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Inheritance Issues: No Surprises

Todays Date: November 12, 2018

Are your children going to be surprised after your passing by what they do or do not inherit? Perhaps it is time to sit down and have an honest discussion about the terms of your will.

This issue comes to light on the heels of a case that was tried in court last fall. The case involved a deceased man whose daughters were not notified of his death, nor did they inherit any part of his estate, per his will. There was only a public notification to creditors, of which there were none that came forth. The daughters tried to make a claim two years after their father died but the courts denied the motion. They were left with nothing, just as the father had wished.

This ruling is in direct opposition to historic cases where the courts were more sympathetic for the cause of the surviving children. Clearly there is no law stating that parents must leave an inheritance to their children. Luckily there were no creditors to lay claim to the estate and the man’s surviving partner received the inheritance.

How This Affects the Property Investor

In the previously mentioned case, the father drew up a will that designated the public trust as executors. For the investor, this is not a good plan.

It is advisable instead to place assets in a company trust, not one under your personal name. This type of legal structure protects any assets – including real estate – from creditors, the Official Assignee, and duties paid on gifts. This also allows the trust to be passed directly into another trust specifically established for surviving children upon the parent’s death.

Another good idea is to draw up a Memorandum of Wishes and ensure that it is kept updated. This will inform the trustees of exactly how your assets should be handled after your death. Along with the Memorandum of Wishes, a will should also be filed. Your will designates the disposition of personal assets outside the company trust.

Why go to all this trouble? For one thing, family relationships tend to change over time. Not all family members get along with each other throughout their lives. Having the proper legal documents in place before you die means that your assets will go where you want them to go and be safe from claim. It also relieves any possible family disputes over an inheritance someone feels entitled to.

As a property investor, it is important to think of all possible scenarios when planning an investment strategy. Take care of the necessary paperwork now, before it is too late. This is an action you won’t regret.

Paul Easton works in marketing for Mathew Gilligan – an accountant and partner at Gilligan Rowe & Associates Ltd (GRA). GRA is a Chartered accountant firm specialising in property in New Zealand.

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