This Part 2 of my 3 part series on the appointment of an Enduring Powers of Attorney, explores matters to consider in Preparing an Enduring Power of Attorney to deal with financial matters. In each jurisdiction it might be called something else, but in NZ such a document is called an Enduring Power of Attorney (Property)(“EPA Property”).
It’s never too early to have an EPA Property prepared. If you have a house, land, or bank account you have financial interests that would need to be attended to if you became mentally incapacitated.
You don’t need to have all your answers lined up before you get advice on an EPA Property but it certainly helps to process the questions in your mind. The following list includes 12 key things to think about:
Do you need to cancel any previous EPA Property appointment?
If you have prepared an EPA Property before, you may need to cancel the appointment. If so, the attorney/s named in the previous power of attorney need to be formally notified in writing by you, your lawyer or your new attorney/s.
Who would you like to be named as your attorney/s – will they agree?
Usually, you can name more than one attorney for financial matters and they can work together. Some jurisdictions limit the number. The more attorneys you choose to work together, the more likely there might be problems. I would recommend you consider keeping the number to a maximum of 2. The person or people you appoint should be financially competent and should be trustworthy. You should talk with that person or people about the role you are asking them to adopt. You will need their full name, address and contact details to complete your instructions.
Do you want to name a successor attorney/s (in case the first named attorney is unable to continue in that role) – will they agree?
I recommend you do nominate a successor attorney if possible as it means the document will survive should there be any reason why your attorney is unable to act (and therefore be more cost effective).
Do you want your EPA Property to become effective immediately or only if you are mentally incapable (with a Doctors certificate certifying incapacity)?
With trusted family members, if you are travelling a lot, or physically incapacitated it might be that you would prefer the EPA Property to come into effect immediately but this gives immediate powers to the attorney and you might prefer to retain sole power so long as you are mentally capable.
If you have named more than one attorney, are they to act jointly (i.e. both must decide) or severally (either can decide) or by majority vote?
My advice on this is very personal to your circumstances. My usual recommendation is joint power for 2 or majority power for more than 2 but, for example, there are cases where one of 2 attorneys may travel a lot and that can cause complications in signing documents.
Should the EPA Property apply to all your property or only to some of your property or to do specified things?
You may wish to limit the EPA Property to dealings with bank accounts only. In most cases, I would recommend broad powers with conditions if there are concerns about the way specific items of property are to be dealt with.
Do you want to impose conditions on any of those powers?
For example, you may want to include special conditions in relation to the sale of the family home or repayment of loans. I recommend preparing your EPA Property at the same time or at least consistently with the terms of your Will so that, for example if you intend to give someone a life interest in your home, that is reflected in your EPA Property conditions.
Who should your attorney consult with and what should they consult about?
The requirement of consultation is a requirement that takes effect before action is undertaken. Examples of persons with whom you may wish your attorney to consult are numerous but obvious ones might include your accountant or lawyer. You will need to provide your adviser with full names, addresses and contact details.
Who should your attorney give information to and what information should they give?
The requirement to provide information takes effect at any time but usually after an action is undertaken. This might involve an attorney providing information to your children or step children for example. By including a provision to disclose information you can help to ensure that your financial circumstances when in the hands of an attorney are more open to disclosure. You will need to provide your adviser with full names, addresses and contact details.
Should the attorney be entitled to profit from acting as attorney e.g. should attorneys be allowed to charge for their time?
All professional attorneys are entitled to charge fees. This can prove costly for your estate but may be necessary. You may also wish to reimburse an Attorney, professional or otherwise for expenses they incur in helping you.
Should your attorney be allowed to apply to the Family Court if for some reason your will is out of date and needs to be changed?
There may be a change in your financial circumstances while the attorney is acting on your behalf that alters the intended effect or validity of your Will. For example, if a property must be sold to meet your expenses but you gave a life interest to it to one of your children in lieu of other bequest.
What other terms and conditions would you like to impose?
There are some things you can do with an EPA Property and some that you can’t. Your legal adviser will be able to take you through your options.
Be wary of one size fits all EPA Property documents. They are like one size fits all Wills. Often ill-fitting and some times not even valid.
