Helping Others

Over the past few weeks, we have been seeing a number of people who responded to our “help a charity program”.  The program has been successful and local charities will benefit by several hundred dollars.  During the course of our interviews we came across a number of issues that must be a concern to a large number of people.  Invariably they were not just local issues.

The number one issue for several people was that they had been sold investments in the ING Diversified Yield Fund or Regular Income Fund.  The people that we saw had been sold these investments by their bank.  In our opinion the amount of their investment assets that they invested in these products was ridiculously high.  It was always going to be a high risk investment strategy regardless of how well the investment performed.  No competent investment adviser would recommend virtually a 100% exposure into such a product.  As we wrote last week, ING/ANZ has come up with a final offer for investors in these products.  Acceptance of the offer means that investors can no longer pursue claims against a number of parties, which incidentally also includes the adviser who sold the investment.  It does not preclude disciplinary action being taken against the adviser by professional bodies such as the Institute of Financial Advisers.  Unfortunately there are very few bank advisers who are members of this professional body.  Most investors will no doubt feel that it is time to move on and will accept the offer, rather than risk the uncertainty, high costs and stress of bringing action against ING/ANZ or the adviser.  However, we suspect that the banking ombudsman will not be amused by removing the right of taking action.

The area of estate planning was also of concern.  Many investors have family trusts.  A number of now elderly investors established their trusts in the late 1990’s.  They were the Settlor’s and donated the assets to the trust.  Some used trustee companies as third trustee.  They also assumed that the third trustee would ensure that all the gifting and administration required for trusts would be carried out.  After all, an ongoing fee was being charged by the trustee company.  There was also an assumption by the settlor’s that what was the family home would also be one of the trust assets.  Unfortunately it does not work like that.  The donors are responsible for ensuring that gift statements are filed.  However the independent trustee, especially if it is a trustee company has a fiduciary duty to ensure that the trust is administered properly, and that includes making sure gift statements are filed, tax returns made (if the trust assets are income producing), resolutions are made, and that trust investments are prudent. 

We believe that there are a number of trusts which will be in a similar situation as to what we have described.  It would be a shame if a trust was set up in say 1999, with around $200,000 and a family home worth around $300,000 at the time, if regular gifting had not occurred.  By now the gifting program for the $500,000 of assets at the time the trust was established, should have been completed.  It may be that only one years gifting may have been made, which puts the assets at considerable risk if for example the now elderly settlors require rest home care.

There is a need to review periodically other estate planning needs such as enduring powers of attorney.  It is normal for married couples to have their respective partners as the person having the enduring power of attorney (EPA).  However as we age, it may no longer be appropriate.  The partner who held the enduring power of attorney may no longer be able to carry out the responsibilities that go with holding an EPA.  It may be time for say the adult children of the marriage to hold the EPA for their parents.