David has been involved with the Beginning Experience Auckland team http://www.beginningexperience.org.nz/  for some years. 

The purpose of the Beginning Experience ministry is to help divorced, separated and widowed men and women and their children of divorce, parental separation and death to heal the grief of their loss, to help them with the suffering of their separation.

For the first time in 6 years New Zealand hosted an International Conference in Auckland in November, with delegates from Australia, United States, Wales, Ireland, Singapore and NZ. David was invited to present a paper on the New Zealand position regarding key aspects of Wills. 

This paper “Will your will work well?  (Will your assets at your death end up going to those you want to benefit?)”  was very well received by attendees so we decided to serialise it in our website over 6 months. The first article covers Powers of Attorney. We hope you find this and future articles in the series helpful.  

 

POWERS OF ATTORNEY

Many of my clients assume that, having made their wills, then if they lose capacity during their lifetimes, the trustees they have appointed under their wills are able to take care of things.

That is not the case.

A will can only speak when we die.

During our lifetimes we need to give powers of attorney if we want anyone to look after matters for us.

A power of attorney gives the attorney the authority to do whatever we would be able to do if we were present. 

However, the attorney’s capacity is only as good as the capacity of the donor.

That means if we have a power of attorney and “lose our marbles” then the attorney can’t do anything for us.

This situation has been addressed by the creation of enduring powers of attorney.  They are creatures of statute.

Once the (now rather onerous) requirements for setting up enduring powers of attorney have been met, then the attorney can represent us even if we later become unable to work out things for ourselves.

Any power of attorney can be revoked – so long as the donor has capacity.

All powers of attorney are revoked on death.

There is an advantage in appointing as attorneys the same people as you appoint as trustees of your will.  That means a seamless arrangement after your death if your affairs have had to be handled by your attorneys while you are living.  It also means that the attorneys (especially if they are family members) are alert to the accountability to beneficiaries when you die.

That removes the attorneys focus from themselves if there is any element of self interest conflicting with your interests or the wider interests of your family.

We have a new physical postal address - but the good news is we haven't moved.  

Confused - well you might be. After being 450 Kamo Road since 1990 we became 2B Meldrum Street earlier in 2017. Then, because of confusion with the flats at 2 Meldrum Street (known as 2A, 2B, 2C, 2D and 2E) the Whangarei District Council (in association with Land Information NZ) has now renumbered the office as 2 Meldrum Street.

After 6 and a half years, as an elected representative on the Council of ADLS, David has reluctantly stood down. He completed his term on Friday 14 October 2016. This was 5 months before the scheduled end of his term. The demands of a busy Whangarei based practice had simply become too great, and of course David’s commitment to his clients always had to come first.

David is very grateful for the support he received from friends and colleagues during his time on the Council . Recognition of his contribution has been forthcoming from several members of the legal profession. A senior colleague in Whangarei, Ian Reeves, recently thanked David for the huge personal commitment and skill he devoted to the role. 

Purchasers beware approving early release of the deposit

It is always in the interests of vendors to get their hands on their purchaser’s deposit payments as soon as they can. Why? After deduction of land agent commission, the balance can be used to repay part of the mortgage prior to settlement and save some interest. Also possession of the deposit gives additional power to the vendors in any dispute. 

Unless the parties agree otherwise, there is a statutory minimum of 10 working days where the agent must hold the deposit. 

People may not be aware however that the deposit paid on a property purchase belongs to the purchasers until the vendors have met all of the vendors’ obligations under the agreement.

Assuming the agreement is the standard ADLSI/REINZ form, these obligations include, but are not limited to:

  • giving vacant possession
  • remedying any matters which need to be attended to after the purchasers have exercised their right to a pre-settlement inspection
  • complying with any requisitions made since the deposit was paid
  • paying the purchasers any amount due for any late settlement by the vendors.
  • providing on settlement a registrable Transfer and discharge of the vendor’s mortgage.

Also there are circumstances (under General Conditions 4 and 10 of the ADLSI/REINZ agreement) where the vendors have agreed that the purchasers will be entitled to a full refund of the deposit. 

It might be difficult for the purchasers to recover the deposit if the purchaser’s lawyer has authorised the release of it in the meantime. 

With this background in mind, where we act for the purchasers, Northlaw’s practice is not to authorise release of the deposit until directed to do so after we have explained the options to them.