In New Zealand you can even expect to pay more for a well prepared EPA Property than for a Will but that is partly because the current form attempts to address many of the problems being faced in this challenging area of law - not least of which is the growth in the number of Elder Abuse cases.
For your documents to be effective in relation to house and land property owned in Australia, you will need to ensure it complies with that state’s requirements and lodge your EPA Property with the relevant land registry (each State and Territory has its own).
There are special considerations if you need your EPA Property to apply to other jurisdictions. Legal advice is essential to ensure you have addressed these.
Preparing a sound EPA Property takes time and consideration and shouldn’t be left until you are in a hurry to get documents done. Make some notes based on the matters raised above, before you go to meet your adviser and you will be well prepared.
Next week I will explore the factors you need to consider in preparing an Enduring Power of Attorney for Health and Welfare (documents which deal with adult guardianship)
With longer life expectancy comes an even greater possibility that at least some of your last years will involve mental incapacity from ill health. Life changing injury, of course, can happen any time.
What happens to you and your finances if you lose mental capacity to make decisions during your life time through illness or injury?
If you don’t have documents appointing representatives to make your decisions for you if you lose mental capacity, the Court makes the decision who to appoint and you will have little to no say in who that is depending on the extent of your incapacity.
Most of us don’t want to think about these possibilities, even if we can point to examples in our own or friends’ experiences where things have gone horribly wrong.
The best time to work out what will happen to your finances and your welfare when you lose capacity is NOW.
NO APPOINTMENT OF ATTORNEY = NO SAY
Two examples I have seen where things have gone seriously wrong because there were no Enduring Power of Attorney appointment include:
ONE SIZE DOES NOT FIT ALL
Even if you have documents, they need to be well considered and the subject of solid legal advice.
Examples where I have seen legal documents go wrong include:
It is really important to prepare for incapacity and to do so properly.
WHAT DOCUMENTS DO YOU NEED?
All Commonwealth countries have the same essential framework for documenting your decisions in these matters, but every one of them has a unique approach. In New Zealand, the documents you need to have in place are called Enduring Powers of Attorney (Property) and Enduring Powers of Attorney (Health and Welfare). In some Commonwealth countries these powers are all combined in one complete document. In other countries, an Enduring Powers of Attorney (Health and Welfare) is called an Enduring Powers of Guardianship document. If you own property in more than one country you will need to have more than one set of documents.
If you are in Australia (or own property in Australia), you also have to consider every State and Territory has different rules. I know this first hand from having worked in four different Australian jurisdictions.
So, what things should you consider in preparing an EPOA (Property) or an EPOA (Health and Welfare)? Next week I will explore the subject further.
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For many of us, starting our own business is one thing we dream to do but unfortunately, of the many hundreds of thousands of new startups every year, over 80% wont make it past their first year.
A few articles ago I gave 6 Legal Tips for Small Business – those tips could apply to all small businesses no matter what stage of development the business is at.
This article gives some special tips for startup businesses. To get the best use out of the article, I suggest that you don’t just answer the questions raised with vague comments to yourself – but really ‘get inside’ each issue.
So, here goes, here are some things for start up businesses to consider if you haven’t already thought of them….
Planning and the Aged Care Subsidy
It’s estimated that on average people under the age of 50 will spend the last 3 years of their lives in residential aged care with the present aged population spending between 1.5 years to 2 years. But who should fund this?
Not everyone will spend time in a rest home, but if they do the cost is high with a current estimated average of up to $80,000 being spent per occupant.
In New Zealand, the obligation to pay for rest home care has been means tested so that the taxpayer only covers the cost if the person needing care is judged to be poor enough to get Work and Income's Residential Care Subsidy.
The maximum subsidy for ordinary aged care is just over $1000 a week showing what a person can expect to pay as a base level if they don’t get the subsidy.
It’s been a feature of Estate planning for some years now to use family trusts, and gift away assets to descendants, to try to keep wealth in the family, and achieve relief through the Residential Care Subsidy if Rest Home Care is required.
But with growing public funding concerns surrounding an increasing life expectancy and a growing, aging population, the means test is becoming harder to meet and however carefully your estate plan is carved, it is getting more difficult to beat the system.
Work and Income is on the lookout for people who have "deprived" themselves of assets and income, and are quick to deny subsidies to people who've done it.
