While everyone knows it is important to have a will, it can be hard to know where to start. Having an up-to-date will makes everything easier for your loved ones and means your assets and taonga are distributed as you wish, and without unnecessary delay.
Here is what you need to consider when writing your will.
The first thing to decide is who will write the will. The best choice will depend on your budget, level of experience and the complexity of your estate.
Whoever you choose to write your will, make sure key people know where to find it when it is needed.
In short, you need to decide who is going to get your stuff, also known as your estate. Your estate encompasses individually held assets, such as property, cars, Kiwisaver and other investments. Jointly owned assets pass to the co-owner, and do not become a part of the estate.
There are two types of beneficiaries to choose for your will – primary and contingent. The primary beneficiary is your first choice to inherit your estate, such as your spouse. The contingent beneficiary is the next option, if the primary beneficiary has died or cannot be located, such as children, a parent or a sibling.
While you choose a beneficiary to inherit your estate, you may also wish to give gifts or a sum of money to others as well. This is called a bequest.
A bequest could be a donation to a charity, a sum of money to someone who isn’t a beneficiary of the will, or a specific item, such as jewellery or art, that you wish to go to a particular person. You can also bequest your body to science (you need to have forms signed by yourself and an immediate relative) and you must bequest any firearms you own to someone that holds a firearms license.
Choosing guardianship for children is often the reason people write their first will. Trying to choose that person is also a reason people put it off. If your children are under 18 years of age, you need to appoint someone to make decisions for their care and wellbeing. This person is a testamentary guardian.
It is important to understand that the guardian’s role doesn’t necessarily include the day-to-day care of the child or children. They will make the decisions about how they are brought up, and by who. This means you can appoint someone whose judgement you trust and discuss with them the various options for raising your children – which can change throughout your child’s life.
If you are responsible enough to be making a will, we hope you also have life insurance in place. In setting up your insurance you need to consider various scenarios and where this money would end up. For example, if you have given someone guardianship of your children – how will you fund that?
It is also important you understand what happens to your debts when you die, so you can include that in your planning.
This is a lot to think about, and can lead to some difficult conversations. At Plus4 we see how much easier it is on everyone when there is an up-to-date will in place, and how much harder it is when there isn’t.
We provide our clients with a template they can use to help plan their will. Using this template means you can go over it in the privacy of your own home and work out the details before you see a professional.
If you want to discuss your life insurance, or would like a copy of our will template, contact one of our advisers today.
When you take on a mortgage, use your credit card or get a new vehicle on finance, you know it is important that you can make the required payments and keep on top of your debt. However, people don’t tend to think about what happens to those debts when you die.
So, what does happen to your debts when you die? The answer is, it depends. It depends on the type of debt, the estate and your next of kin.
To understand what happens to debt, you need to understand what an estate is and how it works.
When someone dies all their individually held assets, such as property, cars, Kiwisaver and other investments, become a part of their estate. Jointly owned assets pass to the co-owner, and do not become a part of the estate.
If you have a will you will have identified an executor, and that person will distribute the assets of the estate. Usually debts are paid first, and what remains is distributed to the beneficiaries of the will. If you die without a will (which is called dying intestate) an administrator will be appointed by the courts to administer the estate.
Any funeral costs or legal costs for managing the assets are paid by the estate.
For most people, this is the largest debt they will have in their lifetime, and because of the way mortgages are set up the bank will likely have “first dibs” on the estate to recover what is owed.
If the property is jointly owned, the surviving party will now be responsible for the mortgage. If this isn’t the case, the executer of the estate will need to use money from the estate to pay off what is left on the home loan. If there isn’t enough, they may have to sell the property to pay back the bank.
This is where life insurance plays a key role. If a home is jointly owned, or you will be survived by someone you want to be able to continue living there, making sure your life insurance pay-out is enough to cover your mortgage is a key factor in how much insurance cover you need.
As with a mortgage, the debt on a joint credit card will fall to the remaining party. However, an individual credit card will have the outstanding balance paid by the estate.
With the high interest rates on credit cards, keeping on top of the debt is important at the best of times, so if you find yourself with a lot of credit card debt it is important to put a plan in place to reduce this.
That car that is still being paid off, the sofa, TV or fridge on hire purchase, all need to be paid for from your estate. If there isn’t enough in the estate to do this, they may be repossessed.
If you die with tax owing this is considered a personal debt, so is paid from the estate. If you have business debts, and the business is in your name, this also applies.
You will need to cancel or transfer accounts for phones, internet and power. If you transfer accounts the new account holder will be responsible for any bills owing. If you cancel them the estate will be responsible.
Sometimes the debts owing are more than the assets available to pay them off. Unless someone was jointly liable for the debt (such as a co-owner of a property or business, or someone who has provided a guarantee for a loan) family members cannot be held liable to pay off debts.
We work with our clients to make sure if the worst should happen their loved ones are taken care of. We look at the whole picture to make sure the level of insurance you have is just right for your circumstances. Talk to one of our advisers today.
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