Estate Planning

6 estate planning tips to help you leave a legacy, not a headache

Thinking about our own death or incapacitation can be grim. It’s little wonder most of us give little consideration to what happens in that situation, even if the statistical likelihood of us all dying someday is 100 percent!

So, when it comes to plans, estate planning is one of those things that often gets put on the back burner. However, having a plan in place for your assets is one of the kindest things you can do for your loved ones.

Estate planning is important for everyone, but it becomes even more crucial as you age.

What is Estate Planning?

Estate planning is deciding who will benefit from your assets when you die, and then legally formalising those decisions. Traditionally, simply preparing a will would have been adequate, however, the current legislation and modern family structures that make up New Zealand mean that we need to take a more thorough approach.

Think of it as a master plan for your family to follow when you pass away or become physically and/or mentally incapacitated.

Research shows only 50% of New Zealand adults have a will. Without a plan, your family could be left to deal with unnecessary stress, costs, and legal battles during an already difficult time. To get you started on your estate plan, here are our top tips to get your affairs in order.

1. Create a Will

The foundation of any good estate plan is a will. This legally binding document specifies how you want your money, property and possessions divided after your death.

Have a Plan, or the Government Decides for You

If you die intestate (without a will), the law dictates for you how your estate is distributed based on a formula, regardless of what your wishes may have been.

“There’s a lot to be said for having a will, without it you don’t have a say in anything,” says Rosemary Riddell, a New Zealand judge who rules on estate disputes. Riddell has seen hundreds of cases where families have fallen out after people die without a will or have a badly written one.

Estate lawyers are saying having a professionally made will is going to become more important in the coming years. Because baby boomers have accumulated so much wealth, in particular from housing over the last two decades, the size of estates has ballooned. With larger sums of money at play, estate disputes are becoming increasingly common.

Your will also requires you to name an executor, the person responsible for carrying out your wishes in the will. This should be someone you trust and could be a lawyer, a family member or a friend.

Learn more: why you need a will in New Zealand

2. Enduring Power of Attorney

Estate planning is not just about when you pass away, it’s also about safeguarding your assets if you become mentally incapacitated. This involves setting up an enduring power of attorney (EPA) whom you appoint to make decisions on your behalf. There are two types:

EPA for property and financial assets

Enduring power of attorney for property and financial assets is effective when you're mentally incapable of making decisions or if you simply want someone to make decisions on your behalf, such as when you move to assisted living. Attorneys can manage your affairs, including accessing bank accounts and selling property.

EPA for personal care and welfare

The second kind of EPA takes care of your personal care and welfare. This allows someone to make decisions on your behalf regarding matters such as your health, well-being, and personal affairs when you are no longer able to make these decisions yourself.

3. Explore Setting Up a Trust

Setting up a family trust can be a useful estate planning tool for people with significant assets. With average house prices comfortably over $1 million in many locations, there are more and more assets at stake. A trust takes over ownership of your assets. In most cases that means your assets are protected from creditors, businesses, or others claiming against your will when you pass.

Trusts can also dictate when and how those assets are distributed to the trust’s beneficiaries, such as your children or friends. This helps protect the assets from unwanted counterclaims.

"Trusts are also useful tools to help with your estate planning, and you provide guidance to your trustees to keep your property in the family long after you’re gone,” says Katrina Shanks, former Chief Executive of Financial Advice NZ.

“The guidance may allow your children to have access to the assets of the trust but protect them so their partners cannot make a claim for half of it should a relationship end.”

That said, trusts aren't necessary for everyone and require administration by appointed trustees, which costs money and time. If you think a trust might be right for you, first discuss your situation and goals with a lawyer or an estate planning professional who can help determine if a trust makes sense for you.

4. Plan for Funeral Costs

A basic funeral in New Zealand can cost $10,000 these days. An important part of estate planning is ensuring your loved ones have access to funds to cover these upfront costs after you pass away.

If you’re a bit thrifty and don’t mind a bit of DIY, you can even build your own casket. Coffin Clubs have exploded in popularity in recent years. Members say it’s not only a good way to save money, but it’s a chance to come to terms with mortality.

“The thing that we have discovered is that the Coffin Club actually opens up the discussion about death and dying and if people belong to that they can talk about that,” says Katikati Coffin Club member John Russell. 

5. Other Important Documents to Consider

In addition to the main estate planning documents like a will and EPAs, there are a few other items you might think about:

• ‍A living will provides specific instructions for your end-of-life medical care, such as refusing treatment in certain situations.
• A funeral plan regarding your preferred funeral arrangements, cremation versus burial, and so on. You might even request which songs you want played at your funeral.
• If you have a cat, dog, or other animal family member, include what you want to happen to them in your estate plan. Who will take over the pet, a friend or a local humane society?
• Social media access — these days, social media accounts have photos, contacts and memories in the data. You may want to share access to these accounts once you pass.

6. Review

If you drew up a will 20 years ago, chances are your situation and wishes have changed since then. Laws also change.

In our experience, the most important estate planning tip to remember is: review, review, review. Regularly update all your documents as life circumstances change. Lawyer Lindsay Graves, who specialises in estate planning, recommends doing a formal estate plan review with a legal professional at least every 5 years.

However, you should update your documents right away if you have a major life event, like going through a divorce, remarrying, having children or grandchildren, acquiring new assets, or if the government passes tax changes. 

The Bottom Line: The Time to Start is Now

While thinking about your eventual death might not be enjoyable, getting started on estate planning ensures you have a plan in place in case the unexpected occurs. Even if you consider your assets and situation to be simple, all adults over 18 should at least have a basic will.

By having a professionally made plan in place you gain peace of mind knowing your affairs will be handled as you wish. More importantly, you spare your family from additional grief and legal headaches during an already difficult time. 

Note: here at Become Wealth, we’re not lawyers or estate planning specialists. Before making any decisions in this area, or before concluding you have the area covered already, we suggest you speak to a trained professional in this area who can consider your unique circumstances and suggest the best way forward.