The way Work and Income approaches the means test is complex, so it’s important to get legal advice before trying to protect assets and in any event as early as possible before the need arises to approach Work and Income with an application.
WHAT IF YOU ACT EARLY?
Acting early to protect assets would be my number 1 recommendation. If you're looking to rearrange your assets because you are likely to go into care in the next few years, it could be too late.
The longer that a trust has been in existence, and the longer the period between the financial gifting and the time you apply for rest home subsidy, the more likely that Work and Income won't take the gifting into account when calculating your wealth.
As far as Work and Income is concerned, its mandatory to include gifts made in the five years before someone applies for subsidy when they calculate the asset means assessment so, paying for a granny flat to be added to your children’s home during the five years, for example, needs to be carefully documented as such an arrangement would come under very close scrutiny.
During the 5 year period, people can give up to $6500 away each year, and it will not be included in the asset means testing. Outside the 5 year gifting period, people can gift away up to $27,000 in any one year.
But even "allowable" gifting can still result in failing the means test.
The effect of shifting property into trusts is to "deprive” yourself of assets. If those assets are income earning assets then Work and Income may form the view that you have deprived yourself of income that would have been available to help pay for care.
In effect, while there is "allowable" gifting of assets, there is no allowable gifting of the income that can be earned from those assets.
When it comes to income, people entering aged care are allowed to keep only a weekly personal allowance from their income, plus an annual clothing allowance. The rest of their income goes to help pay the rest home bill, and reduces the subsidy Work and Income will pay.
There are rules about what income is counted in the test, but it equates to roughly everything for a single person, and half of the income of a couple where one is not going into care.
ASSETS OWNED SEPARATELY
Couples may argue that assets are not co-owned, but Work and Income is unlikely to accept that argument.
Even if the partner regards his or her assets as their own separate property, they are still included in the means assessment.
Even so called 'pre-nup agreements' can be ignored. If subject to a Property (Relationships) Act 1976 agreement, then separate property assets will still be taken into account unless the couple have separated (bona fide).
WHO PAYS IF NO SUBSIDY IS GIVEN
If the subsidy application is declined, family or family trusts will have to pay. This use of funds may be inconsistent with the terms of the family trust, thus opening a whole new can of worms.
THINGS TO WATCH OUT FOR IN ASSET PLANNING
While every single case is reviewed on its own merits, arrangements Work and Income are unlikely to accept, include where people:
There may be no way around making a contribution to yours or your family’s residential care but if you want to know if there is in your circumstances get legal and accounting advice as soon as possible.
There are many circumstances where you need to get your story down in writing for legal purposes. These can include making statements to police, governments and authorities or preparing for court. Broadly speaking, statements for legal purposes are called “statements of evidence”. Some times these are made by way of Declaration and some times by way of Affidavit. The formal requirements for Statements of Evidence can be different depending on the purpose. These guidelines give a broad overview of how a Statement of Evidence can be written.
Depending on the purpose of your statement there will be specific evidence you must include in your statement. You can get help in working out what that specific evidence is by checking information available on line for example, at www.communitylaw.org.nz or www.cab.org.nz or by having an initial consultation with a lawyer.
The Golden Rule
Give yourself enough time and put the effort into getting it right.
Statements of evidence, even for lawyers, take many drafts. You need to spend time in making them as clear as possible because the clearer and more concise your statement is, the more persuasive it will be.
Computer drafts are the best way to go because it is easier to make changes. If you do not have a computer, you should try and get a friend or family member to help you. Also, many community service centres allow you to book or use computers.
Courts have their own special form for Statements of Evidence but essentially the format is generally the same and is quite logical. Numbering your paragraphs can make a Statement of Evidence easier to refer to when talking about it. By numbering paragraphs you can say, “at Paragraph 21, I talk about the second incident”, for example.
This sets out who you are, where you live and what you do. It should also set out your relationship to other parties that you refer to in your evidence and needs to state your qualifications if you think that is relevant.
I, Joseph Bloggs, of (street address) Town, New Zealand, employment title, make oath/affirm and say as follows:
This sets out the facts and evidence you rely on. Try to set out your Statement of Evidence in chronological (date order from first event to last event) form.
