Did you know that if your partner dies, you don’t have to just take what is left to you in the will?
You have a choice under property relationship law to:
a) Have your relationship property split equally between you (Option A) or;
b) To receive what was left to you in the will (or any legal entitlement if there is no will) (Option B)
For Example – Kermit and Miss Piggy had been married for 30 years when Kermit died. The house they lived in, valued at $800,000, was in Kermit’s sole name, along with a bank account containing $5,000,000, from the sale of Kermit’s business.
Kermit had a will in which he left Miss Piggy the house and $1,000,000. They both thought that $1,000,000 was plenty for Miss Piggy to live out her retirement on, because they had never had an extravagant lifestyle. The remaining $4,000,000 was left to charity.
The house and money are all relationship property. If Miss Piggy selected option A she would be entitled to receive half the value of the house ($400,000) and half the money ($2,500,000). This is more than she was left under the will. This would be Miss Piggy’s entitlement even if she had previously agreed with Kermit about the $4,000,000 going to charity.
If Miss Piggy elected option B she would receive what the will provided for her.
Second example – Bert and Ernie lived together for 25 years. Despite their friends telling them how important a will is, Bert died without making a will. Bert and Ernie were the joint owners of a house valued at $600,000 and joint bank accounts worth $80,000. Bert had a Kiwisaver with $200,000. They had no children, but Bert’s mother was still alive.
As the house and bank accounts were owned in joint names the ownership would pass to Ernie automatically. So Bert’s estate would be made up only of the $200,000 Kiwisaver.
Under Option A Ernie would receive half the Kiwisaver ($100,000) and Bert’s mother would receive the rest.
However, under Option B, the laws of intestacy apply because there is no will, and Ernie would receive more. He would get the first $155,000 of the Kiwisaver, plus 66% of the balance ($29,700) a total of $184,700. Bert’s mother would receive the remaining $15,300.
The choice between A or B has to be made within six months of the death. Whichever option is chosen the decision has to be in writing, and be accompanied by a certificate signed by a lawyer stating that the lawyer has explained the effect and implications of the options to the surviving partner.
If a choice is not made within the six months the surviving partner is deemed to have selected option B – that is, what is written in the will or the intestacy laws.
Once the choice is made it is irrevocable unless a successful application to the Court is made. However, once the assets of the deceased have been fully paid out, the Court cannot change the choice that was made.
If you want advice on how relationship property issues may affect your will, or advice on the options please get in touch with us.
[The names and details in the examples above are entirely fictitious and do not relate to actual events]