Most of us know why we need a valid, up-to-date will that spells out how we want our assets distributed when we die, guardianship instructions, our funeral arrangements, legacies and donations to charity. But not many of us understand the role of an Enduring Power of Attorney when we’re no longer capable of managing our affairs.
A Living Will rightfully sits alongside this, especially if you feel strongly about your care in a medical emergency. Officially known as an ‘Advanced Medical Directive’, it may help your family when making major decisions in conjunction with medical staff.
Your will
It’s vital to keep updating your will, as your marital status, your family situation and your assets change.
“Having an out-dated will is almost as bad as having no will at all, and writing a will without expert advice may be only marginally better than having none at all,” says Michelle Pope, manager at the Takapuna, Auckland office of Public Trust. “It will still be an intention of your wishes, but if it hasn’t been signed, dated and witnessed correctly then it may not be valid.”
The ‘Public Trust’, our largest trustee company, holds 270,000 wills and writes 10,000 new wills annually. As a guideline, writing your will is free if you appoint a ’Public Trust’ executor to administer your estate. Otherwise it costs about $200 an hour on a ‘time and attendance’ basis.
Choosing the right executor is important, says Michelle. “We cannot under-estimate the amount of expertise that is required in dealing with wills,” she explains.
“The law requires all children to be treated equally and if one has been left out of a will then an explanatory note will help if a will is being challenged. A discretionary trust may be one of a number of solutions that might work legally. Also, if one of your children has died, then his or her children – your grandchildren – are legally entitled to their deceased parent’s share.”
What is probate?
Once the High Court has granted probate (certified a will is authentic and valid), your executor can distribute your assets. Estates with total assets of less than $15,000 can be distributed without the granting of probate.
Probate is not required in the case of a couple with joint assets which automatically pass to the survivor, because there is no estate to administer as such.
Public Trust has the right to legally close a deceased’s sole name bank accounts (not accounts in joint names) and pay funeral costs before probate is granted. If there is potential for a will to be challenged, assets will not be distributed to allow time for a challenge to be lodged and the issue resolved.
When there’s no valid will
It’s a myth that everything belonging to someone dying intestate goes to the Government’s ‘Consolidated Fund’ bank account. As a trustee company, Public Trust is regularly appointed by the High Court to administer such estates, which means family members have to be traced to identify rightful beneficiaries. The Administration Act sets out the hierarchical order of priority and who gets what.
Enduring Power of Attorney roles
There are two types of Enduring Power of Attorney to act for you when you’re mentally incapacitated. Your ‘Personal Care and Welfare’ EPA makes decisions on matters such as medical treatment or admission to a rest home. Your ‘Property’ EPA deals with matters such as investing your assets, your expenditure and your housing.
An EPA’s powers cease on your death, which makes it illegal for the EPA to access your bank account even if the bank has yet to be notified of the death.
Changes to the EPA laws in September 2008 resulted from instances of elder financial abuse. These changes now better protect people appointing EPAs.
“Your Enduring Powers of Attorney are just as important as your will,” says Marilyn Healy, an estate specialist at Public Trust. “Appointing an Enduring Power of Attorney is like having an insurance policy. If you have it you may not need it, but if you don’t have one appointed then you’ll have to apply to the court and that will be expensive.”
Remember to let your family know where your documents are kept. It’s obvious but it’s often overlooked and that means time and money wasted on searching for your Last Will & Testament, in the absence of a National Register of Wills.