1. I am the applicant/respondent in these proceedings. (ie why are you involved in the proceedings)
2. On x I was telephoned by, the applicant/respondent to these proceedings, asking me to provide a quote for services.
3. On y I provided a quote for my services.
4. On z the applicant/respondent contacted me and ask me to do the work in my quote.
It makes sense to set your Statement of Evidence under sub-headings. Keep those facts in chronological order under each sub-heading.
What should a statement of evidence contain?
A statement of evidence should set out direct observations of matters or statements you believe to be true.
“K approached me waving a fist in my face and K was very red in the face and shouting. There was nobody else around. I felt afraid."
This is acceptable because it records direct observations. It could be used to persuade the Decision Maker that the person’s actions were “threatening” – notice the word ‘threatening’ is NOT used because that is an opinion (see below)!
What Shouldn’t A Statement of Evidence Contain?
Statements of Evidence should not contain opinions.
“K approached me in a threatening way”.
This is an opinion. The meaning of the word “threatening“ is not clear and may mean different things to different people.
Statements of Evidence should not draw conclusions based on observation.
"these actions showed that he wasn’t ever going to pay for the work done”
Statements of Evidence should not summarize in a general way things that have happened.
“Z was always evading me.”
This summarizes actions rather than describes direct observations.
A better way to say the above would be:
“On x I approached y for payment. He said, “I will pay you next week”. And repeat for each incident.
Statements of Evidence should not contain hearsay. Hearsay is what another person told you, you did not see it yourself.
“Peter said to me “I saw Paul leaving the building site yesterday with a stack of gear in his truck”.
The reason Hearsay is not usually acceptable is because the person who made the statement is not present to be tested as to the truth of that statement.
In the example above, the statement of what Peter said is not evidence of Paul leaving the site with gear in his truck, it is just evidence of Peter saying it. If Peter saw something important that can help your position, you should ask Peter if he will sign his pwn statement.
There are exceptions to hearsay. A lawyer can assist you with your statement if you feel you need to include hearsay and do not know if you can.
The value of Independent and Documentary Evidence
Most Statements of Evidence will have attachments. Attachments may include documents such as extracts of emails, text messages, letters, invoices, quotes, proof of receipts and expenditure, telephone accounts that show the numbers called. Basically anything that helps to prove what you are saying is true. Documents are often called “best evidence” because if shown to be genuine, they are very persuasive.
If you want friends/colleagues to write Statements of Evidence, you will probably have to draft something for them too, so don’t forget that when you are planning your time to write Statements of Evidence.
If you would like to have your evidence and statement reviewed by a lawyer don’t hesitate to contact us. We are happy to provide assistance by either reviewing your documents online/by email or by sitting down with you one on one to talk you through it.
Negotiating and Documenting Agreement - Part 3
This "How To" Series Guide helps to explain the steps involved in reaching settlement. You are reading Part 3 of 3 parts. If you would like to read Part 1 click here or Part 2 click here.
Step 2 - Negotiating
Parties negotiate directly or through their lawyers. This can be done at meetings or through email or letters. Where the relationship pool is not significant, I recommend people try to negotiate between themselves first to save legal fees.
Parties may also wish to have mediation, which means a mediator will facilitate the meeting.
If parties choose to mediate, it may be a good idea to each seek legal advice first and get a letter of advice, which summarises the facts of their case, the strengths and weaknesses of their claims, the options available, and the likely outcomes.
If parties choose to negotiate through their lawyers, this is usually done by way of a round table meeting.
Round table meetings can be an effective way to resolve relationship property matters where the parties are willing to engage in discussion in person through their lawyers.
Some key tips for negotiating on Property distributions
Step 3 – Agreement
Where a resolution is reached through negotiation, the final agreement must be signed and certified by the parties’ lawyers. The Agreement will usually contain standard clauses such as the following (examples only):
Step 4 – Settlement (After Agreement)
There will still be legal and financial steps to take to give effect to a Separation Agreement. When you sit down with your lawyer to receive advice on your proposed terms of settlement, it's a really good idea to ask them to help you prepare a list of what will need to be done.
How to work out who gets what when a relationship breaks down (Part 2).
This "How To" Series Guide helps to explain the steps involved in reaching settlement. You are reading Part 2 of 3 parts. If you would like to read Part 1 click here
What sort of documents should be disclosed?
