Are you leaving your wealth in limbo?

People don't like to think about their own demise. It's a scary thing. We still see 10, 15 um, deceased estates a week. A week? Your assets might not go to who you actually think that they might. Half of us don't have a will. And that's the kind of legal limbo that saw someone recently hand 700 grand to the government when they passed away without all the paperwork in order. It's time for some grown up admin, but it doesn't have to be hard. I'm Gareth Bray. This is Shared Lunch. Investing involves risk. You might lose the money you start with. We recommend talking to a licensed financial advisor. We also recommend reading product disclosure documents before deciding to invest. Everything you're about to see and here is current at the time of recording. So I've joined here in the studio by Tammy McLeod from Davenport's Law and also from Naomi Gary from Shares East because we're going to talk about wills, and testaments and executors and a whole bunch of things that probably we put off but definitely shouldn't. How on earth do only half the people around the place have a world, Tammy? I think a lot of it is because people think that you have to be old to have a will. So there's lots of people who don't have a will because they don't think they're old enough and apparently about 50% of those people are over the age of 50. I think the other thing is also that people don't like to think about their own demise. And so it's a scary thing. It's emotional. They have to think about not just their wealth but also their children, their families, what happens next, and that can be terrifying for people to think about. This is a problem, I guess, even for investors, right? Because this comes up. Yeah, yeah. So we did a survey when we were first looking into the space of estate planning and wills, our customer base, 70% of those that participated in the survey didn't have a will in place. And these are engaged investors who are wealthier typically and have started building their wealth but they maybe don't have that level of protection in place. And I guess what you must also be seeing, the ultimate end of this too, we have people pass away and they're on the platform they've invested and this is part of the big admin they now have to do their families and friends now have to deal with. Yeah, I mean we've got over a million customers on the platform now and we've got a really diverse range of customers. About 65% of our customers are under the age of 40 but we still see 10, 15 deceased estate a week. A week? Yeah, so there's much more difficult to manage those estates when your wishes aren't documented and your family maybe doesn't know what you want to happen with your assets and those that you love. You're saying, so you're saying like 10 deceased estate? 10-15. 10-15, it's a deceased estate a week. Yeah. So this is really affecting people. Yeah, it is and I think there's research out of the US and Australia that suggests that if you're a female and you become a widow, particularly if you're younger, you are more likely to end up below the poverty line and so this is a real pressing problem that society is facing. Also alongside that research I was finding that they used to be kind of recognition by the government, both in Australia and New Zealand, that there is particular hardship if you become a widow and there were certain benefits that they were eligible for and both governments have quietly talked that policy away now and you're just seen as a single parent. So you really have to protect yourself. So you really do need to protect yourself. You need to be thinking about life and income protection. You need to be thinking about worlds and how your loved ones are going to be looked after if something does happen. Is there any group that we should be most worried about on there, do you think? Those that have started to build up that wealth, so if you have more than $40,000, you'll need to go through probate or family will need to go through probate to get a hold of those assets and if it's just shares it's $15,000 and that's actually not a hard benchmark luckily for a lot of our customers as we help them build that wealth. So yeah really important thing to get going and there is a substantial number of customers on our platform who we would worry about in that respect. People think really appreciate those quite low levels of wealth. I mean there are plenty of people that are in that position but there will be a lot of people who've taken the time to provide for themselves and their families who would clear that and maybe aren't covered right. Absolutely and I think that people often think that their asset is their house and if they don't have a house they don't need a well whereas if you've got Shizis, Kiwi Sava that's also Kiwi's growing wealth quickly and so those three sholds are actually reached quite quickly and if you don't have a well it is Naomi said your assets might not go to who you actually think that they might. What happens when someone is in test state right? It's in test state. Yeah it dies without a well basically so who picks up the the pieces? So under the administration act there's a series of people who can apply for what let us as quad letters of administration to deal with your estate. That sounds expensive. It is it's trickier and expensive and more lengthy. There's different searches that we have to do so for an example for