Fun, or not so fun, fact – approximately half of people that die in New Zealand do not have a Will (i.e. die intestate).
What is a will?
A will is a document to record how a person wishes for their assets/ property to be distributed when they pass away. If a will maker has young children it is also a way to appoint a guardian (called a “testamentary guardian”) to be responsible for making decisions in respect of those children until they reach the age of majority. A will can also include instructions in regard to the person’s funeral and burial/ cremation. A will importantly appoints executors who are to carry out the will maker’s instructions.
I often check with clients, family and friends if their wills are up to date. If they aren’t up to date, or if they don’t even have a will, I try to check in with them each time I see them. This is because if someone passes away suddenly without a will, their loved ones are left with a situation that they had assumed would not be the case: namely, the arguably counterintuitive distribution of assets under the Administration Act 1969 (“the Act”).
By way of example: Let’s take a couple who have been living together for 20 years and are happily married; we will call them Rodney and Elva. Rodney does not have children but Elva has adult children. Rodney helped care for the children in the first half of the relationship when they were children.
The couple’s home is in Rodney’s name, but they have both paid the mortgage for the duration of their relationship. They intend to sell that home and buy a beach house together in Thames, as they can both work remotely, but are just waiting until they find the perfect place.
They have KiwiSaver in their own names, have a small account for joint expenses but have tended to keep their savings accounts and investments separate. Rodney’s mother is deceased, but his father is still alive. Unfortunately, Rodney’s father left when Rodney was a young child, and has never made any effort to connect with Rodney.
Rodney dies suddenly from an undetected medical condition. He had never got around to getting a Will. You would assume that Elva will take (inherit/be left) everything absolutely, being his next of kin. However, under the Administration Act 1969 (“the Act”), section 77, that is not what happens.
Instead, Elva receives the couple’s personal chattels, any joint accounts, and then only receives the prescribed amount under the Act, being $155,000, and 2/3 of the residue of the estate including the family home and Rodney’s savings accounts.
Rodney’s estranged father receives 1/3 of the residual estate. Elva is devastated. Applying for a division of relationship property under section 61 of the PRA would mean she gets even less, as the property pool would likely include all of her savings accounts and investments as well, the chattels and their joint account for the purposes of division.
Elva’s children, who were cared for by Rodney and were close to him, receive nothing.
Elva could litigate, but as she has assets it’s unlikely that a Family Protection Act 1955 (“FPA”) claim would garner her more than she is to receive under the statutory administration of the estate: see Williams v Aucutt [2000] 2 NZLR 479 (CA) regarding the Court’s practice of applying the principle of “minimum interference”, which applies equally to claims under the FPA arising on an intestacy as those challenging a Will; and Re Man [2007] NZFLR 543 concerning the Court’s reluctance to “rewrite the statutory division under the Administration Act 1969” to provide a result that an applicant thinks is fair.
It would also be expensive for Elva to instruct a lawyer to negotiate, and then if necessary apply to the Court for an order under the FPA. Even if successful in that proceeding, costs awards are much lower than actual costs incurred. The whole process could take years. The emotional toll would be taxing.
Therefore, Elva decides to cut her losses and move on. Rodney’s father receives a windfall and does not even attend the funeral.
This situation may seem complicated and unlikely, but often peoples’ estates can be complicated. This example is actually a relatively simple estate, and the administration of it should have been straight forward.
If only Rodney had made a will. He could have left his estate to Elva, and even made gifts to his stepchildren. He would have had no moral duty to provide for his father under the FPA. It would have taken a few hours for him to contact a lawyer, fill in the check list, check the will and then sign it in front of two independent witnesses: no longer than it takes to fill in an enrolment form at a new doctor and attend a check-up.
Our goal is that we help a few less people to die intestate, by persuading them to take a moment to make a will. Once a will is made you can always amend it. However, at least you will have something there in case the unexpected happens.
By Camille Bell | Associate
The information contained in this article is provided for informational purposes only and should not be construed as legal advice on any subject matter.