Examples of standard documents to provide or request include:
How much information can you ask for in the disclosure step?
The main principle is that items for which disclosure is requested must be relevant, tailored and focused to the parties’ relationship property, keeping in mind that the law requires that disputes must be resolved as inexpensively, simply and quickly as possible.
Court cases show that reasonableness and proportionality are key considerations for any request for disclosure. Therefore, a party may not need to hand over requested document if the documents are not reasonably relevant to the case or it is overly onerous to provide (e.g. very expensive and time consuming to put together in light of its relevance). Parties need to seek material in an expeditious way and where such conduct becomes oppressive it may lead to a Court concluding “enough is enough”.
What if there are delays in disclosure?
On average the process of settlement can take between three to six months. If there are delays with providing or obtaining disclosure, it can take a year or more.
Step 1 can often cause delays in the settlement of relationship property especially when parties are not forthcoming with information. We can help clients avoid delays by proactively managing requests for information.
This may mean applying to the Family Court where one party has concealed information and misled the other party in relation to the true extent of relationship property.
To learn more about the next two steps, please subscribe by clicking onto the RSS Feed to the right of this post.
How to work out who gets what when a relationship breaks down
The Property (Relationships) Act 1976 provides for how property of married couples, civil union partners and de facto couples is divided when a relationship ends (including by breakdown or death).
When a relationship breaks down, relationship property disputes can be settled in two ways - either by agreement between the parties or through the Family Court.
Settling relationship property matters by agreement means the Family Court is not involved and parties come to an agreement themselves with or without the assistance from lawyers. Settling by agreement is far more effective in terms of time and money than the Court process. For these reasons I just about always encourage my clients to use this method if they can.
This is part 1 in a 3 part series to help explain the steps involved in reaching settlement and give you some tips to move forward.
4 STEPS TO SETTLEMENT
There are four key steps involved in settlement:
Step 1 – Disclosure / Information gathering
This step allows both parties to establish the total relationship property pool and create a list of assets and liabilities.
When you think about it, it makes sense that meaningful negotiation can't start unless both parties know what they are dealing with and have a full understanding of the details of what is in their relationship pool. This includes knowing what property is considered relationship property and what the value of the relationship property is. It can sometimes be hard to get the ball rolling on Step 1 and people tend to want to skip it thinking that it will just cause trouble.
From a legal perspective, without full disclosure, there is a real risk that whatever the parties agree to in negotiations will be challenged and set aside by the Court in the future. This could occur for example if it is later discovered that one party had hidden financial information (non-disclosure). Non-disclosure can lead to further legal costs and delays for both parties.
How to start the ‘disclosure’ process?
It is often best to confirm the start of this process in writing with one party requesting from the other party financial information or other details in respect of relationship property. You can do this using a lawyer, with the help of a lawyer checking your letter or on your own.
What “relationship property” covers
Relationship property covers things of financial value that were gained during the relationship. It can include:
These issues are explored in Part 2 of this series, so if you would like to know more, subscribe by clicking on the RSS Feed on the right.
Have you ever walked out in a daze after meeting with a lawyer? Was it English they were speaking? What was it they actually said about your problem? Was the only thing you understood, “Don’t worry, we will take care of it for you”, and then with confused relief you left your legal problem in their hands.
A few weeks later you get the bill but you still don’t really understand what work has been done AND why are you paying for photocopying and meetings and phone calls?
Well, the law is pretty complicated. There’s no doubt about that. It’s not always easy to navigate, and often only an experienced lawyer will know the best strategy to help you reach your goal. And, yes, paperwork is generated, even in my paperless office there is photocopying to be done. Meetings, research, reviewing documents and phonecalls are also vital tools of our trade.
And, yes, the traditional model is we do take care of you and you pay us to do that - we can try to keep our fees down but the analogy might be, you are flying first class, with all the tinsel and trimmings and not a care in the world (but for the bill).
But can’t there be a different way? What about those who prefer to, or simply have to, fly economy so to speak.
In my article of 7 December 2018 I talked about preventative law. This article is about an approach to law that is equally exciting. Around the world, it's called “Unbundled Law”, also known as limited scope or discrete task representation. Unbundled Law is where the lawyer and the client make an agreement to limit the scope of the lawyer's involvement in a legal matter down to specific tasks.
