Edmonds Judd

Estate Beneficiaries

Why should I look at my will?

Estate, Kids, Property, Relationships, Retirement
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Review at life’s milestones

You should review and update your will regularly. It is not something that, once done, you should just stick in a drawer and forget about. There are many significant milestones in life when you should think about whether your will is still appropriate for your unique circumstances.

 

If you don’t often review your will, particularly after important life milestones, you may discover (or worse, your family may discover after your death) that your will does not leave everything the way you intended. This means that certain people or causes may miss out on an inheritance or a gift in your will. Also, out-of-date wills can cause significant complications for the people involved in the management and distribution of your estate.

 

With the summer holidays coming up and some time away from the treadmill of daily life, this is an ideal time to review your will.

 

Buying a home is a milestone

Many people make a will when buying their first home. Although there is no reason why you cannot make a will before then, this is often the trigger when it feels like you have something significant to leave in your will. If you buy your home with someone else, usually you will want to leave the house to that person when you die. However, this is not always the case, particularly if you are not in a romantic relationship with that person.

 

If you have children from a previous relationship, you may want to ensure your partner can continue living in the house when you die but, ultimately, you want your children to inherit your share of the house. You may have borrowed money from other family members to help with the purchase that you need to repay first. Your will should be carefully drafted to make sure it truly reflects your intentions.

 

Joint ownership vs tenants in common: The ownership structure of your home, or any asset for that matter, is also very important to understand. ‘Jointly owned’ assets pass to the surviving owner/s when one owner dies. Assets which are owned as ‘tenants in common’ remain part of a person’s estate when they die and will be distributed under that person’s will.

 

Many people are not sure, or forget what type of ownership they have, especially if their house was bought many years ago. If you are unsure, or the ownership structure of your asset/s changes, you should review your will to make sure that everything will still be distributed as you want after your death. You should also review the ownership structure at the same time.

 

Marriage, separation and divorce

Getting married, separated or divorced are all events that have a significant effect on how your will might operate when you die. If you have a will and subsequently get married or enter into a civil union, your will is automatically revoked, unless your will is specifically worded as being in contemplation of that marriage or civil union. If it is not, you could effectively be left without a valid will, even though you have made one in the past.

 

In the case of a separation order or divorce, your existing will is not revoked but the law states that your spouse or partner is treated as having died immediately before you. This means any gifts to them will be void and, instead, any backup provisions in your will would come into effect. You should update your will after a separation or divorce to ensure that it will operate as you intend.

 

It is also important to know that the simple act of ‘breaking up’ with someone is not enough to have gifts to that person automatically voided. You should take the additional steps of obtaining a formal separation order or an order dissolving the marriage, and reviewing your will. If not, you could be left in the awkward situation of leaving everything in your will to your ex-spouse or partner – which may be a very unpalatable idea for some!

 

Birth or adoption of children

There’s a lot to think about when welcoming a child into your family and a review of your will may not be high up on the to do list. Your will should, however, assign guardianship of your children and account for their future needs, particularly if your child has special needs requiring a higher level of assistance. If there is a significant age gap between your children or you have children from different relationships, your will may need to be tailored to account for this.

 

Death of an executor, beneficiary or guardian

Executors are the people you name in your will to manage and distribute your estate when you die. A will-maker will often appoint a family member or someone to whom they are very close to carry out this role. It is important to have an executor who you trust who will do a good job.

The death of an executor, beneficiary or a guardian of your young children means your will may not work as intended or could create confusion. Do review your will if this happens or should your executor’s circumstances or health change.

 

Significant changes in financial position

Receiving a large inheritance or a significant capital gain on, say, property or business assets (or perhaps winning Lotto!) can significantly alter how you want your estate to be distributed when you die. You may decide to include additional beneficiaries – perhaps more distant family members or friends, or leave a gift to a charity that you care passionately about.

Although it’s not always the case, estates of relatively higher value are often more complex and require greater planning to ensure that everything runs smoothly when you die.

 

What if I don’t have a will?

If you die without a will (called an ‘intestacy’), your assets will be distributed according to the default rules established by law. Depending on your circumstances and who survives you, your assets would usually go to some combination of your spouse or de facto partner, children, parents and siblings. Even if some family members are estranged from you, they could still receive something from your estate under the default rules.

 

Other milestones

The milestones we have noted above for reviewing your will are not exhaustive. Starting a business, having a KiwiSaver account, moving countries, changes in your health and amendments to the law are all good reasons to look at updating your will.

