Up-to-date wills, a must-have for everyone.
I asked Michael Win, lawyer and Partner at Wilkinson Rogers, a local law firm in Dunedin, to talk about wills.
What are some of the dangers and fishhooks around wills Michael?
Michael: One of the difficulties we see is people not keeping their wills up-to-date, or in fact, not even having a will. We are amazed how many people do themselves and their family a disservice by not making a will.
And if you do not regularly review your will, you can cause a bit of damage to the family wealth as well.
It is important that people regularly review what their instructions are when they are no longer here because it is too late to change once you have gone. You really should be looking at your wills every 5 years or if there is a major event in your life which could be, for example: a change in your relationship status, inheriting money, or a child dying.
Those sorts of things should trigger your memory to at least review your will, because if you don't and somehow your will is invalid, or you don't have a will at all then the government decides who gets what for you under the Administration Act. I am sure it would not be what most people would want to happen with their family. It could cause your family a bit of grief.
I’d like to explain what happens to you if you don't have a will or if your will becomes invalid for some reason and I'll come back to that in a minute. For example, if you die and there was a surviving spouse and no children or parents around, then the surviving spouse takes everything which is generally fine.
It becomes more complex having a spouse and children because then the Administration Act sets in. The spouse takes the first $155,000 plus 2/3 of the residue and the children get the remaining 1/3 of the residue. This is not always ideal.
If you are in circumstances where there is a surviving spouse, no children but surviving parents (or a parent) then it is split again. The surviving spouse gets the $155,000 plus 2/3 of the residue, the rest goes to the parents. So that sort of thing is probably what most people would not want to happen. Most of us would not see ourselves giving our parents money when we die. So, it is important that you do not let the government decide who gets what.
Rhodes: I suppose if there is no will or there is an invalid will it is going to cost a lot more with people and lawyers working through making sure everyone is happy?
Michael: Yes, it can cause some complexities, certainly it does cost more, sometimes not a lot, depending on what the assets are of course, in the estate, and how complex the family situation is.
You can have a will that becomes invalid for some reason. Some of the common causes for that can happen quite innocently. For instance, say someone has made a will and they may have been in a de-facto relationship for some time and then they marry, as soon as you marry your will is invalid most people don't realize that but that catches a few out. So, if your marital status or your relationship status changes, make a new will.
Rhodes: If your marital status changes - you mean if you get divorced or if your spouse dies?
Michael: If your spouse dies, or you get divorced, or you enter into a new relationship, or you change it from being de facto to married or a civil union, then that's another change and all of those things trigger issues that you should be aware of it. It is only marriage or civil union that invalidates a will. As I mentioned, there are the other circumstances where you should review your will.
Rhodes: For instance if you separate now that's a traumatic experience and you're not divorced, in fact you're probably hoping to get back together, so that must be a time when people would perhaps not think about their will, because it's often a fluid situation.
Michael: Yes, that's right, but you will find they will probably go to lawyers to try to sort out the division of the relationship property anyway and they would then be advised to make new wills.
There are those that separate and do not make new wills and never divorce. There are a number we see who have been separated for 20 years but are still married. If you still have not changed your will and have not done a proper division of relationship property, your former spouse can have a claim against your estate.
Rhodes: If your separated spouse owns your life insurance policies and you have never bothered to change the ownership of them, what then?
Michael: Yes, that is a problem. You must have a really good review of everything when you are in that unfortunate situation.
Rhodes: I was just thinking of my father in his dotage, in his late 90s, he decided he wanted to amend his will but he didn't like paying fees to anyone so he started writing all over his will with a red pen. These were explicit instructions about what was to happen, and some were even contradictory. As soon as I saw it, I said to my brothers and sisters that will is no good, we have got to start again. What is the situation there?
Michael: Each to its own facts of course, but it is possible now to have a will such as that validated as a valid will by the court. Prior to 2007 you would not have been able to validate a will like that because we were acting under the old 1837 Wills Act. In 2007 a new Wills Act was passed. Section 14 of the Wills Act allows the courts to validate a will that would not normally meet the requirements of a valid will. So, if a will has a mish mash of instructions written on the will somewhere but maybe not even signed or dated, but it looks like it's supposed to be a will and adequately disposes of the estate, then it can be validated by the Court. There is a proviso, all the people that are eligible to benefit from or inherit from the will need to sign support statements to say that they agree with it So, the will with handwriting all over it, could be validated, if everyone agrees.
