ARL Mortgages is launched!
This month we launched ARL Mortgages. ARL Mortgages can offer you sound mortgage finance advice. Brendon May, registered financial advisor, is experienced in all fields of finance, from first home buyers to investors, commercial, business and insurance products. Brendon will guide you to the best financial solution for your home and investment property finance, and even your business and commercial lending. He will listen to what you want, work on your behalf and find the best terms so you can meet your financial goals.
ARL Mortgages offer expert advice on:
- How much you can afford to borrow
- How to structure your loan so it suits your needs
- How to reduce payments and get your loan paid off faster
Give Brendon a call on 04 576 1656, or 021-875-700. You can email Brendon at email@example.com
ARL Mortgages is supported by the Property Team at ARL Lawyers who can offer additional advice on a wide range of property and conveyancing matters including the best ownership structure, LIM reports, specialist reports and valuations.
Welcome Joshua Pietras
Joshua Pietras has joined our Disputes Resolution Team.
Joshua grew up in Lower Hutt and studied law and science at the University of Waikato. He then went on to study a Master of Law (specialising in International Security Law) at the Australian National University.
After spending nearly two years at a large commercial firm in the Banking and Finance team, Joshua decided to make the switch to Litigation/Dispute Resolution.
Joshua has a keen interest in all areas of dispute resolution, particularly insurance, employment, debt recovery, and criminal and traffic matters.
Joshua is the president of University of Waikato Alumni Society, a member of the Asia New Zealand Foundation Leadership Network, and a volunteer at Community Law Centre.
Christmas shut down dates
Employees – What are we allowed?
When asking Kiwis what their entitlements are when it comes to annual leave, holidays and resignation, the responses are generally vague. Government statistics show that over 50% of working Kiwis have held their current employment position for less than 18 months. Therefore, it is imperative for them to be familiar with employment law and employee rights.
An Employment Agreement (Agreement) generally allows for employees to resign at any point in employment given they provide notice of resignation (Notice). Notice can be given in the manner specified in the Agreement or in writing.
When resigning there are various options available. However, for the purposes of this article, two options are discussed in detail: Gardening leave, or an Agreement.
Firstly, employees may take what is often known as Gardening Leave. Gardening Leave allows for employees to be bound by their employment obligations and be paid as normal, whilst not undertaking work for the remainder of their Notice.
Granting Gardening Leave requires agreement by the employee and employer, and is often used where employers wish to restrict the departing employee’s access to clients or confidential information.
Secondly, an agreement can be reached between the employee and employer to terminate employment immediately rather than at the expiry of the Notice. If an employee does leave prior to the Notice period finishing, without the consent of the employer, the employer is entitled to recover any loss in the Employment Relations Authority or Employment Court, including the costs of hiring additional staff for the period of the Notice or the loss of work opportunities due to the lack of staff available.
An employee is entitled to request their final pay on the last day of work rather than the following payday.
The final pay must include:
- All hours worked since the last payday until the end of employment
- Any annual holidays, public and alternative holidays accrued
- Any additional lump sum or other payments owing which may be included in the Agreement or
negotiated as part of leaving.
If the final pay does not include the bulleted points above, employees are encouraged to seek any entitlements in arrears from their employer. If a dispute arises, other options available include making a claim for a breach under the Agreement or the Employment Relations Act 2000. In the event of such a dispute, it is recommended to seek legal advice.
Under the Holidays Act 2003, employees in New Zealand are entitled to a minimum of 4 weeks paid annual leave (Leave) per year with the opportunity to take at least 2 of the 4 weeks Leave continuously. Unless otherwise agreed, leave entitlements are subject to the employee working 12 months for the same employer.
Leave pay must be the greater of the ordinary weekly pay or the average weekly earnings over a 12-month period, prior to the Leave. The latter may be more relevant for employees who work on a commission basis or non-periodic schedules.
If an employee has worked for a 12-month period for the same employer, the employee may agree with their employer to either:
- Take all Leave accrued that year
- Take a portion of Leave accrued as soon as possible and carry over the remaining Leave
into the next year
- Be compensated financially for up to one week of Leave.
On resignation, if an employee has not reached 12 months of employment, they are still entitled to payment for annual holidays being calculated at 8% of their gross earnings during employment.
Employees are entitled to request unpaid leave in addition to their leave entitlements.
It is recommended that before resigning from a position, the Agreement’s terms and conditions are read and understood. Understanding your entitlements and the right to request or demand an act, or information as an employee is tremendously beneficial. This knowledge provides protection and ensures employees are informed and treated fairly by their employer.
Reforms in Trust Law – what it means for your trust
Family trusts are a practical structure for holding assets, particularly in New Zealand where there are approximately 300,000 to 500,000 trusts operating today. Currently, the Trustee Act 1956 and the Perpetuities Act 1964 contain provisions which need to be read in conjunction with case law regarding their operation and do not keep up with present-day trust practices. Therefore, the updates regarding trust law under the current Trusts Bill (Bill) are long overdue, being the first significant reform for at least 60 years. The Bill will replace these Acts, clarify core trust concepts and create more practical trust legislation.
Overview of proposed changes
The underlying principles of the Bill are largely derived from the Law Commission’s review in 2013 which recommended that the existing law should be more comprehensible rather than introducing substantial changes. The Bill aims to facilitate the progression of trust law through the courts while also providing:
- A description of the rights and obligations under an express trust e.g. family trusts
- Clarity regarding compulsory and default trustee duties and the exercise of flexible trustee powers when managing trust property
- Requirements for managing trust information and disclosing information to beneficiaries so they are aware of their position
- Transparency around establishing, varying and terminating trusts to achieve cost-effective administration of trusts
- Alternative dispute resolution mechanisms to pragmatically resolve internal and external trust-related disputes
- A description of some of the court’s powers and avenues available for court assistance
- The circumstances in which trustees must or may be removed or appointed outside of court
Trusts subject to the Bill
The Bill will apply to all (including existing) express trusts. However, it can also apply to trusts that are created under an enactment that is consistent with the Bill or as the courts direct.
