Estate Planning: A Three Part Series Preparing well for the road ahead - Part 2

“What you leave behind is not what is engraved in stone monuments, but what is woven into the lives of others.”

Pericles, a Greek Statesman and Legislator was the orator of this insightful quote. He implicitly understood legacies, especially those founded in political power and worldly goods, could be used to benefit and progress society long after their benefactor had departed.

In my experience, this quote epitomizes the wish of most people who leave legacies – they hope their gift will bring some comfort and ease, possibly enabling a more prosperous future to be enjoyed than what might otherwise be.

This article, being the second in the series, discusses the legal method used today to create certainty in the bestowing of legacies – that is by the use of a Will.

No Will Scenario

Despite the inevitability of death, not everyone takes time to plan for their demise through making a Will. This can cause grief to those left behind who wonder why their loved ones did not make the effort to ensure their futures were guarded. Pain and grief can be amplified, and legacies can be threatened and lost all through the lack of Will.

When someone dies without leaving a Will, they are said to have died ‘intestate’. In that circumstance, the law steps in under the guise of the Administration Act 1969 (‘Act’). This Act determines who will be the person to sort out the deceased’s affairs. This person is called an ‘Administrator’.

Receiving Assets

People often think if they do not have a Will, their assets will go directly to their next of kin. But this is not necessarily so. The Act dictates that when a person dies intestate, a formula be followed. This formula stipulates who will receive the deceased’s assets and in what proportion. Succinctly, the formula provides:

If you die and leave behind a spouse but have no children or parents living, your spouse will receive 100% of your assets;
In cases where your spouse and parents are alive, but you have no children, your spouse will receive two-thirds of your assets and your parents one-third;
If you have no spouse but do have children, your children will benefit equally from all your assets; and
Finally, where your spouse and your children are living, your spouse will receive all your personal chattels together with the first $155,000 cash you have together with one-third of your assets. Your children will then receive the remaining two-thirds of your estate, distributed equally between them.
The above division of asset rules are representative of simple scenarios. Things become much more complicated when you factor in the quagmire blended families have to traverse.

Who Should Make A Will

It should be clear from your reading so far that a lack of a Will results in a complete loss of control over asset distribution. It usually gives rise to the incurrence of unnecessary legal expense and time protracted Court processes too, all at the Judiciary’s decree. These issues can be avoided by making a last testament.

We recommend everyone over the age of 18 years, who is of sound legal mind and who has $15,000 or more in the value of personal assets, makes a Will.

Often people think they do not own enough assets totalling $15,000 or more to bother about making a Will. This however can be a mistaken belief they labour under. For example, whilst an individual may not hold bricks and mortar in assets, they may well hold a Kiwisaver account which has a balance of $15,000 or more or be a beneficiary of a Trust where they are owed $15,000 or more in distributions and assets. As such, they should make a Will.

People under the age of 18 can also make a Will, providing of course they have full mental capacity. Often for example, members of the Armed Forces who are younger than 18 years will make a Will.

Benefits Of Making A Will

There are numerous benefits to taking the time to formulate and document your wishes. In the main, these include being able to:

1. Designate whom you wish to be your Executor/ Executrix – that is the person you want to look after your affairs and to ensure your wishes are carried out. For instance, an Executor / Executrix will deal with administering your estate, paying your funeral expenses and other accounts and distributing your assets in accordance with the instructions you’ve left;

2. Set down your funeral and burial / cremation instructions thereby ensuring your body is treated as you wish. This can be important if you have particular religious or cultural beliefs;

3. Decide who will be the guardian of your minor or disabled children on the basis their other parent does not survive you. This avoids the necessity for an application for guardianship being made to a Court in the case of your demise;

4. Nominate who will receive your assets and decide what assets they will receive. You may wish your diamond ring to go to your eldest daughter and your motor vehicle to go to your son and your painting of the Marlborough Sounds by Tim Wilson to go to a friend for example;

5. Determine the age your beneficiaries are to receive their gifts at. To illustrate, you can stipulate your eldest daughter is to receive your diamond ring upon her 21st birthday and your son is to receive your motor vehicle when he turns 18 years old. By establishing the age your recipients are to receive their gifts at, you can increase the chances they will be responsible enough to handle what they receive. This is especially important if they are to receive a monetary gift;

6. Ensure your favourite charity is the recipient of a gift from you; and

7. Minimize the fees and probate expenses and decrease the time it can take to otherwise administer your estate. This can relieve your loved ones of financial pressure at a time they are labouring under emotion distress.