male people who die without a well we have to do a status of children's search to see if they've got any children other than the ones that the family might know about so that's interesting. This is crawling over all kinds of rocks yeah. It does and it can be quite distressing for people and that's probably the big one that I remember I had a very good friend who died when he was only 21 and that was I remember that being the really stressful thing for his family was a search to see if he had new children but also it means that your assets might not go to who you think that they would usually go to. It's on the one hand that's saying it's your money it's your wealth you get to say where it goes but then there's a lot in the law that says if you've got you've got moral obligations to family that can sometimes offset that right and that's usually the kind of tension we see out the play out in the movies and so on but also in real life there's that tension between providing for people and having your own wishes respected. That's right and I think that's if you die without a well that's what the law is trying to do so give some to your kids and some to your partner whereas that's really not what everyone wants to do and the usual course for Bence in a nuclear family situation it would often be to mum if dad dies and then to the kids once they're both gone but that doesn't happen if you die without a well but you're right too that there are different moral obligations even if you've written a well that there's moral obligations to certain groups of people that you should think of them when you are making a well and get advice around that. I'm hearing some triggers here for when you might want to think about it it sounds like if you've had someone pass away that puts it in the top of your mind what are some other times that maybe you see clients come through the door who go I need to do this because. Often it's when they're getting married that would be something if they've come into money themselves if they've inherited money themselves and they need to think about where that goes next or something happened to them the other one is often when people buy a house and I guess that comes back to the point of the whole shears as exercise is that we're trying to get New Zealanders to grow wealth and other ways not just their property and so we're part of this process is trying to trigger a different way of people to be thinking about or what happens to my assets if I die. I'm pretty sure it was when our family was expecting a child and you sort of sitting there on the couch going I need to do something about this right now but it means you're going to have to go to an office all that kind of stuff I guess this proposition is a little different what's being offered on the platform here is something more straightforward. Yeah yeah I was similar I didn't write my will until I was pregnant thought oh god what's going to happen if this bill doesn't go so well and so me and my husband put out wills in place and so the Shearsies proposition is really something that you can do at home you can do fairly easily I think when we did a bit of a scan of the market and what's available going to lawyer can be more expensive and and maybe not everyone needs legal you know that legal advice along the way they can probably just work through something online we also looked at you know feedback on existing digital wills they're already available cost was a barrier it's quite confronting and hard hard to do so we've been really careful to kind of give you information as you go but not overwhelm you really just like step you through the process like like Shearsies does with a lot of our propositions where we make it kind of easy and accessible. To when would something like that not be necessarily the best idea what sort of situations might you want to sit down with someone who's going to say actually you you need to think about this and you to think about that. The ones that come to mind are if you own a business if you have a trust then you will look a little bit different if you have a more complex family situation blended families that's that's a straightforward will often won't fit that situation if you've got significant assets overseas and so those are the times when you really need to have more of an estate plan I think rather than just a simple will. What about pets? Pets are pets is something that also people think about when they you know if I die who's going to look after my dog do I need to leave that person some money to look after my dog. A pet is actually a chattel under a well and I know so you can actually deal with pets under your well it's probably a good idea to actually tell the people who you want to look after the animals that that's what's happening though. Rather than just drop them off as they had by the way even here at this dog and you know good luck with that. What can you actually pass on like do you have to say how you want it are you saying I want this person to have my house or is it I want them to have the value of my estate. Is the Is it actually make a difference? - That's a really good point. It does make a difference, so we have had situations where someone has said, "I want this particular child to have my house, then the house is sold, and that child is must out on a chunk of what the person has wanted them to inherit." So there's different ways of doing it. You can give