One thing that becomes apparent in life insurance is as humans we have all the best intentions when everything is great but when things go wrong, often the worst type of person comes out.
This is more true when someone passes away, we find out there are several zeros on a piece of paper and someone who’s struggling or envious can see the potential access to that money. A lot of times if there’s an inheritance, big or small, the vulture inside of people tends to come out.
We all have an experience where there hasn’t even been a funeral yet and someone's already asking what happens with the house.
Fortunately, there are options to manage this beforehand. It just means getting our Will, Enduring Power of Attorney, and maybe a Trust organised correctly with a lawyer. Also talking to your adviser about Insurance ownership. Then taking the time to discuss what’s in your wishes with those who are affected by the outcome.
If we pass away without a Will, we die ‘intestate.’ This means the estate will undergo a longer form of probate that requires court approval–a process that can take anywhere from 6 months to multiple years, with some cases even lasting over a decade. It can also cost hundreds of thousands of dollars in the worst cases.
If we have kids without a Will, you don’t even get a say in where they go – I’m sure as most people can understand, often the person that you’d least like to take your kids will put in the best story about why they should have them. Ultimately meaning the person you least want to look after your kids could get custody.
People without a home or kids like to think this doesn’t apply to them, however, even if you don’t have big assets – but you have more than $15,000 in KiwiSaver - the above does apply to you.
But what happens if you’re in hospital, in a coma, unable to make decision for yourself – who steps in to manage your things? Our Enduring Power of Attorney
There are two types of enduring power of attorney one for our medical decisions, and one to manage all forms of property (incl. accounts, power bills, mortgages etc).
If the paperwork is set up, the enduring power of attorney of your property can make sure your bills are paid. They can contact the bank, etc on your behalf to make sure no assets are seized. Effectively, they can manage anything that’s not related to your medical care. Meaning you must choose someone you trust, as there’s a lot of room for fraud and theft.
There is also a power of attorney for health, they make the decisions around treatment etc. I don’t think I need to expand on the consequences of choosing wrong here.
Both can be the same person, or different people. But we only get to choose if we get the paperwork organised before anything goes wrong. Otherwise, it can take several months, and it’s down to whoever puts in the best case to the courts, who gets control. This will likely go to the person with the best story, not necessarily the best credentials for the job.
The clearest, most common example is where two people separate, but one doesn’t update their will and everything gets left to the ex. Even though there was clear documentation that the separation was fully completed, money changed hands and all assets are split - a Will precedes a separation so the ex is entitled to what the will says. In these scenarios a new partner, or the kids are left at the peril of the legal system. The law protects our wishes; consequently, if we don’t update them – old wishes are protected.
It's not just enough to have the paperwork set up through a lawyer. It's always important that we have a conversation with those that are involved in the estate. The theory being, if we talk about it on the front end there's a far lower possibility of needing to pick up the mess at the end. This is, if everyone understands what was down on paper from the beginning.
The easiest way to make sure our loved ones don’t have these issues with us:
Go to a lawyer and set up a Will and your Enduring Power of Attorney
Talk to everyone involved about what happens, if something happens to you. If they know what’s in the Will, there’s a significantly lower chance of the estate being challenged.
Check the ownership of your insurance policy with your adviser. We can update this to the right person with just a form.
MAKE SURE ALL ESTATE DOCUMENTS COMPLETED WITH A LAWYER – The worst thing is when someone does it themselves – I am yet to see one succeed.
It’s a hard thing to talk about – but once you’ve got everything sorted, you don’t need to change it until something massive changes. So, get it sorted!
Looking for a referral for this? We have a strong network of experts we can put you in touch with.