Rhodes: Well, we did not want to go down the path of having one or more of my brothers or sisters disagree so the obvious thing was to redo the will?
Michael: You cannot redo the will once he is dead though. In such a situation you could either try and get the intended will validated or alternatively, get the will that he wrote over, probated by the Court.With the agreement of all the beneficiaries and the Executors of the will, a Deed of Family Arrangement could be done to distribute the Estate as agreed by everyone and this can often be done without the needs to go to Court.
Rhodes: At what age should someone have a will? Because we talk to the children of our clients and I am just not quite sure at what age we should be saying to them go and see a lawyer.
Michael: You must be 18 to make a will but you can do it from age 16 if you get the court’s consent. I have never seen that done and I cannot think of a circumstance where it would be warranted. Maybe if a child is orphaned and came into some money that might be something they might do.
Most 18-year olds would not have requirements for a will, but they can make one. Certainly, as soon as you get a few assets around you then it is a good idea. KiwiSaver is the common one now. they might have just gone in to their first home and they may have had some savings in KiwiSaver or the bank. So, it is a good idea for them to make a will, otherwise it all goes to mum and dad.
Rhodes: I see, and they might also have a life insurance policy early on?
Michael: Yes, and in that case, it is good idea for them to make a nice simple will, it does not cost much.
Rhodes: I have always said not to go and get a free will. Do not go to someone who does wills on the side. Go to a lawyer who specializes in this area. Do not be a cheapskate, spend a little bit of money, get some good advice and it is likely to help you in the long run.
Michael: That is good advice Rhodes. Same with the online wills’ kits that you can buy online. It is a source of revenue for lawyers trying to fix the mistakes later!
Rhodes: Are there any important considerations that people should think about before they go to see the lawyer and make it will?
Michael: I think you need to really need to consider who you want to benefit from your will, and these days there can be a lot of complexities in families. We have lots of blended families.
One of the common cases I see where people have a family when they are very young and then they get divorced and they become estranged from their children and perhaps don't see them ever again. Under the law they have a moral duty to provide for those children who they have never seen.
A lot of people in that situation may consider putting all their assets in a family trust. This cuts out those children they have a moral obligation to support where the practical real-life situation might suggest another outcome.
Rhodes: What about looking after my children if both of us are dead?
Michael: Testamentary guardians, okay. It is not the be all and end all to put them in your will. Appointing a testamentary guardian gives them very little in the way of any powers. If the intention was that they have parental powers, then they must apply to the family court for a parenting order.
Bear in mind too that biological parents automatically have the right of guardianship, so if you are estranged from your ex-spouse somewhere who doesn't have the day-to-day care of the child, legally they are a guardian, but would still probably need to apply for a parenting order.
Rhodes: I was thinking just of an everyday couple where both have died.
Michael: You should appoint guardians. It is an indication, but first make sure that the Guardian agrees to do it before you put them in your wills.
The family court help sort these things out. Once the children are teenage or even from ten or eleven onwards, the judge will just ask them directly who they want to live with. Which makes it easier, because the last thing you want to be doing if the children have lost their parents is to send them off somewhere where they don’t want to go.
Rhodes: Well that is another reason to keep it up to date I suppose.
Michael: Yes, every five years minimum or whenever those life changing experiences come along.
The other thing to be aware of is claims against your estate. If you don't do your will properly there could be claims against your estate. You have this moral obligation to provide for your spouse and your children otherwise they can bring a claim against your estate.
The Family Protection Act gives rights to your spouse, your children, stepchildren if you have financially supported them, your parents if you financially supported them, and your grandchildren if you haven't provided for their parents. That is the only group that can make a claim against your estate. It does not go as far as sisters and brothers or second cousins, just that narrow group, so you if you haven't provided for that group and any of them get disgruntled, they can make a claim. Perhaps another reason for a family trust.
Rhodes: Okay, we will talk about that at another time Michael. We will call it quits there. Thank you very much for your time. We really appreciate that wills are a basic need that everyone needs to be thinking about.
During the Covid-19 lockdown there was the thought, were we going to survive it? And did we have a valid, up to date will? This passed through most people’s minds.
Thank you, Michael. A good reminder to go and check on our wills.
Keep asking great questions …