THE IMPORTANCE OF HAVING A WILL
1 September 2021
by Henry Brandts-Giesen and Silvia McPherson of Dentons Kensington Swan in association with Community Foundations of New Zealand
In support of Community Foundations of New Zealand Wills Month we partnered with Dentons Kensington Swan to explain the importance of having a will.
As lawyers involved in preserving and enhancing family wealth we regularly meet with clients to discuss their objectives and risks. It is surprising how often we realise that a client does not have a will or has not reviewed their will in recent years.
Having a will in place (and regularly reviewing it) is very important.
What is a will?
A will is the expression of a person’s wishes concerning the transfer of property on their death. It is very important that we make one so that our loved ones and dependents are looked after when we pass away.
A will can include:
- instructions for payments of debts;
- gifts to named individuals, charities, schools, or groups;
- testamentary trusts;
- the appointment of guardians for children;
- instructions in relation to education and welfare of the children;
- specific terms relating to a family business or a family discretionary trust;
- funeral and burial/cremation instructions; and
- the appointment of executors to carry out the instructions.
What happens if you don’t have a will?
If you die intestate (without a will) the estate will be distributed according to the Administration Act 1969 and the administrators may have to trace relatives. This can incur significant costs for the estate.
Generally, the people who would receive estate property if you die without a will have some form of legal relationship with you. The laws of intestacy do not provide for giving specific items to people or charities and distributions can have unintended, detrimental consequences - especially if you own a business or other complex asset classes.
Who gives effect to a will?
A will appoints executors who are the people responsible for carrying out your wishes. Executors may also act as trustees of a trust set up by the will or during your lifetime. A good executor must be empathetic, trustworthy, experienced, independent, accountable, and have the right skills.
What happens if I die with young children?
A will allows you to appoint guardians. Your will may also make provision for the associated costs of caring for young children. Under intestacy children would receive any inheritance outright at age 18. A will allows you to specify that they will inherit when they are slightly older.
What happens if I have assets in other countries?
Although a will made in one country can usually deal with assets held in another country, it is often more cost effective to have a will in each country. It can save the executors from the process of having a foreign will validated. This is particularly problematic when dealing with foreign real estate.
What happens if I separate?
Marriage and entry into a civil union revokes prior wills. Dissolution of the relationship revokes the part of your will that makes gifts to your former spouse or partner and appoints him or her as the executor. However, informal separation does not revoke a will.
New Zealand law recognises that surviving civil union partners and de facto partners have the same rights as a legally married spouse. A surviving spouse or partner may make a claim for a distribution of relationship property under the Property (Relationships) Act 1976.
What happens if I own a business?
Without a will, your shareholding or interest could pass to someone who is not authorised under the shareholders agreement or someone without the necessary skills or interest. The best way to influence the future management of your business is to appoint other directors while you are still alive and to deal with the shares in your will. Another option is to set up a trust to hold the shares.
What if I want to change my will?
A will can be amended and should be reviewed or updated when any of the following events occur:
- civil union;
- de facto relationship;
- dissolution of marriage or civil union;
- separation from marriage, civil union or de facto relationship;
- setting up or terminating a trust;
- acquiring or disposing of significant assets;
- incurring significant liabilities; or
- changes in law or tax rules that affect you.
Can I leave a gift to a cause I care about in my will?
You can leave a gift of any size in your will to a cause that you care about by, for instance, naming a particular charity as a recipient of a gift in your will, or for gifts of significant size (typically of over $50,000) you can consider setting up your own endowment fund that will be invested and will give to causes of your choice for the long-term. It is a bit like having your own charitable trust fund but with your local Community Foundation taking care of the fund. Community Foundations across New Zealand can advise you on your options of setting up such a fund through a gift in your will. Please see communityfoundations.org.nz/how-it-works for more information.
Don’t hesitate – make a will or review your current will!
Your will is often your last message to your loved ones and people who are dependent on you. We recommend that good legal advice is taken when making a will so that potential challenges can be anticipated and avoided.