Every adult should have a will. We explain what to consider.
Making a will is not as simple as it may seem – there are pitfalls that may not emerge until after you've gone. We explain the legal requirements for making a will, and what it's likely to cost to administer after your death.
Every adult should have a will. That's because the law is inflexible about what happens to your possessions if you die without one.
Dying without a will
Where there’s no will, your estate will be divided up by the Administration Act:
- Your spouse or partner gets your personal chattels, the first $155,000 of the estate and one-third of the rest. The other two-thirds goes to your children.
- If you have no children, your partner gets the personal chattels, the first $155,000 and two-thirds of the rest. Your parents get the other third. Your partner gets the lot if your parents are deceased.
- If you have children but no partner, the entire estate is left to the children equally.
- If you have no partner or children, your parents inherit. If your parents are deceased, the entire estate is left to blood relatives or to the Crown if no relatives exist.
Making a will
Less than 5 percent of us die intestate. But we're often sluggish about putting pen to paper, fearing the lawyer's bills that may result. Making a will doesn't cost that much. The expensive bit is the will's administration after your death: these costs come out of your estate and vary depending on who administers the will.
You’re legally entitled to make a will yourself – but just 4 percent do, according to a Public Trust survey. A DIY job may be fine if your assets are modest and your family relationships orderly. But if not, you'll probably need legal advice.
There are potential downsides to DIY. Experts say home-made wills may create problems if the will-maker’s intentions aren't clear. Simple errors – for example, the will's not signed or witnessed properly – can also create grounds for challenge.
Most people use a law firm or the Public Trust to draw up their will. This doesn’t mean the will can’t be challenged: disgruntled relatives can still pop out of the woodwork to dispute your last wishes. But using a professional should help to ensure the will is legally valid.
Some law firms may also prepare a will for free if you're doing other business with them. However, they usually expect to be named as the executor (that's how they earn an income).
You can choose anyone to be your executor. The person doesn't have to be a lawyer: they can be a family member or friend. It's common for people to name a friend or relative and a professional as co-executors (they’ll administer the estate together).
There can be advantages in naming a legal expert as an executor because they can deal with legal matters. Probate (authorisation to administer your estate) will usually need to be obtained from the High Court. Your legal expert can also deal with the transfer of any property.
Friend or family
If you name a friend or family member as executor, they may be willing to do the job for free. But there are still likely to be some costs that have to be met, such as High Court fees for applying for probate. You can specify that these costs are to be met by your estate.
If you choose a trustee company as the executor, it will charge for time plus disbursements such as court filing fees, photocopying and postage. By law, trustee companies are limited to charging a maximum fee of 5 percent of the gross value of your estate.
The Public Trust estimates the cost of administering a simple estate (a $300,000 house in joint ownership, personal savings of $50,000 and a life insurance policy of $100,000) to be $3800 plus disbursements. Another $375 would be payable if the surviving partner asked the Trust to transfer the joint home into their name.
Like trustee companies, lawyers' fees for estate administration can be based on an hourly rate, a task-based rate, a percentage of the gross value of the estate or some combination of these methods.
A 2009 survey by Validatum, a law-firm pricing consultancy, found fees based on time only or a percentage of the gross value of the estate only produced the lowest costs. Validatum's Richard Burcher says firms that use a pricing method of either time plus a percentage of the estate or task-based pricing plus a percentage of the estate invariably produced a higher fee. Reflecting different pricing methods, Validatum's survey found costs for administering a complex estate ranged from $4425 to $16,235.
Before you sign up, you're entitled to ask what the lawyer's fees are likely to be and the scope of the work that will be undertaken. Lawyers must provide you with information in advance about the basis for their charges.
Writing a will doesn’t give you the freedom to do what you want. Otago University law professor Nicola Peart says if you overstep your legal rights, the will can be challenged. And challenges are fairly common, she says.
