Getting the house in order
Topics covered in this article: Home Owners, Property, Succession Planning, Trusts
DON’T FORGET THE NUTS & BOLTS OF ESTATE PLANNING
September is Wills Month. Some of you may be dusting off your will and reviewing it for necessary changes. Updating your will however is only a part of good estate planning. If you want to leave things clean and tidy for the next generation, there are a number of things to consider.
We recommend maintaining a list of your assets and liabilities; a balance sheet. Include everything; bank accounts, shares, insurance policies, loans such as from a bank, or to a family member, properties, cars, anything of value. It would make sense to put customer reference numbers or account numbers next to the items where relevant. This will help you organise your wishes, and later, assist your executor deal with those items and the organisations that manage them, such as banks after you are gone. Your balance sheet should be updated annually.
Your balance sheet should also note who the legal owner of each asset or liabilities is. Is it you personally, or is it jointly owned with your better half? Perhaps a company or a trust is involved? The type of ownership has implications for the way that asset is dealt with once you are gone. With joint ownership; the asset goes directly to the survivor and does not become part of your estate. Similarly trust assets are not part of your estate and need to be dealt with separately, often through a memorandum of wishes addressed the trustees.
Many assets require careful consideration. Life insurance policies are a prime example. Who is the beneficiary of the policy? Is it you or someone else? If it is you, the funds will go into your estate and will be used in the manner provided for in your Will, perhaps to pay for a fitting funeral, or to ensure someone is provided for? If the policy owner is someone else, they will receive the money and can choose what they do with it.
Some assets require your executor to apply for a grant of probate. Probate is a sign off by the Court that the executor may deal with the estate assets in the way set out in the will. Probate creates some increased costs for dealing with your estate, but also provides some discipline and oversight for the executors. Assets valued at over $15,000 or interests in land, if they form part of your estate, will require probate. Bank accounts, shares, and insurance policies can all cause extra cost and delay where they are owned in your name. Where appropriate, a transfer of those assets to joint ownership during your life will make transfer on your death straightforward, via survivorship. If all assets are jointly owned, say with your spouse, no probate will be required when the first of you passes on. Blended families need to be careful around joint ownership, and estate planning generally. They need specific advice from a solicitor with expertise in estate planning.
If you have a share portfolio that you manage yourself, you may wish to consider whether you transfer this to a custodian. A number of financial advisers and share-broking firms in New Zealand offer custodial services. They can talk to you about whether that service might be right for you and your family longer term.
Things can change too. A recent example is the closure of the Bonus Bonds scheme. Bond holders will need to consider where funds are to be invested next. When giving consideration to that, they should also consider whether this has implications for their estate planning. Some people ear-mark accounts like Bonus Bonds funds for particular family members, such as grandchildren. If you leave your Bonus Bonds to Little Johnny in your will, but cashed in the bonus bonds to invest elsewhere, then Little Johnny may miss out on his inheritance.
As you will appreciate there are many things to consider when estate planning. We have only covered some of the territory here. If you wish to discuss updating your Will and any aspects related to that, such as the appropriate ownership of assets, then we would welcome your call. Please contact me or one of my colleagues in our trust and estate planning team.
Latest Update : 20 August 2021