One of the things that regularly comes up with the discussion on risk is estate planning. This post is the first of a three-part legal series from the team at Legal Beagle to outline the considerations on estate planning that might apply to you.

If there is one thing we cannot stress enough to our clients, it is the importance of great asset protection. The first step to achieving that is planning your estate. We would all love to live to a grand old age and it’s too easy to think that planning for your death is something that can be done ‘another day’, but the reality is that life is uncertain and you need to have a plan in place for the fate of your worldly possessions. As the team at Willowgrove Consulting will tell you, having a Will in place is super important in ensuring the proceeds from your insurance policy end up in the right hands. Your Will can also dictate what will happen to your home, your car, your jewellery, your bank accounts; basically anything in your life that you consider valuable. But effective estate planning requires consideration of more than just your Will.

Here we want to give you a brief overview on some different elements to consider in your estate planning process. Parts two and three of this series will cover estate administration (i.e. what happens after you die), and a more in-depth look at trusts and how you could benefit from one.

Do I need a Will?

The short answer is YES! Even if you hold nothing of value right now or only have a few assets, having a Will will help your family understand your wishes. You never know, you may wind up with something valuable in the future and a Will you make now will cover your future assets too. Moreover, needless to say, if you have a partner, children, or wider family you want taken care of, the best way to look after them is to make provisions in your Will.

For the record, we recommend reviewing and updating your Will every time you reach a life milestone (for example, having a child or buying a house). This is because as you get older and the circumstances in your life change, your priorities are likely to change with it and so it is important those priorities are accurately reflected in your Will.

I am in a relationship, how does that affect me?

When you start a relationship, and everything is new and exciting, potential legal matters are probably the last thing on your mind. However you should keep your legal situation in mind; if you acquire assets together, this can trigger a relationship property situation, and if you have been together for three years the law will treat you as if you are married which means you will each be entitled to 50% of any relationship property you have accumulated.

The effect of this is that estate planning is so much more than just having a Will. If you have assets in the form of investments, business ownership, or property, you need to think about how they will be protected in the event the relationship ends, whether that end comes by a breakup or a death. You may be able to hold assets in a trust, but otherwise, a relationship property agreement (what we know as a ‘prenup’ thanks to American television) will provide appropriate asset protection.

If you want a relationship property agreement, both you and your partner need your own separate lawyers as you each need to receive adequate legal advice for the agreement to be legitimate.

Will a Trust help me?

A trust can be a great tool if you are looking for asset protection from business, trading or director risks. By removing your personal ownership of your assets, they can be put out of reach; we will talk more about this in part three of this series.

In terms of estate planning, a trust can be a really effective way of ensuring your assets end up with the people you want to have them. When you set up a trust you will create a ‘Memorandum of Wishes’ – you can think of this like a Will for your trust. In the memo of wishes, you can outline exactly what you want to happen with all the trust property. The key thing to understand is that when you put the property into a trust, it stops being your own property; that means, it is no longer yours to give away under your personal Will. If you hold all of your assets in a trust prior to your death, you may be able to avoid a lengthy estate administration process as there is effectively nothing in your estate; meanwhile, the trust can continue to operate and use its assets without interruption. 

What happens to my house?

What happens to your house when you die comes down to how the house is owned. If you own your house with your partner jointly, your interest in the house will automatically pass solely to your partner. However, if you own your house alone, or if you and your partner own it in defined shares, you will be able to leave your interest to someone in your will. Your home ownership structure should be discussed and perhaps even changed as part of your estate planning process.

What needs to be considered is what will happen to the mortgage and house while you are waiting for the estate administration to be completed; accounts could be frozen by the bank, and unexpected interest may be charged. It is important to ensure that there is cash money available to take care of this! (As a side note, if you have Jon-Paul and Willowgrove Consulting do your insurance planning, this will be part of our conversation).

Discussing your estate planning options with your lawyer and other professional advisers is a great step towards ensuring your assets are protected in the way you want. When estate planning goes wrong, and assets end up in the wrong hands it can cause a headache for everyone involved, so it is worth spending the time now to get it right! 

This article discusses matters in general terms only and should not be relied upon as legal advice.

This article was written by Claudia King, Lawyer and Director of Legal Beagle, Online Law firm based in New Plymouth. This article was accurate at the time of writing, as things change and the internet retains everything accurate or not, consulting a suitably qualified lawyer, Claudia will do, for your specific set of circumstances is strongly recommended.

You can contact Claudia through her website www.legalbeagle.co.nz or by calling 0508 4 LEGAL (0508 453 425)