When I look around at my friends, I often count my blessings. You see I am one of the lucky ones. The work that I do, I truly love. I am passionate about helping people protect what they have worked so hard to get.
I also really enjoy writing and presenting which I guess is one of the reasons I wrote Family Trusts 101. Ultimately, I don’t think I really work at all – I simply indulge in my passion most days. Lucky for me, my passion happens to be of interest to other people after all, most people want to ensure their assets are protected, they don’t pay more tax than what they legally have to and their assets get handed onto their loved ones when they depart planet terra firma.
Whilst my work does involve Trusts as this is a handy means of ensuring asset protection, it also involves money – predominately how to make it, how to keep it and how to deal with it generally.
Of course, this means I need to be aware of what the Government and the economy is up to. Which of course has recently led me to doing a little research and a little thinking. To this end, I’ve jotted down three particular issues I’ve been mulling over, the first one of which I present here.
Budget changes – alignment of tax rates
In the last five days, I’ve completed 16 presentations on the Budget changes coming through. One of those changes involves aligning the top marginal income tax rate with the tax rate Trusts pay.
According to the budgetary commentary that was posted, this alignment is being introduced so that New Zealanders won’t spend time sheltering their income in Trusts. Great line but I’m not buying it for one single minute.
Put three thoughts in your mind. First, the Government has known for years that it will have trouble paying out superannuation in the future if no action is taken. Secondly, when you move assets into a Trust, you are moving them from your personal name and identity into the names and legal possession of the Trustees of a Trust. Thirdly, it means testing is well and truly alive and operating here in the land of the long white cloud.
To assist in filling its coffers, the Government introduced Kiwisaver. Initially this was optional to join. Later it became compulsory but Kiwis had an option to opt out. In other words, the rules got changed.
Telling New Zealanders not to move their assets, including their income, into Trusts, just gives the Government the ability to mean test Kiwis in the future.
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Imagine this. In about 15 years time, Mr Smith rocks up to the powers that be and asks for his weekly government superannuation payments. The Government clerks requests he fill out an asset and liability schedule and it’s established that Mr Smith owns his own home, bach, shares, a little cash and his own Kiwisaver fund all with a grand asset total of $1.2m.
Now on the basis that the entitlement to government superannuation is mean tested, do you think Mr Smith will get his weekly superannuation payments in full?
If you think I am wrong consider this. Right now to get a rest home subsidy from WINZ you can have only $200K worth of assets in your own name and that includes the family home. More than this and you are told to either sell down your assets and use your own money or a charge is put against your home.
Which means that when you die and the home is sold, the Government is paid back what they have been paying out. Whatever is left over (if any) is then distributed to your heirs.
Medical science now keeps us alive for longer even if quality of life isn’t what it used to be. So you can spend years in a rest home. At an average weekly rate of $900 + GST for rest home care, the bill can really mount up.
I can hear some people out there saying Government superannuation will never be means tested. Well if they can change the Kiwisaver rules they can certainly change the entitlement to Government superannuation.
If I’m wrong and you’ve put your assets in Trust all you suffer is great asset protection along the way. If I’m right and your assets are in Trust, when you are means tested you will be able to state you own nothing and then will be entitled to collect your Government superannuation payments.
Until next time … Ciao
Janet
© Gilligan Rowe & Associates Ltd
Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
I also really enjoy writing and presenting which I guess is one of the reasons I wrote Family Trusts 101. Ultimately, I don’t think I really work at all – I simply indulge in my passion most days. Lucky for me, my passion happens to be of interest to other people after all, most people want to ensure their assets are protected, they don’t pay more tax than what they legally have to and their assets get handed onto their loved ones when they depart planet terra firma.
Whilst my work does involve Trusts as this is a handy means of ensuring asset protection, it also involves money – predominately how to make it, how to keep it and how to deal with it generally.
Of course, this means I need to be aware of what the Government and the economy is up to. Which of course has recently led me to doing a little research and a little thinking. To this end, I’ve jotted down three particular issues I’ve been mulling over, the first one of which I present here.
Budget changes – alignment of tax rates
In the last five days, I’ve completed 16 presentations on the Budget changes coming through. One of those changes involves aligning the top marginal income tax rate with the tax rate Trusts pay.
According to the budgetary commentary that was posted, this alignment is being introduced so that New Zealanders won’t spend time sheltering their income in Trusts. Great line but I’m not buying it for one single minute.
Put three thoughts in your mind. First, the Government has known for years that it will have trouble paying out superannuation in the future if no action is taken. Secondly, when you move assets into a Trust, you are moving them from your personal name and identity into the names and legal possession of the Trustees of a Trust. Thirdly, it means testing is well and truly alive and operating here in the land of the long white cloud.
To assist in filling its coffers, the Government introduced Kiwisaver. Initially this was optional to join. Later it became compulsory but Kiwis had an option to opt out. In other words, the rules got changed.
Telling New Zealanders not to move their assets, including their income, into Trusts, just gives the Government the ability to mean test Kiwis in the future.
<!--page-->
Imagine this. In about 15 years time, Mr Smith rocks up to the powers that be and asks for his weekly government superannuation payments. The Government clerks requests he fill out an asset and liability schedule and it’s established that Mr Smith owns his own home, bach, shares, a little cash and his own Kiwisaver fund all with a grand asset total of $1.2m.
Now on the basis that the entitlement to government superannuation is mean tested, do you think Mr Smith will get his weekly superannuation payments in full?
If you think I am wrong consider this. Right now to get a rest home subsidy from WINZ you can have only $200K worth of assets in your own name and that includes the family home. More than this and you are told to either sell down your assets and use your own money or a charge is put against your home.
Which means that when you die and the home is sold, the Government is paid back what they have been paying out. Whatever is left over (if any) is then distributed to your heirs.
Medical science now keeps us alive for longer even if quality of life isn’t what it used to be. So you can spend years in a rest home. At an average weekly rate of $900 + GST for rest home care, the bill can really mount up.
I can hear some people out there saying Government superannuation will never be means tested. Well if they can change the Kiwisaver rules they can certainly change the entitlement to Government superannuation.
If I’m wrong and you’ve put your assets in Trust all you suffer is great asset protection along the way. If I’m right and your assets are in Trust, when you are means tested you will be able to state you own nothing and then will be entitled to collect your Government superannuation payments.
Until next time … Ciao
Janet
© Gilligan Rowe & Associates Ltd
Disclaimer: This article is intended to provide only a summary of the issues associated with the topics covered. It does not purport to be comprehensive nor to provide specific advice. No person should act in reliance on any statement contained within this article without first obtaining specific professional advice. If you require any further information or advice on any matter covered within this article, please contact the author.
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