Trust duration and distribution
Currently, the vesting date for trust property of 80 years is provided under the complex Perpetuities Act 1964 and case law. The Bill proposes to remove the existing rule against perpetuities and provides that an express trust can exist for a maximum of 125 years or a shorter duration as specified in a trust deed. This is aimed to provide certainty in trust dealing, avoid indefinite trusts and allow settlors to distribute property as they choose.
Upon expiry of a trust, all property must be distributed in accordance with the trust deed or, if the deed is silent about how property is to be distributed, in a way that is consistent with the objectives of the trust. Where there are surviving beneficiaries and it is not possible to determine how to distribute property in accordance with the trust deed, the property must be distributed to the beneficiaries in equal shares.
Trustees’ duties and powers
The Bill provides for five mandatory trustee duties that cannot be excluded from a trust deed. These include the duty to act in accordance with the terms of the trust and to act in good faith. The 10 remaining default duties, including the duty to act impartially, can be amended or excluded by the terms of the trust deed.
There is a presumption that trustees must provide basic information to the beneficiaries such as notifying beneficiaries of their position and the right for beneficiaries to request trust information and the contact details of the trustees. Trustees must consider certain factors, such as the age and circumstances of the beneficiary or the effect on those involved with giving the requested information, before deciding whether this presumption applies. If the trustees reasonably consider that information should not be given after reviewing the mandatory factors, the trustees may refuse the information request. The Bill sets out the procedure for trustees when deciding to withhold information.
The Bill is currently in its first reading. Once enacted, there will be an 18-month transition period to allow anyone involved in trusts to consider the application of the Bill to their trust. This long-awaited Bill aims to be a flexible tool to accommodate the wide use and effective management of trusts for the benefit of our society’s future asset planning.
How the Residential Care Subsidy can affect your Asset Planning – What you need to know?
The Residential Care Subsidy (Subsidy) is becoming increasingly topical as New Zealand’s 65+ population is projected to increase from 15% in 2016 to over 25% by 2068. The growth in this population will increase the number of Subsidy applications for financial assistance for long-term residential care in a rest home or hospital (Care).
Despite the predicted growth in applications, many New Zealanders are not aware that their current asset planning has the potential to affect the outcome of a Subsidy application significantly. In light of this, advice surrounding asset planning is essential.
The Ministry of Social Development (MSD) determines Subsidy applications. When considering an application, they will conduct a financial means assessment to determine whether the applicant qualifies under the prescribed eligibility thresholds. This includes both asset and income assessments.
Before the applicant undertakes the income assessment, MSD will first assess whether they qualify under the asset assessment (Assessment). The asset thresholds for the Subsidy are as follows:
- A single applicant or applicants that have a partner in Care: The total value of their assets must not exceed $224,654 including the value of the family home and vehicle
- Applicants who have a partner that is not in Care can elect to be assessed under either of
the following thresholds:
- Their assets must not exceed $123,025 (not including the value of the family home and vehicle); or
- The total value of all their assets (family home and vehicle included) must not exceed $224,654.
The Gifting Provisions
MSD implemented gifting thresholds to prevent the giving away of assets with the purpose of attempting to qualify under the asset thresholds for the Subsidy.
Gifting thresholds apply to gifting commonly, i.e. birthday gifts, and gifting undertaken to a Family Trust (Trust). Gifting to a Trust is when an individual (Settlor) who owns assets such as houses, cash and shares, sells these assets into a Trust. In return, the Trust owes a debt back to the Settlor. The debts are then “forgiven” by the Settlor through a process called gifting.
The MSD gifting thresholds are:
- Five years before applying for the Subsidy each person can gift up to $6,000 each annually. In this case, those in a qualifying relationship under the Property (Relationship) Act 1976 may gift $6,000 each.
- Beyond five years before the Subsidy application, a couple or individual can gift up to $27,000 annually. In this case, those in a relationship may gift up to $12,500 each.
Gifting that falls under the prescribed gifting thresholds will not be considered in the Assessment. However, if an applicant has sold an asset into a Trust that exceeds the gifting threshold, MSD will consider the value of the asset that exceeds the gifting thresholds as a personal asset. For example, an applicant sells their house valued at $300,000 to their Trust in 2011 and gifts annually until 2016; they apply for the Subsidy in 2017. MSD will subtract the value of the prescribed gifting being $27,000 in 2011 and $6,000 annually until 2016. The remaining $243,000 will be considered a personal asset under the Assessment. The applicant would not qualify for the Subsidy in this instance.
If the same applicant had a partner who was not in Care, it may have been more beneficial for the applicant to hold the property as a personal asset. If the house was a personal asset, in this case, they could be considered under the eligibility threshold which excludes the value of the family home and vehicle if they chose. The applicant would qualify for the Subsidy in this instance.
MSD will only consider gifting to a Trust that has been completed and will not take into account any entitled gifting that has not been completed.
- Plan. If a Subsidy application is likely, and you have formed a trust, implement a consistent gifting regime so that you can take advantage of MSD’s prescribed gifting thresholds.
- If you already have a trust or are considering forming a trust and may apply for the Subsidy, consider seeking legal advice on your position, including whether you could consider selling your home out of your Trust to meet the Assessment.