An example of what can happen 

A property is completely destroyed by fire prior to settlement but after the agreement has been declared unconditional and the agent’s commission deducted.  The agents resist refunding the commission (on the basis they have earned it by achieving for the vendors an unconditional sale). This could be very disadvantageous to a purchaser who had authorised early release of the deposit and deduction of the commission.  The vendor’s liability to the agents for their commission is of no concern to the purchaser if and when the purchaser is entitled to a refund.

There would be the same problem if a purchaser’s lawyer authorised the release of the deposit if the purchaser clients subsequently had difficulty recovering it following a default by the vendors.

As always make sure you talk with your lawyer about these issues so you don’t get any nasty surprises.

Impact on the Transfer of Property (Conveyancing) process

The Government has made changes to improve Tax Compliance in the property sector. These will have a significant impact where we are transferring property for our clients. We are now required to provide tax information by way of a “Tax Statement” to Land information NZ (LINZ) who will then provide this to IRD. A transfer of land will not be able to be actioned unless the required information is provided.

We will therefore now need a lot more detail from our clients than we are presently obtaining. Costs will increase because;

  • A New Zealand IRD number will be required by both vendors and purchasers as part of the land transfer process.  
  • “Offshore persons” will need a New Zealand bank account before they can get an IRD number.
  • As part of the land transfer process, “offshore” buyers and sellers must also provide their tax identification number from their home country.

An individual is exempt from the above rules if they are not an “offshore person” and they are purchasing or selling their main family home. However:

  • The main home exemption does not apply if the property was or will be owned by a trust.
  • The main home exemption does not apply if the person has used the exemption twice or more in a two year period.
  • For the main home exemption to apply the land must be residential land.
  • If a person has multiple homes the exemption for providing the information for the main home can only apply once.

The requirements apply to all contracts entered into on or after 1 October 2015.

In addition to the above changes, IRD proposes that residential land withholding tax (RLWT) will apply to sales of residential property in New Zealand from 1 July 2016 where the vendor is a foreign investor and the property is sold within two years of purchase.

The amount of RLWT withheld would be the lower of:

  • 33% of the vendors gain on that property; and
  • 10% of the sale price of that property.

It is also proposed that the lawyer involved in the transaction will withhold and pay the appropriate amount of RLWT to Inland Revenue.

David has been instrumental in the revision of the  Guidelines adopted by the Property Law Section of NZLS and ADLS Inc for incorporation in the latest edition of its widely used agreement for sale and purchase of real estate.

The Guidelines assist the day to day smooth running of transactions involving the sale and purchase of properties, the registration of mortgages and their subsequent discharge and relationship property protocols.

Many of the Guidelines are of a technical nature. However there is much in them that help all law firm clients - including Northlaw’s - understand the matters considered when we act in respect of property transactions. 

Here is a link to the 80 page edition of the Guidelines (updated and operating from 13 April 2015):

http://www.lawsociety.org.nz/law-society-services/law-society-branches/auckland/documents/Property-Transactions-and-E-Dealing-Practice-Guidelines-amended-April-2015.pdf

Downton Abbey fans have, in Episode 1 of Season 4 of this TV blockbuster, seen the anguish created when a young husband and father is taken from his family without leaving a will.  Northlaw would like fans to take heed of the message in the drama about the importance of making a will.

The first episode of Season 4 talked about the rules on intestacy (where there is no Will) - giving the infant child a greater share in the estate than his mother.  Adding to the widow's anguish was talk of a life or widowhood interest.

The programme features the sudden death in a car accident of Matthew Crawley, who had been the joint owner of Downton Abbey.  It appeared that Matthew had not left a will.  The predicament facing Matthew's family illustrated how important it is for even young couples to seek the expert advice of a lawyer about their wills.  Making a will ensures that treasured belongings and particularly a home will pass to those we choose to benefit in the way we think they should benefit.

A talk to a lawyer means that your personal wishes can be expressed in a way which will minimise problems for family and friends left behind grieving at the death of their loved one.  Northlaw has never seen a situation where the arbitrary rules of an intestacy benefit the deceased's family appropriately.

In the TV drama, it was subsequently revealed that, before his death, Matthew had written a letter expressing his intention that his widow (Lady Mary) should inherit his share of the Abbey.  The Earl's lawyer has advised the family that Matthew's letter is as good as a will.

In New Zealand the scenario that played out may not have had the same results or even if it had, there is likely to have been a very drawn out and expensive process involving an application to the High Court. New Zealand has seen a recent change (2007) to the old Wills legislation which provides some latitude around the strict requirements for the signing and witnessing of a Will. However Northlaw strongly recommends to all clients, and anyone reading this article, that a lot of cost, upset and surprise can be avoided if people make sure their Wills are current and properly signed and witnessed.

