Why you should review your estate, asset planning and protection
It appears that Covid-19 is going to have far reaching implications and create challenges within our economy not seen for many decades.
- Higher unemployment will lead to:
- Less PAYE;
- Less GST available to the government as a result of diminished spending.
This will inevitably lead to the government looking at all avenues to repay borrowings over the next generation or two.
To repay this debt the government may look to:
- An increase in personal tax rates particularly the marginal tax rate of 33 cents in the dollar; and/or
- Other taxation sources such as revisiting the possibilities of death duties (abolished in 1992), inheritance tax; capital gains tax, sales tax, property speculation tax and so on.
If you have spent a lifetime preserving personal assets and structuring your affairs to ensure reasonable wealth, financial comfort, security and succession, it is important now more than ever to review those asset protection and succession issues or if you have not considered these things previously it may be a good time to start planning.
What should you consider when looking at your existing structures?
With all of these things it is important that you take proper and considered legal and accounting advice.
- For those of you who have family trusts, you may wish to consider transferring other assets to those trusts for some form of protection.
- Family Trusts and related entities have long been a source of asset protection for a number of reasons:
- They can protect individuals against personal liability issues, when those individuals are in business on their own account and are required to incur personal debt or guarantees;
- The provide a tool for succession to ensure that assets devolve to your family after death and do not necessarily become exposed to relationship property claims or other claims against your children for personal liability and so on;
- As a way to reduce taxation liability; for example, Trusts may lead to ways of avoiding capital gains, inheritance tax or death duties so that assets are held outside your sole control. While current income tax rates are no longer beneficial in terms of trust income as opposed to personal income, that may well not be the position in the future if marginal tax rates increase for personal tax liability.
- For those of you that do not have family trusts you may wish to consider setting one up as a vehicle for holding assets outside of those in your own personal name or names, however it depends on your own individual circumstances and Trust law is rapidly evolving; a Family Trust may not offer as much protection as it once did in some circumstances.
We believe the current climate is an ideal opportunity to discuss with your legal and accounting advisers your estate or asset protection situation particularly as many of you will be finalising your accounts to 31 March 2020.
We would welcome the opportunity to assist you in any of these matters. Please do not hesitate to contact us if you need any assistance in this regard.
The above information is of a general nature only; in no way does it constitute legal advice. All readers should contact a law firm for advice relating to their specific circumstances.
About Lee Robinson, MNZM
Lee is a senior partner of Saunders Robinson Brown with extensive commercial and property law experience. In addition to overseeing complex commercial and property projects, Lee is a leading New Zealand sports lawyer with a particular focus on cricket. He has acted for national sporting bodies and individual athletes throughout his career.