specific assets, but if that asset no longer exists, it doesn't necessarily just transfer the cash amount that that's developed into over time. So people do it differently, in most simple will situations that would be percentages of your estate. But you can, for an example, in the Shizuwil does this, deal with investments and say that you want those investments to go to a particular person in a particular way, rather than just cashed up and sold. - Which is, I mean, protection, right? Because we're taught when we're investing to think about the time horizon when we might need it. But if that time horizon comes up unexpectedly, you might have built a portfolio that's got a 15-year plan and life didn't last that long for you at that time. And suddenly, they have to liquidate that, right? So you can actually say, "No, I want this to go to this person as it is rather than being cashed up." - Okay. - Yeah, absolutely. - But you've got to ask. - Yes, correct. - Wow. - Yeah. - That's good to think about. - Yeah, that was something that came up in our early research is that people are actually quite emotional and attached to the portfolios that they're building on Shazies. And that's awesome. But we have to work through with Tammy. How could we represent that in the world so that you could say, "Hey, I actually want to be passing on this portfolio as it is to my children or my husband or whoever." And yeah, it's got some interesting wording in there about held-in species, which-- - Sounds like something from an alien's movie, that you're-- - Yeah. - Nation. Yeah, so you can do that within the Shazies world as to pass on your portfolio as it is today. - Emotional attachment is great for building interest, but always keep it clear. When it's investing, that's not advice. That's just good sound, was it, I think. I mean, let's talk about some myths there. I mean, there are some any kind of misconceptions that are around what's world's cover or what they don't. Like if I leave a world and I've got Kiwi Saver, does the money automatically go to whoever I've said gets all my money in the world kind of thing? - Yeah, so in Australia, you can have a beneficiary of your superannuation, but in New Zealand, it disforms part of your estate. And so you can specify within your world that you want the balance of your Kiwi Saver to go to a particular person. But if not, it goes to what we call the residue, which is the rest, the balance of your estate and then is dealt with here. I think the misconceptions are around what the world actually deals with. So, it deals with anything that's in your personal name. It's not a joint will, you can't do it well jointly with your husband or wife or partner. You, if you own assets jointly, so for an example, most New Zealanders would own their properties jointly for a couple. - Joint bank account, even. - Joint bank account, your partner gets that by survivorship rather than it going through your will. So that is a misconception that you can deal with, joint assets within your will. - And we sort of touched before on how there's this assumption, if you pass away, you've got a partner, they get everything if it's, but that's not how the law is set up necessarily, is it? - No, it's not. So if you die without a will and you have a partner and children, your partner gets the first $155,000 plus a third of the balance in the children get two thirds. So we have had a situation or situations where there's been life insurance, as a good example, held on one party's name. That person's died. The life insurance was really there to pay off the mortgage, but the surviving partner only received $155,000 plus a third and the little baby children are received the other two thirds and so we had to be quite creative as to how the surviving partner was able to actually do what was intended with the life insurance. - We covered death pretty well here. I feel it was like, what about divorce when a relationship breaks up? You've got to remake a new will or you've got to change things there? - Yes, so if you just separate, then there's no impact on your will. So some people never get divorced and so if they don't make a new will, then their previous spouse will still be. - Hello. - Yeah, dealing with having a partner there a stage, whereas if you do get divorced, then your will is read as if your partner, spouse has died before you, so that automatically takes them out. But those sort of life changing events are times when you really should review and look at your will. - Especially because we're not just talking about assets here, we're talking about liabilities, right? - Correct. - So you can inherit half of someone's student loan debt, half of their. - No, student loan gets right when. - No, not student loan. - Yes, student loan gets right when you don't. - A back debt or any other kind of debt that's incurred by two people. - Well, yes, you would. - So if there was a mortgage, then you would receive a net asset so that would need to be. probably would need to be sold if the person who was receiving that couldn't afford to deal with that. - There are different situations, right? Where you might need help, you might need just go for the basic DIY option. But I mean, can you sort of see any kind of really. big decisions that people make? A really big error around how they've constructed their will that sort of comes to mind that explains why you've got sort of think-eatfully which bucket