both came out of their previous relationship with some cash - $300,000.00 Billy and $100,000.00 Bobby. Just like Tina and Tommy the two B’s buy a house after five years, then separate after another five. However, unlike the two T’s, the two B’s didn’t sign a pre-nup. What happens? You should know the answer by now. After the house sells each B receives $200,000.00 of the equity – Billy’s share has gone down $100,000.00 and Bobby’s has gone up $100,000.00. She has cut her capital in half and he has doubled his. Or another way of looking at it, Billy has just given her ex-partner’s children another $100,000.00 for their future, at the expense of her own children.

This is an extremely simple problem to avoid. It is not difficult to enter into an agreement to protect yourself, and your children. Again, it is a form of relationship insurance. You pay a fee (somewhere between $1,200.00 + gst, and $1,600.00 + gst) and you are ‘locked in’ for the entire relationship. In my opinion that’s a small price to pay – especially when you think how much we all spend on insurance for our houses, lives, contents, cars etc.

 

If you have any questions about contracting out agreements – any questions at all – I would be happy to talk to you. You can either call me at work: (09)4077099, email me at Graham@lawnorth.co.nz, or if you are in Kerikeri, come into the office for a chat – next to McDonalds and above Pagani.

Law North Limited – local lawyers looking after Far North people: Kerikeri, Kaikohe, Paihia, Opua, Okaihau, Kaeo, Kaitaia, Whangarei – and everywhere else in between.


Brangelina news update - Fri, 7 October 2016

I did write a short time ago about the Brangelina split. I said I don't care about it. And I still don't. But I did say if anything interesting came out I would post an update.

For what seemed like weeks people were discussing how they would split the fortune. I remember at the time I said to somebody - "this is rubbish - there is NO WAY they didn't have a pre-nup."

And so when the stories came out that they did in fact have a pre-nup, I was not shocked.

See here for example:

http://www.stuff.co.nz/entertainment/celebrities/84692378/brangelina-had-a-prenuptial-agreement-details-revealed

It is common sense. If you want to ensure there are no arguments in the future, you need to think about a contracting out agreement (pre-nup). It does not matter if you have $50,000.00 to save, or $500,000,000. The same rule applies - if you don't take steps to protect it, you risk losing it.


Beating the pre-nup drum. - Fri, 7 October 2016

I found this story on the stuff website. Yes it's old but just in case people think I am beating on my drum too much about these pre-nups I keep talking about:

http://www.stuff.co.nz/business/money/67536836/advice-for-parents-get-prenup-protection

This is a story about a lawyer urging the public to consider pre-nups if they are helping family getting into homes. Hmm. Very familiar - see my previous posts.


Different types of contracting out agreements - Inheritance and building a home - Wed, 5 October 2016

This is ‘part two’ of my series on when a contracting out agreement (pre-nup) may be helpful.

This one is pretty simple. This is the classic case of an inheritance divided. Again, the names have been invented.

Jill’s parents have passed away. Her mother was the last to die, and left Jill a modest inheritance ($200,000.00). Jill and her partner Kent purchased a home together with the money. This was to be their home. But prior to purchasing the house Jill and Kent signed a pre-nup. The pre-nup “ring fenced” the $200,000.00 inheritance. The agreement recorded that this $200,000.00 was Jill’s separate property and that this separate property was being used to purchase a family home. The agreement said that if Jill and Kent separated the inheritance would be protected. The agreement said that Jill could either buy Kent out (half the equity, after the mortgage, and after the $200,000.00), or if the house was sold she would get her $200,000.00 back, if there was enough money available after paying the mortgage. Five years later Jill and Kent separate. The house is valued, and has not gone up much. Jill ‘buy’s Kent out’ for a very small amount of money $10,000.00. She does this by borrowing a little more, and taking over the debt. Kent is not very happy, but there is nothing he can do, and the couple go their separate ways.

Jen’s parents have passed away. Her mother was the last to die, and left Jen with a modest inheritance ($200,000.00). Jen and her partner Kenny purchased a home together with the money. This was to be their home. They don’t sign a pre-nup. Five years later Jen and Kenny separate. The house has not gone up much in value, but still has the $200,000.00 equity. Jen has to either find/borrow another $100,000.00 to buy Kenny out, or sell the house. Either way Kenny gets $100,000.00 because that’s the value of the equity. Jen can’t afford to refinance the mortgage that much, and the house is sold. Five years after her mother died she has managed to keep half of the inheritance.

...

In a small town like Kerikeri when I mention I’m a lawyer it’s situations like this people often mention. People want to know if they can fix the problem. Technically they can, but they need to act fast I say. Often it’s seen as too difficult. Sometimes it's too late. In those cases we can only hope there is not a separation. But usually when one party is asking those questions it means there may well be a separation.

New Zealand law protects inheritances. Usually it will be your separate property. This means when you separate it won’t be able to be shared by your spouse or partner. However if you use the inheritance to purchase a family home or family chattels (furniture, cars etc) the inheritance is not protected – the law is very clear – your separate property rights are overruled. It is only in cases of exceptional circumstances where you can recover a bigger share of the property – usually it’s a 50/50 division.  Realistically if you want more than 50/50 you are going to have to go to Court.

Again – the problem can be avoided very easily by signing the contracting out agreement. As I have said it’s a form of insurance.

 

If you would like to discuss pre-nups you can contact Law North Lawyers in Kerikeri on info@lawnorth.co.nz or 4077099, or contact me directly: Graham@lawnorth.co.nz . If you’re a local and want to just chat just pop into our office (above Pagani, next to McDonalds).

Law North Limited – local lawyers looking after Far North people.