Tags: Law

Time for a legal check-up?

Jean and Peter were in their early 80s and were still living in their family home. Many of their friends had moved into retirement villages, but they loved the home they had lived in for the last 30 years. Their home was owned by a family trust and had been in the trust for 20 years. They had set the trust up because everyone else seemed to be doing it at the time and they had thought if one of them needed to go into care, then the trust might protect their family home.

Jean and Peter were trustees together with their daughter, Olivia. When they first put the home into the trust, gift duty was still applicable. When gift duty was abolished in 2012, they had stopped gifting and were still owed money by the trust. They hadn’t been to see their lawyer in years and their wills were the same ones they had done when they set up the trust 20 years earlier.
Jean had noticed that Peter had started to get quite forgetful, but she put it down to old age. It had started slowly, but when their daughter, Olivia, visited from the South Island, she said to Jean that she had really noticed how bad Peter had got. Olivia suggested that they take Peter to the GP for a check-up. The GP tested Peter and said in her view he was already quite a way down the track with loss of capacity and referred them to a geriatrician.
Over the next few weeks Peter’s health deteriorated rapidly and quite quickly it was apparent that Jean would not be able to look after him at home and that he would need to go into care. It took some time to find an appropriate care facility for Peter, but fortunately Olivia came back up to Auckland to help. Olivia also helped Jean complete the residential care subsidy application in the hope that Peter would qualify for the subsidy. As well as the family home in the trust, Peter and Jean had a small amount of savings in their personal names on term deposit.
Jean was surprised to learn that Peter would not qualify for the subsidy, and that was simply because the family home was owned by a trust. If the family home was owned by them in their personal names, they would qualify for the subsidy as the family home is exempt if only one person goes into care. When the family home is in a trust, then WINZ treats that as being an investment that you have deprived yourself of. Fortunately, WINZ does allow you to restructure your affairs if you can qualify for the subsidy in a different way, and that is what Jean decided to do in this case. The trust was wound up and the family home distributed back to personal names and Peter qualified for the subsidy. This was a great relief for Jean.
The other hurdle was that Peter and Jean hadn’t put in place enduring powers of attorney. The doctors said that Peter no longer had capacity to make decisions in relation to either his property or his personal care and welfare. This obviously meant that he was not able to sign powers of attorney to appoint someone to act on his behalf. Jean and Olivia had to make an application to the Court so that Olivia could be appointed as Peter’s attorney. Unfortunately, the costs of making the application to the Court and the time involved were both on the high side. It was a stressful time and made Jean realise that it is important to go and get legal check-ups with your lawyer in the same way that you go and get a health check-up with your GP. She quickly put in place her own enduring powers of attorney which gave her some peace of mind.
It is important to regularly review your legal document status every five years, or if there is a change in circumstances. This can include your will, enduring powers of attorney and trust documents if applicable. Ensuring your assets are appropriately structured and spending a little bit of money to make sure everything relevant is in place regularly, is far preferable than having to spend a lot when you don’t have the right documents in place.

Tammy McLeod, Managing Director, Davenports Law

Issue 152 May 2024