you own. - I think that probably comes in the blended family situation most often where people might want to leave new partner, the ability to live in the property, but really wanted to go to their kids when their new partner dies. And so that's probably a situation where a simple DIY will probably won't help you with that. So I think that's definitely the biggest situation. And when it's 50% of relationships not lasting, then blended family is more than norm than not these days. - I guess a lot of people as well don't necessarily think about the property relationships act and how that comes into play, right? Oh, well, I'm not married, so it doesn't matter. Is there a lot of awareness around that, you think? - Probably not. So the property relationships act treats death the same as separations. So if your partner dies, then you're entitled to make an application under the act, 450% of relationship property, even if that property was all held in your partner's name and they've left it a different way in the well. So yeah, property rights are the same on death as separation. So it's not just if you're married, it's also if you've been in a relationship for three years or more that the property relationships act can override what's in your well. - And I guess there's other kind of complicated situations, like situations where someone's maybe inherited money and they're sort of mixed it into that relationship and so on and then it's not kind of clear exactly who owns that kind of thing. It's become relationship property at that point. - So if you call it intermingling, so if you intermingle separate property or if relationship property, it becomes relationship property. But also if you have got separate property that you've inherited or had prior to the relationship and you want that to be treated with differently than your relationship property, I guess you really need to have a well to sort that out because you're not going to be there to defend your position. Hey, that was mine before. - Speaking of defending your position, I'm sure one thing that all of these options requires is an executor, right? Someone who's gonna respect your wishes, carry this kind of thing out. - Yeah, so we kind of say who would you like to be your executor? You can either choose a friend or a family member, you can choose a professional and input that professional's details yourself or if you're one professional and you don't have one in your back pocket, we can help you set a Denver Ports law app as the executor as well. Some people have more complex estates and they really do need a professional to look after their trusty obligations or take care of things. But the vast majority of people don't need that. And for me personally, and I'm pretty representative of many of our customers on the platform, I have a house, I have a mortgage, I have a daughter, I have a dog and I have a husband and. - In the daughter? - Yeah, in a chair, so I can't have my husband. And I have a lovely little Shares' portfolio that's growing really well. My husband can take care of those things possibly with the support of my mum. And I think they're both very organised and that's okay for me and that's probably all my family would need. - Someone wants you to me, if you want an executor, you want that person that if you got locked up overseas for some bizarre reason, you would have ring them to say, please help me. You kind of need a person who's a details doer, not going to be emotionally engaged in things too much. - I'm not too close to that. - Correct. Yeah. And once again, that depends on your family's circumstances as well. So for most people with a simple well, it can definitely be a family member, often a partner or spouse. - Lots of people don't have a person at a time when maybe there's been a bereavement, but that's something I'm thinking about too right. - But there's no race when someone dies to get it all sorted. You can take your time. - Are there any people that you shouldn't use as an executor or is there nothing else? - Oh, once again, in that blended family situation, that can be a bit tricky if you've got leaving different things to different people and they could be in a position of conflict. There's also different tax laws around the world, around trusts and estates, and a state is effectively a kind of trust. And so for an example, if you had an Australian executor, so a sibling who lived in Australia and you wanted them to be the executor of your estate, that could potentially pull your estate in New Zealand into the Australian tax net. So ideally. - That doesn't sound good. - No, it's not good. So ideally someone in New Zealand is a better option because we're very straightforward with our lack of taxation if you like with the states. - Have you ever sort of seen any really big, other big mistakes apart from that when picking executives? - Sometimes leaving a child out can create big issues. So you might have to have your three children as your executors that can create mistrust and that in itself creates cost and expense sef te a pustan, huwio. left out as lawyer I'm up even if something is I had one situation where there were my client was I've been a fishery equal with her brothers and sisters but she wasn't an exeke there and she spent more money than she should have with me just asking questions on her behalf because she felt left out basically. Are there other kinds of things that people should be