Estate Planning Basics Every Kiwi Over 40 Needs to Know

If you're like most New Zealanders over 40, the answer is probably "never" or "not recently enough." According to government research, nearly half of all Kiwis don't have a will, despite most people owning significant assets like property, KiwiSaver balances, and family heirlooms.

Estate planning isn't just about deciding who gets what. It's about protecting your family from unnecessary stress, legal complications, and potentially devastating financial consequences during an already difficult time. It's about making sure your wishes are honoured, your dependents are cared for, and your legacy reflects your values.

The good news? Estate planning in New Zealand is relatively straightforward once you understand the basics. Whether you're just starting to think about this or reviewing an existing plan, this guide will walk you through everything you need to know.

A will is the cornerstone of any estate plan. It's a legal document that specifies how you want your assets distributed after your death, who will care for your minor children, and who will manage the distribution process (your executor).

What happens without a will? If you die intestate (without a valid will), New Zealand's Administration Act 1969 determines who inherits your estate. This follows a strict hierarchy: your spouse or partner first, then children, then parents, then siblings. This may not align with your actual wishes, especially in situations involving:

• Blended families with children from previous relationships
• De facto relationships that haven't been legally formalized
• Wishes to leave assets to charities, friends, or specific family members
• Complex family dynamics or estrangements

What goes into a will? A comprehensive will typically includes:

• Appointment of executors (the people who will manage your estate)
• Guardians for minor children
• Specific bequests (particular items to particular people)
• Residuary clause (who gets what's left after specific bequests and debts)
• Funeral wishes (though these aren't legally binding)

While you can draft a will yourself using templates, many Kiwis work with a lawyer to ensure their will is valid, comprehensive, and considers tax implications and family protection claims. Costs typically range from $200 for a simple will to $1,000+ for complex estates.

Family trusts have been a popular estate planning tool in New Zealand for decades, though recent tax changes have reduced some of their traditional advantages. A trust is a legal arrangement where trustees hold and manage assets for the benefit of beneficiaries.

Potential benefits of family trusts include:

• Asset protection from creditors, business risks, or relationship property claims
• Succession planning for family businesses or property
• Providing for vulnerable beneficiaries (those who can't manage money themselves)
• Some flexibility in distributing income and assets among family members

Important considerations: Trusts are no longer the tax-saving vehicles they once were. Since 2021, the trustee tax rate has been set at 33%, and the IRD has significantly increased compliance requirements. Trusts now require annual tax returns, detailed record-keeping, and clear documentation of trustee decisions.

Setting up a family trust typically costs $1,500-$3,000, with ongoing annual costs for accounting and compliance. The complexity means they're not suitable for everyone. Factors to consider when evaluating whether a trust makes sense for your situation include the value of assets you're protecting, your business or liability risks, and family circumstances that might benefit from the structure.

It's worth discussing these factors with both a lawyer specializing in trusts and a qualified accountant before proceeding.

One aspect of estate planning that surprises many Kiwis is how relationship property law interacts with wills. The Property (Relationships) Act 1976 governs how property is divided when relationships end, either through separation or death.

Key principles: After three years together (or if you have children together), couples are generally entitled to an equal share of relationship property. This includes the family home, chattels, and other assets acquired during the relationship. When one partner dies, the surviving partner typically has the right to claim half of the relationship property, regardless of what the will says.

This can create complications, especially in blended families. Imagine you're in a second marriage with adult children from your first marriage. You might want your share of the family home to eventually go to your children, but your current partner has a legal claim to half the relationship property first.

Options to consider include:

• Contracting out agreements (prenups) that specify different property divisions
• Life insurance policies to provide for children while protecting a partner's rights
• Trusts established before the relationship (separate property may remain outside relationship property)
• Frank conversations with family members about intentions and expectations

These situations can be emotionally complex and legally intricate. Professional guidance from a family lawyer is valuable when navigating relationship property and estate planning together, particularly if you're considering what happens to assets like KiwiSaver when a partner dies.

While wills deal with what happens after death, Enduring Powers of Attorney (EPA) address what happens if you lose mental capacity while still alive. This is an often-overlooked but crucial part of estate planning.

There are two types of EPA in New Zealand:

1. Enduring Power of Attorney for Property: This authorizes someone to manage your financial affairs, pay bills, manage investments, and handle property matters if you become mentally incapable. Your attorney can be granted power immediately or only when you lose capacity.

