Why you need a Will – and why you need it now

If you’re reading this – and you’re a Caucasian New Zealander - there’s only a 47% chance that you have an up-to-date Will.

If you’re Māori or Pasifika, the chances are 31% and 20% respectively. If you’re Asian, it’s 25%.

Statistics also show that around 90% of those with valid Wills haven’t updated them when their life circumstances changed or were about to change.

The most common reason people give for not having a Will is because they don’t think they are old enough or have sufficient assets to make it worthwhile.

But dying without a valid Will (called ‘intestate’) isn’t an option unless you want the government and the courts to decide who gets your stuff or takes over your business. If you die intestate, the process is expensive, tricky and frustrating for your loved ones and could so easily be avoided.

Probate – the court process of determining whether a Will is valid – normally takes about six months but will take much longer if you die without a Will.

It’s particularly problematic with blended families or if both parents die at the same time, leaving minor (under 18) children.

Even if both parents have Wills, saying their assets will go to the other partner, some mechanism must be put in place for transferring those assets to their minor children. If that isn’t spelt out in the Will, the court will appoint a trustee, along with a guardian to make decisions in the best interests of the children. That person might be someone with no understanding of your family or its values and the way it sees things.

With blended families, you also need to think carefully about how and when you want your children to receive any of your assets. Will they have the patience to wait until a step-parent has died, or will they make life hell for your new wife/husband/partner? It may not even be your children that you have to worry about, but the people who influence them such as their partners or perhaps their parent, who is your ex.

Enduring powers of attorney

Making a Will should be mandatory for everyone over the age of 18. It’s the passage into adulthood and the foundational financial instrument which dictates how your assets will be distributed and your estate administered.

Along with a Will, you also need an enduring power of attorney – a legal document naming the person who can make decisions about your finances, property and wellbeing on your behalf if you become mentally incapacitated.

This person must be over 20, and not bankrupt or mentally incapacitated themselves. It can be a friend or family member but should be someone you trust to respect your wishes.

Enduring powers of attorney are one of the most practical legal documents you can have. If you die without a Will, there is a process as noted above, and while it may not be perfect, it is still a process. However, if you lose capacity, and have no enduring power of attorney, then there is no process other than making an application to the court.

Many people think they are too young to have an enduring power of attorney. But any one of us at any time could have an accident, stroke or other medical event which could render us incapacitated.

Insurance

Once your Will and power of attorney are in place, you might also want to consider life insurance, particularly if you have dependents.

Traditionally, life policies pay a lump sum on the policyholder’s death. But you can also buy policies that will pay out if you’re diagnosed with a terminal illness. It can be a good option because only 3% of people die suddenly. Receiving a lump sum payment after a terminal diagnosis can help you access expensive alternative treatments (e.g. those not funded by the government), pay off the mortgage, or take a holiday. And it will help pay your funeral costs and foot the bill for insurances, rates and other outgoings until your estate is finalised (remember, this will usually take a minimum of six months, even if you have a Will).

But be very careful when signing up for life insurance. About 90% of life policies are owned by the wrong person – the life assured -

meaning that when he or she dies, the policy becomes part of their estate and subject to the probate process. If you don’t have a Will, it makes the problem worse.

Many Financial Advisers will structure the policy so your spouse has some form of ownership, so when you die, your policy does not become part of your estate and can be paid out almost immediately.

You, as the insured, should stipulate who the beneficiary should be when you sign up for the policy. That section of your application form is super-important but most people forget to fill in. Remember, your beneficiary can’t be your minor children so the ownership structure needs to take that into account.

Maybe you feel you don’t have enough assets to justify making a Will. But everybody has an estate of some sort, even if it’s only your car and a couple of sofas. Many people have KiwiSaver and accessing this without a Will becomes far more complex. You’d probably prefer these assets, no matter how small, to go to the ‘right’ person. And you’d probably rather choose the person who will distribute your assets rather than leaving it to a judge.

It’s absolutely critical to make a Will if you’re buying property. If your lawyer doesn’t raise the issue – and many of them won’t – seize the opportunity and ask them for help. It’s even more important if you’re buying property with a partner or a friend, especially if the initial financial contribution is unequal between the parties.

And if you’re still sceptical about needing a Will, google the case of Prince, the rock star who died of a fentanyl overdose on 21 April 2016. Sadly, Prince died without a Will and seven years later the administrators of his US$82 million estate are still battling with the US authorities who’re claiming more than US$32m in back taxes.

So, why are you waiting? If you don’t have a Will, get it done now. If your Will was made five or more years ago, review it with a professional and make sure your wishes and intentions are clearly understood. Talk to your kids to make sure everyone is on the same page, and (most important) make sure your beneficiaries know where to find your Will.