What Your Will May Cover

Wills are personal legal documents that cater to an individual’s life circumstances. Accordingly, some Wills are relatively short in the number of provisions they contain whereas others will contain a greater number of provisions and a higher level of complexity. The bare bones of a Will however usually provide for the following:

• The appointment of your Executor / Executrix. This person has to have the confidence and intelligence to carry out your wishes so select wisely. Better still, appoint two people to act so a checks and balance system is established. This will also provide for the situation where you will always have an Executor / Executrix should one of them die.
• The appointment of a Guardian for your children. If you are a parent of a child, under the age of 18, or a child who is disabled in any respect, appointing a Guardian is imperative. This person should be someone whom you believe is best placed to teach your child the values you wish them to learn and who is able to provide the love and emotional support your child will need.
• Funeral and burial/cremation instructions. Directions in this respect can be very useful if you have specific wishes or if you perceive arguments between your Executor and loved ones or amongst family members may transpire as to how your body is to be treated and where it is to be buried.
• The bestowing of your chattels on a recipient/s. An Executor will need to deal with your moveable goods such as your personal belongings, household items and furniture. Having the name of the person/s you want these items to go to, is helpful as it can stop argument and discontent amongst family members arising.
• A specific bequest that instructs a particular item to be given to a recipient. This can include an item of jewellery, furniture or memento that you wish a person to receive.
• A legacy which is much like a specific bequest only it is a certain sum of money that you instruct be given to a person, organisation or a charity.
• An instruction with respect to your residual estate. This is a command as to what is to happen and who is to receive to your remaining possession, aside from your chattels, and the bequests and legacies you have made.
• An order to forgive a debt that may be owed to you at the time of your death. This is commonplace where you have loaned money to a Trust or to a person during your lifetime.
• A direction to transfer the power you hold to appoint a Trustee and/or Beneficiary. Should you have a Trust, it is usual to transfer the power you hold under the Deed of Trust to another person whom you have confidence and trust in to follow the wishes you have laid down in your Memorandum of Wishes. This will be discussed more fully in the next article in this series
• A permissive provision acknowledging your Executors have the authority to hire and pay for professional services as is required in carrying out your wishes and attending to administering your Estate.

How Your Will Should Be Signed

Under the Wills Act 2007, Wills need to be signed in a particular manner to be valid. In the main, the Will-Maker must sign their signature at the end of the Will

document. Two witnesses must witness the Will-Maker signing the Will. The two witnesses must also sign the Will at the end of the document and then complete the witnessing provisions. The Will must then be dated.

These signing provisions mean all three people, being the Will-Maker and the two witnesses, must be present at the same time to see each other sign their usual signatures, when signing the document. It is important to note the two witnesses must be independent of the Will-Maker – that is they cannot benefit in any way under the Will.

Finally, it is common practice for the Will-Maker to sign their initials at the bottom of each page of the Will to signify they have read and agreed to all the provisions contained on that specific page of the document. The witnesses will also write their initials at the bottom of each page of the Will to indicate they have seen the Will-Maker read that page of the Will.

Should a Will not meet all the above formal signing requirements, the High Court of New Zealand does have the power to declare your Will valid however that takes time and expense which can be avoided if your Will is correctly executed in the first place.

Summary

It should be clear from reading this article, circumstances outside our control can mean we leave it too late to make a Will. Procrastination ultimately can cause our loved ones to suffer stress and increased expenses if we leave planet terra firma without leaving a Will behind. These effects can also beset our nearest and dearest when we use take home Will-Kits procured from stationery shops. The High Court frequently deals with DIY Wills and the time and expense this takes, places unnecessary stress and financial burdens on loved ones.

You can assist your family and beneficiaries move past your death by making a Will. This ensures you do not lose control of your Estate and your loved ones are not subjected to the whim of the legislature and the Courts jurisdiction.

In summary, the message is clear... don’t procrastinate – make your Will whilst you can, before it’s too late. If you need help in this area, Greenlion Trustee Services can assist so contact us now. We write Wills and Memorandum of Wishes for our clients. We’re here to help. So, if you’re without a current Will, don’t delay. Take action now.