How to talk about estate planning with your family

“We need to talk about what would happen if I died”.

Cue awkward silence.

No one likes talking about death: it’s morbid and reminds us of our own inevitable passing. We like contemplating the death of family members even less. However, an honest discussion over what should happen when you die is one of the most important conversations you can have as a family unit.

Many people have learnt this the hard way. After suffering the loss of a parent or partner, they encountered further heartache when they discovered there was no will, or worse, an out of date will. Both of these scenarios will cause a great deal of stress for your family members.

Having a frank, in-depth discussion with your family about your wishes should anything happen to you is a good way to avoid future arguments and promote financial planning.

Start by making a list of all your assets, and then make a list of all the people you would like to leave them to. Is it fair? Do you think your wishes could cause conflict? Although we see many examples in popular culture of a parent disinheriting a wayward child, disinheritance is quite a complicated affair in real life. Under New Zealand law, close relatives may challenge your will if they feel that you had a ‘moral duty’ to provide for them. If you think your wishes may be received negatively by some family members, talk to them about the reasons behind your decision; some parents decide to leave less money to a child who is already financially comfortable. Try to come to a decision which everyone is happy with.

Another benefit of creating a will is setting out any funeral plans and burial arrangements.  This includes things such as whether you are cremated or buried, where you are laid to rest, and also which assets should be used to pay for funeral expenses.

Once you go ahead and write your will, it is equally important to notify your close relatives where your will is stored, so that they can easily locate it after your pass away.

So, what are some ways you can initiate this topic up with your loved ones?  There are plenty of examples in the news or on television of people who have made estate plans (or haven’t as the case may be!). You may also be able to think of a family or friend who has recently taken the step to make a will. However you bring it up, discussing an estate plan with your family will be one of the best decisions you can make.

#179769971 / gettyimages.com

Contesting a will

Contesting a will is a costly and a painful process however it is a scenario which plays itself out in the courts fairly often.

There are numerous reasons people challenge wills. Most grievances stem from a family member feeling they’ve been hard done by in their deceased relative’s will. The problem is the court generally honours whatever is written in the will unless the claimant can prove that they have not received their ‘moral duty’, or on the grounds that the will is invalid.

 A will may be ruled invalid if the testator (will writer) was not in a good state of mind when the will was written, i.e. a Parkinson’s sufferer, or if the will was not properly signed and witnessed. Close family members may contest a will on the grounds of moral duty if they have been inexplicably or unfairly cut from the will. Most claims are laid by the children of the deceased.

 In New Zealand you must file your claim in Court within 12 months of the grant of probate. Under the Family Protection Act 1955, those entitled to challenge a will are the deceased’s spouse/civil union/de facto partner (of at least three years); child; grandchild; dependent step-child and parent.

 As of 2002, the three year requirement for de facto relationships can be waived if there is a child, or if the court is satisfied that the de facto partner made a substantial contribution to the relationship and not making the order would cause them serious injustice.

 When making its decision the court takes into account multiple factors: the wishes of the deceased, the financial needs of the applicant and what has been received by other beneficiaries.

 The process of challenging a will is expensive and legal costs can be deducted from the estate. In order to prevent your will being challenged it is a good idea to have your will written by an experienced legal professional. It is also important to update your will as your life circumstances change, perhaps as a result of marriage, divorce or the death of a beneficiary.

 For more information on wills, go to Perpetual’s ‘Wills Explained’ section.

Myth busters: Commonly held beliefs about estate planning, and why they're wrong

Approximately 50% of New Zealanders don’t have a will, and of those who have made one, half haven’t updated their will to reflect their current circumstances. Why is that? Well, in this blog post I’ll look at the most commonly cited excuses and explain the reality.

Myth #1: “I already told my spouse/brother/mother/best friend etc. that I want all my belongings to go to them, so I don’t need to do anything else”.

Fact: Wrong. We like to think that when we die, our assets will transfer automatically to those we love the most. Unfortunately, when we pass away without a will (this is called intestacy), the law determines how our estate is divided up.  Instead of an executor of your choice, the court appoints an administrator to administer the estate.

 The way it is divided all depends on your family situation:

•  If your partner is living, but you have no children or living parents, everything goes to your partner.
• If you have children, but no partner, everything goes to them in equal shares.
• If your partner and children are living at the time of your death, your partner receives all your personal belongings, $155,000, and one third of the remainder. Your children will receive two-thirds of the remainder when they turn 20.
•  If you don’t have a partner or kids, everything will go to your parents.

If all this sounds a bit complicated, it’s because it is. It’s best not to leave these things to chance.

Myth#2: “I’m not rich enough to make a will”

Fact: No matter how big or how little your estate is a will ensures that whatever personal belongings and assets you do have go to the right people; these items could include your favourite pieces of jewellery, your car or even your pet.

A will is especially important if your children are still minors. You’re able to appoint a guardian who would care for your children should anything happen to you. A will also allows you to decide how and when your children receive their inheritance.

Myth#3: “Writing a will is too difficult and awkward”

Fact: Ok, so this one is half true; nobody really enjoys talking about death. But it’s an important conversation to have if you to avoid more heartbreak for your family after you’re gone. If you find it uncomfortable to discuss to private affairs in person, then try our online will service. All you have to do is fill out the quick form, and our experts will get back to you in 48 hours with your complete will.

For more information about wills and estate planning, head to www.perpetual.co.nz.

© Eric Ward, 2007

Protecting Your Assets - Even When You're Gone

One story which has been playing itself out in the tabloids lately is that of Whitney Houston’s daughter, Bobbi Kristina, and her inheritance of Houston’s estimated US$20 million (NZ$23m) estate.

Whitney Houston, Bobby Brown & Bobbi Kristina

In her will the singer who passed away two years ago stipulated that daughter Bobbi Kristina would receive the money upon her 21^st birthday. The will was written 20 years ago, and Houston’s relatives say that she actually changed her mind in recent years and intended for Bobbi to receive the money much later. But unfortunately, what she intended doesn’t matter as she didn’t express this by updating her will.

There’s also the issue that Bobbi Kristina’s relatives don’t consider her emotionally mature enough, or in the right frame of mind to handle such a large sum of money. Cissy Houston, her grandmother, has begun legal proceedings in an attempt to prevent Bobbi from becoming a millionaire at such a young age and effectively overnight.

These circumstances may seem like far-fetched Hollywood antics, but there are many reasons why family members may wish to prevent another relative from receiving their portion of the residuary estate. They may have a mental disability, an addiction, a spend-thrift, or simply unable to manage their finances.  

If you wish to protect your assets as well as ensuring that your beneficiary is provided for, a good solution may be to establish a trust in your will. You can set out terms and conditions over how the trust is administered and managed. You can appoint a third party who has the best interests of the beneficiary at heart to manage the trust.

It is also important to make sure that your will is up to date and reflects your current wants and wishes. Important life events such as marriage, the birth of a child and divorce may impact what is written in your will.

To write a will or establish a family trust, you need expert legal advice. Call Perpetual on 0800 737 738, and speak to one of our expert professionals.