What is Asset Planning & How Can it Help YOU?

If you’re a business owner, property investor or home owner, then you may already be familiar with Asset Planning.

Even if you aren’t, but you are interested in achieving your life and money goals quickly in the most efficient way, you should read on. Why? Because Asset Planning is one of those things that is important but must be done right.

The Asset Planning and Structures division at Gilligan Rowe + Associates Ltd (GRA) is run by me, Matthew Gilligan. We are a chartered accounting firm specialising in Asset Planning.  I am the founding partner and our asset planning aims to ensure your taxation and asset protection structures are optimised.

What does this mean, and what is asset planning? Asset Planning is the process of designing taxation and legal structures.  Asset planning ensures that taxation, estate planning and asset protection goals are all dealt with at the same time.

In short, creating a good ‘structure’ to own your home, business assets and investments requires thorough planning.  This involves taxation and legal analysis. The end result is a ‘holistic’ outcome that means you will be in the best position to increase your net worth while having the right protection in place.

A Holistic Approach – The GRA Difference

Don’t fall into the trap of allowing a practitioner from one discipline (accounting or legal) or a person who is non-expert in this area to set up your structures.

Take the typical lawyer. She will seek to maximise asset protection and design your estate plan – good motives and integral to the process. But they tend to put all of your assets inside a Trust, without thought as to the tax ramifications of moving assets.

Asset Planning & Tax Issues: Some Traps

Some examples of some of the tax issues you may face are:

1. Locking up losses on rental properties:  Properties in Trusts and companies outside of ‘group’ structures result in losses not being accessible to income earned.  This can impact on your cashflow, tax efficiency and cost money;
   
2. Loss of tax credits:  If you move the shares of a company that carries tax credits, NZ tax rules say if you have shifted more than 34% of the company’s shares, the breech in ‘continuity’ of shareholding results in forfeiture of all taxes paid by the company. This could be a disaster for you as you end up paying taxation.
   
3. Forfeiture of losses to carry forward in companies:  For those with losses in companies to carry forward, transferring more than 51% of the shares results in forfeiture of losses to carry forward. This continuity test aggregates all shareholding shifts through out the years and matches them to losses earned ‘period by period’, so if you moved 51% 3 years ago and lost ($100k) that year, – no problem. If three years later you still carry these loses, and move 1%, the losses are forfeit.
   
4. For farmers:  Moving stock causes you to crystallise stock values with resulting losses or taxable surpluses, as you dispose of the asset out of your valuation scheme.
   
5. For rental investments shifted, you create depreciation recovered, resulting in tax to pay on the depreciation claimed life to dates.
   
6. Selling business assets from Companies to other companies, or Trusts, resulting in a capital gain will cause such gain to be taxable to the company selling it(on realisation of the gain), unless some tax planning is done in advance. For example you have a business in a company, that is sold at valuation to a new company owned by a Trust for $1m. Because the gain is a related party gain, the gain is taxable on windup of the vendor company! This could easily be avoided with a bit of planning in advance.

This list, which is a small list of tax travesties we see lawyers (and some accountants) committing, are common traps for people not familiar with tax issues in asset planning.

If this all sounds a bit confusing, we understand.  We can help you demystify these issues in plain engish as they relate to your personal circumstances.  To learn more, please click on the button below.

The result is that you pay the cost, and fall out with your advisor as you realise they have let you down by not providing, or causing the information to be provided.

Some Accountants Can Get it Wrong Too

As well as this, accountants setting up asset planning structures often make problems for their clients. How? By not addressing the legal points of interest in relation to a structure.

There are some areas where even some accountants fail.  These areas and issues must be addressed.  They are:

1. Failure to consider the nature of the property from a relationship property perspective – is it joint property or separate relationship property? Take an inheritance for example. If kept in a separate Trust, it is not joint property. We frequently see accountants not versed in the legal side of asset planning trampling these sorts of issues, resulting in one spouse losing 50% of their separate relationship property to the other.
   
2. Failure to look at general security agreements securing your own money in your own company, a huge advantage for self employed and something that should be addressed in all self employed structures, bout not tax so often ignored by accountants.
   
3. Failure to draft new Wills and set up the estate plan, as part of an asset planning process. ( When you do Trusts, you need to do new Wills, which typically an accountant will not have the expertise to do.
   
4. Failure to address blended family issues, – children to prior spouses. Consider what happens if one spouse dies leaving the surviving spouse in charge of the assets of the deceased spouse for their children to their proper spouse. Will the deceased spouses children be treated equally and properly? These sorts of things are often ignored by advisors not versed in asset panning.

Let GRA Help

If you want to achieve your money goals then asset planning will be a critical part of that success. It is a specialist process, best run by a combination of legal advisors and taxation advisors.  That’s what we do.

We help to get your lawyer and accountant working together so that they think through not only the obvious issues, but also your future investing goals.

GRA is a chartered accounting firm, specialising in asset planning. We have a good commercial knowledge of all the issues of asset planning, and seek to work together with your solicitors as part of the process.

The end result for you means better peace of mind and less time to achieve your financial goals.

For a free interview on asset planning or any other accounting matter, please click the link below and we’ll contact you.

Thank you for reading this.

Matthew Gilligan
Director Asset Planning Division
Gilligan Rowe + Associates Ltd

Phone: +64 9 522 7955
Email:  mg@gra.co.nz

P.S.  Did you know that GRA work with asset planning clients anywhere in the world?  We can help via skpe, email and telephone.  To contact us click here.

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Asset Planning