So don't put it off and if you haven't reviewed your Will recently then get hold of your lawyer. David Roughan is one of the most experienced lawyers in New Zealand when it comes to Wills and is only too happy to talk with you about what's involved and the costs. So call David now.

Mary Holm endorses David's advice re family loans. Does your Will need amendment....

Well known financial commentator Mary Holm answered (Herald 25 October 2014) a letter concerning how best to handle the common situation involving a loan to a family member to avoid future complications and family upset.

David wrote a letter in reply which appeared in the Herald on 8 November 2014, along with Mary's supportive reply. The text of the letter (with a little more detail) and reply are reproduced here;

As a lawyer since 1972, I agree with all that you said about documenting loans to children.

I would like parents to consult their lawyer, not only about the form of the IOU documentation (no-one can advise about that better than we can –particularly about the IOU being a joint one if the child is in a relationship and the loan/gift is to benefit both the child and the partner) but also about the benefits of amending the parents' wills to include a hotchpot provision.

The provision should:

(1)   Record the loan or gift.

(2)   Mention any past or future loans or gifts to be brought into account (possibly excluding any below a certain dollar figure or before a certain date).

(3)   Provide for those gifts and any unpaid loan balance being deducted from that child's share of the parent's estate.

(4)   Thereby prevent "double dipping".

In an estate of $800,000 left to children A, B, C, and D, with a loan or gift of $40,000 to child B still outstanding when the parent dies, the $40,000 is treated as part of the estate. So there is $840,000 to distribute. That's $210,000 each.

Children A, C and D would each receive that amount. Child B would receive $170,000 ($210,000 minus $40,000). And that would deal with the $800,000 estate because $210,000 x 3 = $630,000 + $170,000 = $800,000.

The hotchpot clause means that the parent doesn't need to involve the other members of the family at the time the loan or gift is made. A parent might want to help a child without other children knowing at the time. The will can also be changed if the parent later decides that the loan/gift should be a benefit that the child receives in addition to that child's equal share of the parent's estate. Properly drafted the clause doesn't have to be changed for future loans or gifts.

The greatest benefit is harmony and fairness among the children after the parent has died.

One bonus I've seen is where the remaining siblings acknowledge that the favoured child needed and deserved greater help than the rest of them and resolve to ignore the hotchpot provision and direct the executors to divide the parents estate equally. The parents have given the siblings the chance to show how they care if they choose to override the hotchpot.

Mary Holm's reply was

"When I started reading your letter, my reaction – to be honest – was, "Here's a lawyer just drumming up business for himself and his colleagues." But you put up a pretty good argument, which I suppose is what we should expect from a lawyer!

The hotchpot idea makes a lot of sense and I particularly like your point that it can remove the need to tell other family members about a loan. While open communication is often good, there are situations when it may not be.

By the way, I love the name "hotchpot", which Wikipedia says means "the blending or combining of property in order to ensure equality of division". Apparently the word comes from a kind of pudding"

The Lawyers Complaints Service has been operating for only 6 years. And in that time it has received over 12,000 complaints about lawyers.

That`s bad news isn`t it? Especially when there are now 12,000 lawyers in NZ in total. (there were only 3,000 NZ lawyers when I became one in 1972).

But hold on. What`s this? According to the NZLS report received on 25 November 2014, the Lawyers Complaints Service take no further action in over 87% of the complaints they investigate; because either its obvious from the start (or after a thorough investigation taking months) there is nothing of substance in the complaint.

But isn`t even 13% of 12,000 complaints over 6 years (about 5 per week spread around the 24 Lawyers Standards Committees operating throughout NZ made up of appointed lawyers & lay people) too many?

Perhaps – although less than 1 complaint a week has gone as far as the Lawyers Disciplinary Tribunal.

What is really interesting from the latest report is that now 47% of complaints against lawyers are made by non clients. And that percentage is growing. 

So we have a system where if your lawyer does a great job for you, one or more of the people on the other side can lodge a complaint against your lawyer.

That could result in younger, less experienced lawyers, having some apprehension about doing their very best for their client – fearing that someone on the other side will go to the Lawyers Complaints Service. That’s the really bad news. Lawyers shouldn’t be constrained by this issue hanging over them. They need to be confident that they can represent their clients with passion and determination – accepting of course that they have obligations to act fairly and lawfully.

David wants to assure his clients that he will continue to “go in to bat” for them – focused on their interests – as he has now for over 40 years.