Many people don’t have a Will, or their Will is out of date. But there is a third issue; someone who has a Will but does not understand the potential costs.
When you set up a Will, you can do it yourself, you can engage a lawyer, or you can use a professional trustee company. The latter may seem an attractive option, as their setup fees are minimal. But be careful; they become your executor and their fees once you die are hefty, easily $8,000, even for a simple estate. An executor is the party appointed under your Will to carry out your wishes. An estate is simply the physical stuff that you leave behind.
Usually, a life insurance policy should be held jointly with your partner. Exceptions to this could be insurance held for business purposes or if you have children from a previous relationship and want to leave them something. The advantage of a jointly owned policy is that the life insurance proceeds go directly to your partner, rather than forming part of your estate.
If your house and the life insurance policy is owned jointly, there’s no harm in using a professional trustee company as your executor, right? Wrong! Upon death, any your personal assets owned solely in your name fall under your wishes expressed in your Will. If these exceed $15,000, then your executor will need to be involved. The average KiwiSaver balance is now in excess of $15,000 and KiwiSaver can’t be owned jointly. How would you feel knowing that half of your KiwiSaver could be spent in winding up your estate?
You can appoint your solicitor as your executor, but it could also be a family member or friend. The next time you review your Will, talk to your solicitor about your executor. In my experience, you’re better to pay for good advice while you’re still here instead of having your inheritance eaten away by unnecessary fees once you’re gone.
Mark Lynch is a Registered Financial Adviser. His Disclosure Statement is available free upon request. Any comments in this article are the opinion of the writer and should not be construed as financial advice.