 

If it’s been a while since you’ve looked at your will, we hope this article gives you the impetus to pull it out of that drawer and dust it off. Better yet, talk with us about it so you can have peace of mind knowing that, when you die, your loved ones will be taken care of as you wish.

 

 

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Providing for your family in your will

Estate, Kids, Property, Relationships, Retirement
0

You have some legal obligations

We all want to look after our families – both during our lives and after we die. One way you can make sure that your family is looked after when you die is by leaving behind a clear, well-drafted will.

 

In New Zealand, we have considerable ‘testamentary freedom,’ meaning we can generally choose how we want to distribute our personal assets after our deaths. Testamentary freedom has been a fundamental feature of New Zealand law for many years. There are, however, limits to testamentary freedom. We see these limits in action when claims are made against a family member’s estate.

 

Claims against an estate

Claims against estates can be made under the Family Protection Act 1955 which provides that you have  a moral duty to provide adequate maintenance and support for certain family members after your death. They include your spouse, children and sometimes grandchildren. Even if you have family members with whom you have had a poor relationship during your lifetime, if you do not adequately provide for their maintenance and support in your will, there is a risk they could make a claim against your estate.

 

If you want to leave unequal shares of your estate to your family members, or leave a close family member out of your will entirely, it is important to state this expressly in your will and to provide your reasons for doing so. This can reduce the likelihood of a successful claim being made against your estate.

 

Protecting beneficiaries from their own folly

If you are concerned about how a particular family member (a beneficiary) may use (or misuse) their share of your estate, you should discuss this with us before your will is drafted. Leaving your family members with a significant lump-sum of cash is not the only way to provide them with their share of your estate. There are options such as establishing a protective trust for their share or appointing trustees to manage money on their behalf. These options may ease your concerns.

 

Family members having different needs

If your family members have different needs, you may want to consider adjusting their share of your estate. With family members who have significant health issues or support needs, your obligation to provide for them may be greater.

 

Earlier this year, the High Court made a decision in a case,[1] upholding an earlier decision of the Family Court. That decision increased the proportion of a father’s estate that was awarded to his unwell son by a small amount. His son had been unable to work for several years due to his illness, and incurred costs associated with managing his illness. When his father awarded him a smaller share of his estate than his sister, the court decided this had breached his father’s duty to him. The duty to provide adequately for maintenance and support applied, even though the relationship with his father had been strained and dysfunctional over several years before his father’s death.

 

Repercussions of not providing for your family

If any of your family members have been left out of your will or have not been adequately provided for, they could make a claim against your estate.

 

When such a claim is made, the court can review the circumstances and make an award from the estate to remedy failure to provide adequate maintenance and support. This is why it’s important to talk with us about the drafting of your will. We can help you adjust your will to minimise the possibility of a successful claim against your estate.

 

Estate claims can cause increased distress, conflict and delays during an already challenging time for your family. The legal costs associated with defending such a claim can also significantly reduce the value of your estate.

 

Important to think this through

If you’re tempted to write your wayward son, estranged daughter or irresponsible spouse out of your will, it’s well worth getting advice first. This may spare your family a claim against your estate, and the stress and expense that goes along with such claims.

 

 

[1] Emeny v Mattsen [2024] NZHC 291.

 

 

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Fineprint may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

New Year – New Will

Estate, Health Issues, House, Kids, Property, Relationships, Retirement
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The new year is an opportunity to reflect on your life and your wishes for the future, including how you want to provide for your loved ones when you pass away.

 

The most important aspects of your will include the people in charge of your estate (your executors), what happens to your assets, the guardian of your children and your funeral/burial wishes. If you do not have a will or a valid will, then you do not get to decide these aspects for yourself.

 

Having a will is particularly important for parents and those with assets worth $15,000 or more (including Kiwisaver).

 

If you have a will, you should review it regularly to ensure your will is practical, up to date and valid.

 

Is my will valid? Common traps

 

Marriage or Civil Union

Ordinarily, a will is automatically revoked when you marry or enter into a civil union. If you have a will but have since married or entered into a civil union (or intend to in the near future), then you should review or update your will to ensure it is still valid.

 

Divorce or Separation

A separation does not automatically revoke your will. If you have separated and your ex-partner is still in your will, any gifts to them will remain valid unless you have a separation order or a court order dissolving the marriage or civil union.