2. Enduring Power of Attorney for Personal Care and Welfare: This only comes into effect if you lose mental capacity, and allows your appointed attorney to make decisions about your healthcare, living arrangements, and personal matters.

Without an EPA, family members may need to apply to the Family Court to be appointed as your property manager or welfare guardian, which is time-consuming, expensive, and stressful during an already difficult period.

Choosing your attorneys carefully: Your attorney should be someone you trust completely, who understands your values, and who is capable of managing the responsibilities. Many people choose their spouse or adult children, though you can appoint professional attorneys (like lawyers or trustees).

You can download EPA forms from the Ministry of Justice website, though many people work with a lawyer to ensure they're completed correctly. EPAs must be witnessed by an authorized person (lawyer or qualified legal executive) and the certificate completed properly, or they won't be valid when needed.

KiwiSaver and life insurance: These assets typically sit outside your estate and go directly to nominated beneficiaries. Make sure your nominations are current and align with your overall estate plan. If you haven't nominated beneficiaries, these assets will fall into your estate and be distributed according to your will.

Business succession: If you own a business, planning for succession is critical. This might involve buy-sell agreements with business partners, training successors, or structuring ownership through trusts or companies. Without clear succession planning, a business that took decades to build can be worth significantly less (or fail entirely) after your death.

Digital assets: Don't forget about digital property like online accounts, cryptocurrency, digital photos, and social media. Consider creating a list of accounts and passwords (stored securely) and include instructions in your will about how you want digital assets handled.

Charitable bequests: Leaving money to charity can be tax-effective and creates a lasting legacy. Charitable bequests can be made in your will either as a specific amount or as a percentage of your estate.

Family protection claims: New Zealand law allows certain people (spouses, de facto partners, children, and in some cases grandchildren or stepchildren) to challenge your will if they believe you haven't adequately provided for them. The Family Protection Act gives courts discretion to override your will if they determine it doesn't meet your moral duty to provide for eligible claimants. This is another reason to work with a lawyer who can help structure your estate to minimize the risk of successful challenges.

Estate planning isn't a one-and-done exercise. Your circumstances, the law, and your family situation all change over time. Regular reviews ensure your plan remains fit for purpose.

Review your estate plan when:

• You marry, enter a de facto relationship, or separate
• Children are born, adopted, or reach adulthood
• You acquire or sell major assets (property, businesses)
• Executors, trustees, or attorneys die, become incapacitated, or your relationship changes
• You move overseas or acquire assets in other countries
• Tax or trust laws change significantly
• At least every 3-5 years as a general practice

A comprehensive estate plan review involves examining your will, trust deeds (if applicable), EPAs, insurance policies, and KiwiSaver nominations to ensure they all work together cohesively.

If you don't currently have an estate plan (or haven't reviewed it in years), here's how to begin:

Step 1: Take inventory. List your assets (property, investments, KiwiSaver, business interests, valuable possessions), debts, and insurance policies. Don't forget digital assets and sentimental items.

Step 2: Clarify your wishes. Think about who you want to benefit from your estate, who should care for minor children, and who you trust to execute your wishes. Consider discussing your intentions with family members to avoid surprises and potential disputes.

Step 3: Understand your options. Research the tools available (wills, trusts, EPAs) and how they might apply to your situation. General information from sources like Sorted.org.nz can help you understand the landscape.

Step 4: Seek professional guidance. While simple estates might be manageable with online templates, most people benefit from professional advice. A lawyer specializing in estate planning can help you navigate relationship property issues, minimize the risk of successful challenges, and ensure documents are legally valid. For complex estates involving trusts, businesses, or significant assets, working with both a lawyer and an accountant can help optimize both legal protection and tax efficiency.

Step 5: Document and communicate. Once your estate plan is in place, make sure executors and attorneys know where to find important documents. Consider keeping originals with your lawyer and providing copies to key people. Have conversations with family members about your wishes, especially regarding medical care and end-of-life decisions.

Estate planning works hand-in-hand with comprehensive retirement planning, ensuring that the wealth you build throughout your working life is protected and distributed according to your values.

Disclaimer: This article is general information only and does not constitute personalized financial advice. For advice tailored to your situation, speak with a licensed Financial Advice Provider. You can find a registered adviser at fma.govt.nz. For legal advice regarding wills, trusts, and estate planning, consult with a qualified lawyer.