Wills and Buy & Sell Agreements
Your Will underpins the entire Trust process and is a particularly important component of your estate and succession planning. Where there is a Will there is a way! Without a Will, your advisers have no guidance as to your wishes after your death.
Your Will should:
- Appoint an executor and trustee
- Specify any funeral wishes
- Appoint guardians for young children
- Forgive any debts owing to you by your Trust
- Make any specific bequests ( i.e. jewellery, furniture and effects etc )
- Direct who is to receive the balance of your assets, when and in what shares
- Direct who is to receive the assets of your Trust, when and in what shares
- Ask yourself the following questions:
- Do you have a Will?
- Is it up to date?
- When was it last reviewed?
- Are you aware of what it says?
- Does it reflect your current thinking?
- Is it in harmony with your Trust?
If the answers to these questions are a “no” or “not sure”, contact us
Your Will is your voice from the grave
Your Will only talks from your death, not before, therefore as you are not around to contradict yourself, you need to be clear about your intentions! Confused? Well if you die without a valid Will, your estate will be administered and distributed according to statutory directions. In other words, the law of the land, not you, will dictate who is to receive your estate and in what shares. A properly constructed Will working in harmony with your Trust is a vital part of all estate planning exercises and like a health check, should be reviewed annually.
Your Will should ensure you elect your beneficiaries
What about that particular family memento that has been handed down the family for generations?
And then there is the item of furniture you promised to your son? And what about your particular items of jewellery that you pledged to your daughters? Without clear direction, families can split apart on the death of a loved one because of disagreements and arguments over who was promised what.
Unfortunately and all too often this is over some inconsequential item that suddenly becomes of major importance! Your Will should clearly detail who is to receive what, in what proportions and when.
Failure to execute a Will often causes confusion, added cost, time delays, disagreements and ultimately often an outcome that was not intended or desired. In most cases a properly executed Will, reviewed periodically along with your Trust will allow for the smooth implementation of your wishes after death.
Your Will should avoid grey areas and confusion
Do you want to be buried or cremated? What are your funeral service wishes? What is to happen to your personal items? Do you have any charitable gifting wishes? Do you wish to leave specific legacies to specific relatives, friends? Do you wish to acknowledge someone who has provided a valuable service to you during your lifetime? And importantly, how is your Trust to be viewed after your death, who is to replace you as a Trustee and who is to benefit and when? These are all questions that may be asked after you die and without a Will may not be answerable. A Will is a clearly stated true reflection of our current intentions and will accurately reflect your wishes as though you were still alive.
Your Will should reflect your intentions
Your Trust speaks whilst you are alive and is usually an open document that doesn’t provide any clarity. This is deliberate so as to provide the widest possible scope for future actions which currently are not clear. After all, life changes, sometime dramatically and quickly and your Trust must be able to cope with and cater for such changes. Whilst you are alive you are able to determine and direct appropriate courses of action for your Trust for the benefit of the beneficiaries but of course after death, it is your Will that will be a driver in underpinning your estate and succession plans. Therefore it is important that firstly you have a current Will and secondly that it is up to date and reflects your intentions for both your estate and your Trust.
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In New Zealand we are inundated with small to medium businesses with two to five Directors. Issues constantly arise when one party dies or becomes permanently disabled and the remaining business owners are faced with the reality that they now need to buy this individual’s shares in the business.
This causes tremendous financial problems for the business and in some instances can result in the ultimate failure of that business.
There are many complex issues surrounding the preparation of Buy/Sell Agreements and many Advisors lack the skills required to complete a detailed agreement and advise on an appropriate Business Succession Plan.
We have therefore developed a process which will allow businesses to continue after the death or permanent disability of a Director/Shareholder. This is via an appropriately structured document, commonly known as a Buy/Sell Agreement.
This is a concept that is certainly not new, but one rarely constructed in a correct manner. Often most Buy/Sell Agreements are poorly drafted and almost never reviewed. Generally this is due to the person who is drafting the Agreement having little understanding or knowledge about insurances and the effect these have on these Agreements. Many Agreements, once executed, are not subject to a review process and as the Company grows in value the insurances in place could well be inadequate. Like all Agreements, they must be subject to an annual review.
The Buy/Sell Agreement is where the parties involved in the business that hold shares (including Trustees as Family/Business Trusts) agree on a process involved on the occurrence of certain predetermined events. As this Agreement is funded by insurances, the placement of this insurance should be implemented by a qualified Insurance Advisor.
The buying and selling of shares in this Agreement is usually in respect of the following 4 situations:
- Suffering TPD;
- Suffering Critical Illness; and/or
- Diagnosed with a Terminal Illness
Buy and Sell Agreement Notes
New Zealand Trustee Services ( Stakeholder) Limited is a company specially formed to hold stakeholder appointments primarily where a Buy/Sell Agreement is in place. It is the sister company of New Zealand Trustee Services Limited which is a Professional Independent Trustee and acts in a large number of Trustee Appointments throughout New Zealand.
Why Use New Zealand Trustee Services ( Stakeholder) Limited as a Professional Stakeholder?
- We have NO vested interest in funds held;
- We provide security for the proceeds of the insurance claim until the funds can be distributed;
- We are removed from the pressures affecting your business; and
- We provide protection for all parties until the Agreement can be signed.
What Do You Get For Your Money?
- Use of a Professional Independent Stakeholder;
- Completion of a Declaration of Trust from when the policy is issued until when the Agreement is signed;
- Plain Language Proposal Document detailing all key factors of the proposed Agreement;
- Fully comprehensive Agreement between all Shareholders and the Stakeholder; and
- Annual Review of the Agreement.
- Application for Insurance made and approved;
- A detailed questionnaire for the Buy/Sell Agreement to be completed;
- Declaration of Trust made when policy issued;
- Plain Language Proposal Document issued with draft Buy/Sell Agreement;
- Buy/Sell Agreement signed and reviewed annually along with associated Insurances.