It’s Wills Month in September and it's a good time to review your basic “life” documents and make a time to talk through any changes. At the top of this list should be your Wills and Enduring Powers of Attorney.
The starting point is whether you have a Will?
There is a common misconception in New Zealand that if you die without a Will, all of your assets will automatically pass to your spouse. This is not quite the case. Take Morgan as an example.
Morgan owns a large life style block, farming equipment, Kiwisaver and other small shares and investments. He has a rocky relationship with his parents but a wonderful wife, Kayla. They don’t have any children. Tragically Morgan dies in a farm accident. Unfortunately, Morgan dies without a Will. Morgan believed he did not need a Will as he believed that Kayla would inherit all of his assets regardless.
As Morgan did not create a Will expressing his wishes, Kayla now has to apply to the Court for “Letters of Administration”, to have herself appointed as the administrator of Morgan’s Estate. She will then need to distribute the assets in accordance with the Administration Act 1969.
This Act sets out that Kayla must distribute Morgan’s assets as follows:
1. Kayla (as Morgan’s wife) will receive Morgan’s personal effects, $155,000 and 2/3 of the remaining assets in his Estate; and
2. Morgan’s parents receive the remaining 1/3 of Morgan’s Estate.
Morgan’s parents are thrilled that they get a large distribution from their son (especially because they had such a rocky relationship)! They cannot wait to spend their inheritance.
Kayla however, is left incredibly upset that Morgan’s wish that she inherits all of his assets, had not been followed. She also cannot help but feel angry that Morgan did not make a Will.
It is vital to create a Will to ensure your assets are distributed in a manner you are comfortable with, and that saves your loved ones undertaking the difficult administration process.
Major life changes may trigger the need to review your Will. These include the beginning or end of a romantic relationship, buying or selling major assets and whether the people you have chosen as your Executors are still suitable for that role.
Enduring Powers of Attorney for your children?
Enduring Powers of Attorney (EPOA) are another area that often catches people out. Most people know that there are two types of EPOA – one for personal care and welfare and one for property decisions. EPOA need to be put in place before you lose capacity – once capacity is lost, the only avenue for these decision making powers is through an expensive and time consuming Court process.
One aspect that is often overlooked is the legal age at which responsibility for these decisions passes from parent to child.
Take Tim as an example. Tim is 19 and recently moved away from home to take up a Junior Shepherd role in the King Country . Tragically, while shifting some ewes, he rolled the quad bike and is now in ICU, in a medically induced coma. Decisions need to be made about his ongoing medical care, including whether life sustaining care is to be withdrawn if he shows no sign of improvement. If Tim does recover, a lengthy stay on a spinal unit is likely – decisions need to be made if he should go to Auckland or Christchurch for this care.
Tim’s Dad is very vocal in his view that Tim should not be allowed to suffer. Tim’s sister has a different view and believes everything should be done to sustain Tim, at any cost. If Tim survives, she wants him moved to Christchurch where she is living. Tim’s parents believe that, as his parents, their views will take precedence. They are shocked therefore when Tim’s sister applies to the Court to be appointed as his welfare guardian, with the power to make these decisions on Tim’s behalf.
Up until they turn 18, parents who are guardians can make decisions on behalf of their children. However, once a child turns 18, parents lose the legal right to make these decisions for their children. Before the law changed in 2005, parents were guardians until their children turned 20. The lowering of the age to 18 still catches many people by surprise.
In Tim’s case, if he had appointed his Dad (or his sister) as his EPOA for personal care and welfare, it would have been clear from the outset who he would want to be making these decisions for him and an expensive and stressful Court process could have been avoided. Tim’s example serves as an important reminder to encourage your children to make both a Will and EPOA when they turn 18.
For advice or assistance with making Wills, EPOA, or applying to Court for the Orders mentioned above, contact our team.
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This article was written by Associate Nicole Porima
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