In  this the second of the series of Articles taken from David’s paper (Will your will work well”) David describes and explains various types of Wills

Under our will we appoint executors (who become trustees if administration of our estate goes beyond the “executors year”) to get in our assets, deal with our liabilities and distribute our estate according to our wishes – holding certain assets as trustees if the entitlement to them is postponed.

The types of wills include:

  • Wills in contemplation of marriage.  Any will is revoked by marriage.  However, because newly weds might not be focussed on the need to make new wills immediately after their wedding, the law provides for them to make their wills prior to marriage.  Any will that is expressed to be in contemplation of marriage to a certain person will not be revoked by the will makers marriage to that person.
  • Mutual wills.  These are rare but they have their place.  Here each will maker benefits the other and agreed beneficiaries in reliance on the other will maker not changing their will without joint agreement.  Because it takes away testamentary freedom (the right to revoke your will by making another) I have never been confident that a mutual will can “stick”.  However, I am sure they have their place.
  • Wills creating legacies, bequests, donating organs, directing cremation/burial, imposing conditions on inheritances such as age, marital status etc. 
  • Wills creating life/widowhood interests.  These provisions give limited rights until the beneficiary dies or remarries.  The Death Certificate or Marriage Certificate evidences the end of the interest. 
  • Wills creating rights of occupation.  These are common for blended families and in de facto relationships.  The danger with them is how to determine when the right ends.  Often it is left to the trustees to determine whether the beneficiary is in a new relationship (how many days/weeks residence, toothbrush test, holidays) so if the trustees are the surviving partner and a child from the first relationship (who is to benefit when the right ceases) then there is a conflict and often an argument as to when the right has ceased.
  • Hotchpot provisions.  These take into account gifts/loans (other than small amounts for Christmas, birthdays etc) made by the will maker during his/her lifetime.  Such gifts and loans are taken into account prior to distribution of the deceased’s estate to even out the entitlement of the beneficiaries.

Downton Abbey fans have, in Episode 1 of Season 4 of this TV blockbuster, seen the anguish created when a young husband and father is taken from his family without leaving a will.  Northlaw would like fans to take heed of the message in the drama about the importance of making a will.

The first episode of Season 4 talked about the rules on intestacy (where there is no Will) - giving the infant child a greater share in the estate than his mother.  Adding to the widow's anguish was talk of a life or widowhood interest.

The programme features the sudden death in a car accident of Matthew Crawley, who had been the joint owner of Downton Abbey.  It appeared that Matthew had not left a will.  The predicament facing Matthew's family illustrated how important it is for even young couples to seek the expert advice of a lawyer about their wills.  Making a will ensures that treasured belongings and particularly a home will pass to those we choose to benefit in the way we think they should benefit.

A talk to a lawyer means that your personal wishes can be expressed in a way which will minimise problems for family and friends left behind grieving at the death of their loved one.  Northlaw has never seen a situation where the arbitrary rules of an intestacy benefit the deceased's family appropriately.

In the TV drama, it was subsequently revealed that, before his death, Matthew had written a letter expressing his intention that his widow (Lady Mary) should inherit his share of the Abbey.  The Earl's lawyer has advised the family that Matthew's letter is as good as a will.

In New Zealand the scenario that played out may not have had the same results or even if it had, there is likely to have been a very drawn out and expensive process involving an application to the High Court. New Zealand has seen a recent change (2007) to the old Wills legislation which provides some latitude around the strict requirements for the signing and witnessing of a Will. However Northlaw strongly recommends to all clients, and anyone reading this article, that a lot of cost, upset and surprise can be avoided if people make sure their Wills are current and properly signed and witnessed.

So don't put it off and if you haven't reviewed your Will recently then get hold of your lawyer. David Roughan is one of the most experienced lawyers in New Zealand when it comes to Wills and is only too happy to talk with you about what's involved and the costs. So call David now.

Mary Holm endorses David's advice re family loans. Does your Will need amendment....

Well known financial commentator Mary Holm answered (Herald 25 October 2014) a letter concerning how best to handle the common situation involving a loan to a family member to avoid future complications and family upset.

David wrote a letter in reply which appeared in the Herald on 8 November 2014, along with Mary's supportive reply. The text of the letter (with a little more detail) and reply are reproduced here;

As a lawyer since 1972, I agree with all that you said about documenting loans to children.

I would like parents to consult their lawyer, not only about the form of the IOU documentation (no-one can advise about that better than we can –particularly about the IOU being a joint one if the child is in a relationship and the loan/gift is to benefit both the child and the partner) but also about the benefits of amending the parents' wills to include a hotchpot provision.

The provision should:

(1)   Record the loan or gift.

(2)   Mention any past or future loans or gifts to be brought into account (possibly excluding any below a certain dollar figure or before a certain date).

(3)   Provide for those gifts and any unpaid loan balance being deducted from that child's share of the parent's estate.

(4)   Thereby prevent "double dipping".

In an estate of $800,000 left to children A, B, C, and D, with a loan or gift of $40,000 to child B still outstanding when the parent dies, the $40,000 is treated as part of the estate. So there is $840,000 to distribute. That's $210,000 each.

Children A, C and D would each receive that amount. Child B would receive $170,000 ($210,000 minus $40,000). And that would deal with the $800,000 estate because $210,000 x 3 = $630,000 + $170,000 = $800,000.

The hotchpot clause means that the parent doesn't need to involve the other members of the family at the time the loan or gift is made. A parent might want to help a child without other children knowing at the time. The will can also be changed if the parent later decides that the loan/gift should be a benefit that the child receives in addition to that child's equal share of the parent's estate. Properly drafted the clause doesn't have to be changed for future loans or gifts.

The greatest benefit is harmony and fairness among the children after the parent has died.

One bonus I've seen is where the remaining siblings acknowledge that the favoured child needed and deserved greater help than the rest of them and resolve to ignore the hotchpot provision and direct the executors to divide the parents estate equally. The parents have given the siblings the chance to show how they care if they choose to override the hotchpot.

Mary Holm's reply was

"When I started reading your letter, my reaction – to be honest – was, "Here's a lawyer just drumming up business for himself and his colleagues." But you put up a pretty good argument, which I suppose is what we should expect from a lawyer!

The hotchpot idea makes a lot of sense and I particularly like your point that it can remove the need to tell other family members about a loan. While open communication is often good, there are situations when it may not be.

By the way, I love the name "hotchpot", which Wikipedia says means "the blending or combining of property in order to ensure equality of division". Apparently the word comes from a kind of pudding"