A current Will is just the beginning
“I must update my Will.” Does this sound familiar? You’re not alone. Talking about our own death is not a nice thought and people often put off doing or reviewing their Will for another day, week or year. To ensure that what you have worked hard for during your life ends up where you want it on your death involves more than just drafting or reviewing your Will. You need to enter into what is often referred to as ‘estate planning’.
Whilst your Will is a very important part of your estate planning exercise, the process also looks at the ownership structure of your assets to ensure that they can be dealt with in accordance with your wishes. Below are some points you should consider:
List your assets and liabilities
This is not as easy as it seems; people often overlook assets that they own or they want to deal with certain assets in their Will that they don’t personally own. Write a list of all your assets and liabilities. As well as the more obvious assets such as property and shares, don’t forget these which are often overlooked:
- Company shares (remember companies where you are the sole shareholder)
- Loans to companies, trusts, children or other family members (documented or otherwise)
- Superannuation schemes, and
- Life insurance policies.
Your Will can only deal with the assets that you own in your personal name; it cannot directly deal with assets owned by a trust or a company. If assets are owned by a company, then any shares that you own will be dealt with by your Will, but not the asset itself.
Remember to list assets that are jointly owned – with your spouse/partner or other third parties. These could be jointly owned bank accounts, shares or property. Assets that are owned jointly with another person will, after your death, usually go to the survivor by right of survivorship and therefore cannot be dealt with in your Will.
Once you have listed all of your assets you need to indicate where you wish these assets to end up on your death. You may want everything to go to your spouse or partner, or you may prefer to leave some assets to your children and/or grandchildren.
Once you know what assets you have and who you want to leave them to, you’ll need to provide more information to enable us to advise on ownership structure and the type of Will you should have. This advice will also take into account the risk that any person (child, partner, spouse) will be able to challenge your Will, together with the likelihood of their success.
We’ll advise you of any amendments needed to your ownership structure or Will that may avoid or lessen these risks.
In order to do this successfully you will need to provide the following information.
Relationships: Is there anyone who may consider that they are in, or have been, in a relationship with you? The legal concept of de facto relationship takes into account a number of factors and whilst you may not consider yourself to be in a relationship, others may think that you are. You should let us know of this possibility and we’ll give you advice on whether you need to consider this relationship in your estate planning. It’s important to note that legally you may be in more than one relationship at a time.
Are you and your partner, or spouse, parties to a relationship property agreement which deals with your relationship or matrimonial property? Even if you entered into an agreement many years ago and you no longer believe, or wish, it to be a legally binding agreement, it should be reviewed and – if necessary – amended.
Business entities: If you are involved in a partnership or own shares in a company you may need to deal with your holdings in these entities separately, particularly if you are a party to an agreement such as a buy/sell agreement, shareholders’ agreement or a partnership agreement. The terms of the agreement may state how any shares in the company or partnership are to be dealt with on your death, and may restrict what you can incorporate into your Will. For example, it’s not uncommon for such an agreement to prohibit any shares being disposed of in a person’s Will; the shares must be offered to or purchased by the other owners involved in the partnership or company. Your Will may, however, deal with any proceeds from the sale of this business interest.
Life insurance policies: On your death who will receive the funds from any life insurance policies you have taken out? A quick phone call to your insurance broker or insurance company can provide the answer. It’s common for proceeds to be paid directly to your partner or spouse or sometimes directly to your children, and therefore the proceeds cannot be dealt with in your Will. If, however, insurance proceeds become part of your estate you may wish to stipulate who you wish to receive the proceeds.
Life insurance policies can be a helpful tool in the estate planning process. In blended families, in particular, the proceeds can be used to enable you to provide for both your children, and your new spouse or partner. It’s quite usual for people to amend the beneficiaries of a life insurance policy when they carry out an estate planning review.
Your children: Who are your children? Again this sounds straightforward; however, it’s important to let us know if anyone you consider a child is in fact a step-child or a birth child who was given up for adoption. It’s also important to tell us if you have children who you are not including in your Will or treating equally with their siblings, and to record the reasons for doing so. This may help prevent a successful claim being made against your estate.
After providing this information, and any other material you feel may be relevant, we can check the ownership of your assets and recommend any change in their ownership structure. This could be as simple as changing ownership from ‘joint tenants’ to ‘tenants in common’, having parties enter into a relationship property agreement or may include the establishment and transfer of assets to a trust.
When drafting your Will it’s important to think about who you wish to have as your executors and trustees. These are the people you appoint to look after and then distribute your estate in accordance with your Will.
When appointing executors and trustees, there are a number of things to consider:
- If you appoint one person and this may be your spouse or partner, it’s quite hard to deal emotionally with this responsibility on their own. You may therefore want to appoint more than one person. Being an executor can also take up a great deal of time, and if there are two or more executors, the workload can be shared. However appointing too many executors can frustrate and slow down the administration process and add to the costs.
- If you have an estate with some complexities, for example, a business or extensive investments, you should consider appointing a person with some commercial knowledge and who has some background of your personal affairs.
- If appointing more than one trustee, do appoint parties who are able to work together. Estates may get delayed and beneficiaries frustrated when trustees cannot work in harmony.
The points we’ve mentioned in this article are a starting point only but they do raise a number of issues to consider before you make a Will, or review your current Will. Although almost everyone says “I just want a simple Will”, in this day and age there are very few situations where your wishes can be met by a simple Will.
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Copyright, NZ LAW Limited. Editor: Adrienne Olsen. E-mail: firstname.lastname@example.org. Ph: 029 286 3650.