The first week after a loved one has died is a blur of grief and arrangements. The only thing you need to get in touch with us for during this week is to check if the will has any wishes for the funeral. The wishes in a will are not legally binding but, unless there is a good reason not to, they should be followed by the family. We encourage people to let family know ahead of time what their wishes are as well as including them in the will.
Who are the Executor(s)?
An executor or trustee is the person named in the will to carry out the deceased’s wishes. This may be one or more family members and/or one of us as lawyers for example. These are the people who give us instructions to administer the estate and we will assist them through the process. A power of attorney ceases on death so even though it may be the same person who was attorney and is now executor, their role has changed. In NZ we don’t usually have a “reading of the will” but those named as beneficiaries under the will are advised of their entitlement.
What are the assets?
This may seem an inappropriate place to start but the assets that “fall into the estate” of the deceased determine the next steps. Joint assets (such as joint bank accounts or real property held as joint tenants) passes directly to the joint owner. Assets held in a Trust or Company will belong to that entity and not the deceased directly, although they may have held shares that then become estate assets. So, the relevant assets are those held by the deceased alone and if they amount to more than $15,000 held in any one holding or institution (bank, insurance company, share in a property) then probate will be needed to administer the estate. Small estates can be administered more simply and we also assist with this.
Bank accounts held in the deceased’s sole name must be frozen on death and we will assist with advising the bank. The only debt that can be paid from a frozen bank account is the funeral invoice, sent to the bank’s estate team by us. Other arrangements will be needed if day to day bills are paid from a deceased’s sole bank account. Deposits can still be made to frozen bank accounts but the funds cannot be accessed until the account is closed.
Applying for Probate
If there is an asset worth more than $15,000 then an application to the High Court is required and we assist executors to make that application. The executors need to sign an affidavit in support of the application. Once the court grants the order of probate the administration of the Estate can begin. The order usually takes 4-6 weeks to be made by the court.
Gathering the Assets
Once probate is granted the executors can begin gathering in the assets of the estate. This can include the sale of a house property, closing bank accounts, selling shares, claiming life insurance policies, and attending to distribution of the personal property of the deceased. In practice the person property such as household items and chattels can begin to be sorted before probate is granted but it must be in accordance with the will. The timing of gathering assets will depend on the nature of that asset. Assets which are converted to money can be gathered into our trust account to be held pending distribution.
Timing of Distributions and potential claims
Once all the assets are gathered and the costs and debts of the Estate paid, the executors need to consider the timing of distribution to the beneficiaries. There are time frames during which claims can be made against an Estate if someone is unhappy with the provisions of the will or if a debt is owed to someone by the deceased.
Under the Family Protection Act 1955 and the Law Reform (Testamentary Promises) Act 1949, the statutory period during which claims can be made against an estate is 12 months from the date of Probate being granted. Under the Property (Relationships) Act 1976 the spouse or partner of the deceased can elect to divide property under that Act rather than the terms of the will and these claims must be made within six months of the death.
Executors are personally liable for any distributions made out of Estate funds within 6 months of the grant of Probate, in the event that a claim is made and there are insufficient funds in the Estate to meet the claim(s). In other words, their own assets would be vulnerable if they distribute Estate funds during this time. If a successful claim is made after the expiry of the 6 month period, but within the 12 month limitation, then they would not be personally liable as executors, however the Court would trace any distributions made to beneficiaries in order to satisfy the claim.
We will advise you on the best timing of interim and final distributions to beneficiaries depending on the circumstances of the Estate.
What’s a Life Interest
A will can provide for a beneficiary to have a life interest, usually in a home, which means that the beneficiary (the Life Tenant) has the right to use the asset during their lifetime and the distribution under the will for that asset is delayed until the Life Tenant dies (or the interest ends on other terms as set out in the will).
What if there is no will?
An Estate where no valid will has been left is call an “Intestate Estate” and the Administration Act 1969 provides which next of kin can apply to the court for Letters of Administration (similar to Probate). They then have the authority to administer the Estate in accordance with the Act’s provisions. The percentages of the Estate that pass to various family members are set out in the Act. As the deceased has not left his or her instructions for distribution in a will there is nothing to give the Administrators guidance as to their wishes. This is why it is important to have a will in place.
How we can help
Our Estate team is experienced in the applications needed and administration of Estates of all shapes and sizes. Please get in touch with Ingrid Taylor, Jo Mechaelis-Wall or Kim James who can assist you in the various steps needed.