The Family Protection Act says you have a moral duty to provide for close family members in your will. If you don’t, they have a right to contest the will because you haven't made adequate provision for them. Cutting a close family member from your will is extremely difficult to do, if they choose to challenge it.
The Law Reform (Testamentary) Promises Act says if you’ve promised someone a reward in your will for their services and don’t keep that promise, they can contest the will. Say you hire a caregiver, telling her you can’t afford to pay her much but you’ll see her right in your will. If you don’t keep that promise, she may challenge the will.
If you've been in a relationship for 3 years or more, the Property (Relationships) Act says your partner is entitled to half your relationship property if you separate or die. This applies to married, civil union and de facto couples, including same-sex couples. You can “contract out” by making an agreement with your partner. If you die, your partner has 6 months to either accept what you leave them in your will or claim their share under the Act.
Report by Jessica Wilson.
Wills jargon buster
A person or organisation appointed by the court to pay the bills and distribute the assets of someone who dies intestate.
A document that makes changes to an existing will.
Your assets minus your liabilities.
The person (named in the will) who will carry out the will-maker’s instructions and distribute the estate’s assets.
The term used when a person dies without a will.
A document issued by the High Court after your death authorising the executor to administer your estate. Probate is usually required if the estate is over $15,000.
A person or organisation responsible for holding any of the will-maker’s property until it can be paid to the beneficiaries.
Organisations that specialise in handling wills, estates and trusts.
A will should state the following points:
- that it’s your last will and revokes all previous wills
- how you want your estate distributed
- who will be your executor
- who will be the legal guardians of children under 18 if you and your partner are dead
- anything else that’s important to you (such as instructions for your funeral).
Your will must be written and dated. You must sign it in the presence of 2 witnesses who also sign it. They should state they are doing so in your presence and in the presence of each other. Neither the witnesses nor their partners should be beneficiaries of the will.
Use plain English: if a lawyer tries to foist a will on you that you can’t understand, insist on a rewrite.
Never physically attach anything to your will. The attachment may leave marks and the court may be concerned that these marks indicate there were other instructions forming part of the will. Review your will regularly and update it whenever your circumstances change.
A living will, also called an “advance directive”, states what medical care you should be given if you become physically or mentally unable to decide.
You might want to make a living will saying you should or shouldn’t be resuscitated or that you want life support turned off in certain circumstances. Medical professionals can't ignore an advance directive unless there are reasonable grounds to doubt its validity.
The Health and Disability Commissioner says validity revolves around whether you:
were competent to make the particular decision
made the decision free from undue influence
were sufficiently informed to make the decision
intended the directive to apply to the specific circumstances.
What happens to your loved one’s bank accounts after they die? And can you find out the balance of Grandma’s account the day after the wake?
The Banking Ombudsman has published a Quick Guide explaining what happens to a deceased customer’s bank accounts. There's certain info people must provide and processes banks must follow. Firstly, the bank will need to be told of the customer’s death by relatives, friends or a lawyer.
A copy of the death certificate might also be needed by the bank. The bank then normally freezes the deceased customer’s accounts. Joint accounts will usually be transferred into the remaining account holder’s name.
The bank can then only take instructions from someone authorised to act on behalf of the deceased’s estate. This usually involves obtaining probate or letters of administration from the High Court so the executors or administrators can deal with the deceased’s property.
Once the bank knows it is dealing with an authorised person it can transfer the money to an “estate account” the executors or administrators set up. This estate account is then used to distribute funds, such as money gifted in the will.
Unless you’re the authorised person you can’t find out the balance of Grandma’s accounts. Even after death, banks still have a duty of confidence to their customer. They can’t give information about the customer’s accounts to anyone who isn’t legally entitled to it – even next of kin or estate beneficiaries.
The Ombudsman’s Quick Guide also explains the legal definition of some commonly used words you might hear following a death. And it gives examples of cases the Banking Ombudsman has handled where family have sought information about a deceased’s bank accounts but been denied this by the bank.
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