The New Zealand Law Society* explains the potential benefits to clients in using Unbundled Law as:
It simply stuns me the number of people who do not know what their legal documents say or do - and in some cases don’t even have a copy!
As for court cases, if you don’t know what your legal case is about how can you possibly make decisions about what to do next in it when you are asked by your lawyer for “instructions”?
An important point to make is you don't have to compromise quality with Unbundled Law, because ALL lawyers have professional obligations to their clients that are closely monitored and nowadays it's easy to do some homework and find out about your lawyer's experience and skills - just as you would with any other potential service provider.
There’s no doubt some people will always prefer the traditional legal model and thank goodness there are some great law firms in the region providing those services but more and more people are taking on assisted “DIY Law”.
At Comer Legal, we have developed a fixed fee framework so that clients can get the assistance they require as they require it. When work is completed, the client takes home all their own original documents for safekeeping or lodging – thus keeping control over their own legal matter. Electronic copies are kept by us and also provided by email to the client if requested. If we decide that a client might not be the right fit for Unbundled Law, quality referrals are made to traditional lawyers.
The key to the success of professional services is YOU the client.
More and more your choices matter when it comes to how services are delivered and that’s why Unbundled Law has a very important role to play right now and in the future in helping people access justice.
*Unbundled Guidelines - New Zealand Law Society 9 August 2017
In my November 2018 blog article, one of the 6 key Legal Tips I listed was to “Put it in Writing”. This article tells you why having great Terms and Conditions documented is so important.
When starting up a business, the last thing you want to think about is the worst case scenario but if you don’t put terms and conditions into writing you put yourself at risk of uncertainty and misunderstandings. You need to cover yourself.
Your Business Transparency
Having terms and conditions protects your business but other parties such as customers also need to know where they stand in dealing with you. Terms and conditions have a vital role to play when it comes to two parties (customer/supplier, partners) understanding their duties, rights, roles and responsibilities.
Terms and conditions can save a lot of money by addressing all issues at the outset. This in turn avoids disputes later on about what might or might not have been agreed. Apart from the cost, disputes damage business relationships and your valuable reputation.
What To Include In Terms And Conditions
Well-drafted terms should act like a manual for doing business and provide absolute clarity on what should happen in a given situation. They should set out what the agreed terms are between parties and what happens if things go wrong or one party wants to leave or is unable to continue.
The exact items your terms and conditions should include depend on your individual business but you should consider including:
Many businesses include their terms and conditions on the back of their invoice, but arguably by then, it’s too late. Payment Terms can certainly be re-stated on an invoice but Terms and Conditions should be provided at the outset of a business relationship. This can be done in a fairly brief, easy to adapt, format. It’s also a good idea to display your general terms and conditions on your website.
What Happens If Terms And Conditions Are Not Clear?
Failing to specify terms can have a serious impact on your cashflow and your business relationships. You may end up in a situation where the customer thinks they will pay at the end of service delivery and you think you are being paid at the beginning or in stages, so you could end up having to pay for materials and staff before you have received the money from the customer. Another common example is a misunderstanding can occur as to what is being supplied and when.
Also, if you do not specify your payment terms very clearly, customers may be confused as to when payment is due or you have will have no right to charge interest for late payment.
One Size Does Not Fit All
It’s important to make sure your terms are specifically written for your business – you can’t assume another business will have the same needs as yours.
Consult a lawyer and avoid the temptation to copy someone else’s terms as their business is different and they may not have consulted a lawyer themselves. Consider it an investment. If well drawn in the beginning, terms and conditions should need very little modification as time goes by.
4 Tips For Working Out What You Need To Include In Your Terms And Conditions
When in doubt, seek help. Ask for advice from your mentor, fellow business owners, your accountant and your lawyer.
What if basic Terms and Conditions are not enough?
Most businesses will be able to get by with short form standard contracts (Terms and Conditions) for the supply of goods and services. However, in some cases it may be preferable to have a more detailed and traditional contract in place. A lawyer will be able to advise you what would be the best approach for your business.
Trish likes to do her thinking while she drives - what a perfect combination for a mobile lawyer!
This blog shares those thoughts.
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