thinking about instruments of details or plans or policies or whatever you need to put in place? If you suddenly think about this grown up admin what's the other one? My big thing which I think is probably after your will the most important legal document you can have as an enduring parabotourney so your will is if you die parabotourney you're alive but you can't make decisions for yourself and the difference between the world process if you don't have a will there is a process that your family can follow if you lose capacity and you don't have powers of attourney in place someone has to make an application to the court to be able to act on your behalf. Super expensive and time is not your friend in that situation. Not your friend, no, no, no. So an EPA now to be clear, EPA not part of the offering currently? Not currently. But that's basically what giving someone the ability to make calls on your behalf sounds a little bit it's kind of giving away your passwords isn't it it's a little bit more than that even. It is a little bit it's you definitely need to have someone that you trust to stand in your shoes to do those things for you if you can't do that yourself there's two kinds there's one that relates to your property which is dealing with your bank account paying your bills selling your house if you need to and then one that relates to health so you're a bit personal care and welfare so that's making decisions around surgery, medication, life support those sorts of things. Big stuff. Big stuff. But if you don't have that you must have seen situations where things have gone really off the rails. Very very pear shaped you can end up with situations where you've got competing people wanting to have that person's pair of attorney and so siblings going to court to get the judge to decide who's going to actually have that you can have situations where businesses fail because there's not no one who can step into the shoes of the business owner and you need to make an application to the court and to the court you can't just make an application today and get a court date for tomorrow so it can take weeks and weeks and weeks there also needs to be a lawyer for the person making the application but also a lawyer for the person who has lost capacity so cost plus cost and then if you've got competing interests then other lawyers are getting involved as well so it's very expensive you'd be lucky to get away with $5,000 would be a minimum. Whereas for a much lower fee you can set one of these things up I think it's what ninety-nine bucks to set up a world through the platform you're going to spend a little bit more on that getting professional legal advice I would have thought and getting anything taken care of but that's you know it's a different situation. Yeah I mean compared to the costs of not doing these things then definitely but Pals of Attunee usually if it was just one person you'd usually be able to get your Pals of Attunee down for around $700, $750. I guess looking down the road and I've seen this probably in my career as a journalist reporter whatever but you can see situations where people are offered something for free and it actually turns out that it's not free the cost is down the road with all of these situations you're paying an upfront cost right? Yes. You're not in the situation where somebody is going to take a large portion of their state for themselves managing it right? Not if you're depending on who you're going to appoint as your executor so if it's a layperson they can't charge a fee so if you appoint your brother he can't charge a fee or be a reimbursed for his time that has spent as your executor. If you use a professional they can charge for their time. If you use Davenport's as an example we don't charge for our time for being an executor but any administration that we need to do gets charged for but there are other organisations which do charge large fees and we think some of that and the press at the moment. Right you know you say hey we're leaving you the house that's oh actually we're we're gonna have to sell the house because somebody needs to take 8% of the entire value of someone's wealth. Correct. Because they've got a free will which suddenly becomes an extremely expensive one. Very expensive exercise. Wow okay so you're sitting there you're wondering what to do next. What is like the number one piece of advice? If you have kids really think about who you want to be to be the person to make decisions about your kids just the important things you know like where you want them to have education if they need to grow up with particular religious beliefs or grow up speaking today or whatever's important to you but just have a really good think about that beforehand because that is where people get a bit stuck because it's quite a motive and tricky so have some chats find figure out who you're gonna trust with that big responsibility and then and then get to it. I think just do it. I mean any one of us at any time could have something go wrong and thankfully we don't know when that's going to be but don't think that you're too young to have a well or powers for tuning because you're any one of us at any time. Tell me in the cloud from Devon Portes Law. Nami Gary from Shearsies thanks very much for your insights there. We hope you all got something from that we know that there will be plenty more in the next year lunch. Kuma too that's us for this week.