 

For this reason, your will should be updated as soon as possible post-separation.

 

Witnessing Requirements

There are strict requirements for a will, one of which is having two adult independent witnesses. To be independent, the witnesses cannot benefit under the will or be a spouse, civil union or de facto partner of a person who will benefit under the will.

 

For example, Jane has a will that leaves everything to her son and daughter. Jane prepares her will at home and has her friend and her son’s wife witness her will. Unfortunately, her son’s wife is not independent and therefore the gift to Jane’s son will be void.

 

Circumstances that should trigger a will review

 

If one or more of the following apply to you, it’s time to review your will:

 

  • Family births or deaths;
  • Aging – contemplating the possibility of residential care;
  • Family members moving overseas (especially if they are your executor, as this can add cost and complication to your estate administration);
  • Creation of a family trust;
  • Winding up of a family trust;
  • Buying a property;
  • Change in assets or financial status;
  • Change in relationship status;
  • Change in family dynamics (e.g. estrangement); and/or
  • Simply a change of wishes.

 

Most people will have multiple wills during their lifetime, simply because life is full of change. If you don’t have a will, it’s been a while since you’ve reviewed your will or you’ve had a change in circumstance, we encourage you to speak with your lawyer about your will.

Estates and guarantees

Estate, Trusts
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Can cause difficult legal issues

Guarantees entered into by a person during their lifetime can create some difficult legal issues for their executor after they die.

 

Limiting a guarantee

The terms of most guarantees allow a guarantor to give notice; this stops further liabilities accruing. In an estate situation, this will not alter the liabilities accrued to date, however the executor who is aware that an estate is liable under a guarantee may need to issue a stop notice to protect the estate’s position to maximise the value of the estate.

This can be a difficult decision for an executor, particularly where (for example) a guarantee is important for the ongoing viability of, say, a family member’s business.  However, where the estate does not have an interest in that business, the executor may need to do this anyway as the estate’s position is the executor’s responsibility, and the interests of all beneficiaries must be prioritised, even if the decision causes dissatisfaction for one.

 

Calling up a guarantee

Where a guarantor has died, and the guarantee is called up after their death, the estate is liable to the lender in the usual way.

In the situation where the estate is only one of several co-guarantors, the executor may need to decide whether to seek contributions from the co-guarantors. The executor may also need to take legal action to enforce payment by co-guarantors.

Where any of the co-guarantors are also beneficiaries of the estate, it may also be necessary for the executor to take advice about the extent to which any liability for contribution to the guarantee can be met by funds that the beneficiary is to receive under the terms of the will.

 

Rights of contribution between co-guarantors

The default position is that co-guarantors share an equal liability to meet a common debt. Where one guarantor pays more than their fair share of the debt to the lender, they are entitled at equity to seek an equal contribution from their co-guarantors.

Complications can arise, however, where a co-guarantor is insolvent. In that situation, the other solvent co-guarantors may have to contribute proportionally to meet the shared debt. This means that an estate might be held liable for more than its ‘fair’ share of the debt.

 

Co-guarantors who are also beneficiaries

The situation becomes more complex when a co-guarantor is also a beneficiary of the estate that has paid the debt. Can the executor claim contributions towards the debt paid by withholding the beneficiary’s share of that debt from their entitlement under the will? Although the court has confirmed that a beneficiary owing money to an estate cannot claim a share of their interest without first settling the debt, an executor should not automatically deduct a debt from a beneficiary’s entitlement.

Rather, the first step will usually be for the executor to approach the relevant beneficiary first by letter and then a formal demand. If a beneficiary persistently refuses to fulfil their debt, an executor can then retain that beneficiary’s share or interest to recover their relevant contribution. The executor should then seek the approval of the High Court to deduct the beneficiary’s share of the debt from their estate entitlement.

 

Interests of beneficiaries take priority

Personal guarantees can create tricky issues for an executor to deal with, particularly in family situations. The estate’s position is the executor’s responsibility, and the interests of the beneficiaries of the estate must be the executor’s priority – even if it means one beneficiary is unhappy because they are affected by the executor’s decision.

While it does not commonly arise, the right of contribution is also something the executor may need to explore for the benefit of the estate as a whole and seek some advice. In some circumstances the executor may also need to go to the High Court for assistance where one beneficiary will not cooperate.

 

DISCLAIMER: All the information published in Trust eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Trust eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650