I have chosen this topic as I come across many people who ask me the above question as to what will happen to their house, other assets if one of spouses or both of them die.

Many of the people are under wrong impression that the family will not get anything and everything goes to the government if someone dies without having made a will during his/her life time.

The fact is that if someone dies without leaving a valid will, (in legal term it is called dying intestate) his estate will be divided among his near and dear ones. If the house is owned jointly (as it would be in most of the cases), it will go to the surviving spouse. Other than that, the main rules are as follows-

1.    The surviving spouse (husband or wife) will get personal chattels, plus $121,500.
2.    Out of the balance, the spouse will get 1/3rd.  2/3rd will go to issue of deceased person. (Issue means children plus the children of child who has died before death of the deceased)
3.    In case there is no issue of deceased, the surviving spouse will get 2/3rd of balance and 1/3rd will go to parents or surviving parent of deceased person.
4.    If there is no issue and no parents, surviving spouse will get everything.
5.    If there is no spouse (sometimes both can die together) everything will go to issue.
6.    If there is no issue and no surviving spouse, the whole of estate will go to parents of deceased.
7.    If there are no parents, no issue, no spouse left, the estate will go to brothers and sisters of deceased.

There are further rules if even brothers and sisters are not there, which I am not getting into for the purposes of this piece. The point is that the New Zealand legal system makes every effort to distribute the estate of a person who died without making a will to his/her relatives in fair manner. Only if no one can be found, the estate goes to the Crown.
Another point worth mentioning is that when any children or grandchildren are unmarried and are under the age of twenty, their share (as discussed above) is held under trust and is made available for their proper maintenance and education.

Still it is suggested that everyone over the age of 18 should have a will, the question arises as to why?

Because it is the best way of ensuring that your loved ones will be taken care of after you are gone. It is not only about how your financial assets should be divided but it can also be about guardianship of your children, gifts you will like to leave etc.
The biggest advantage is that it saves time and money for survivors.

If a person dies without making a will, the law requires that next of kin will apply to the High Court for an order. It is a time consuming and expensive affair. The court will appoint someone who will distribute the estate. On the other hand, if you had made a will, the executor will be of your own choice.

This process is relatively short and simple. The executor can be your friend, family member, a trustee company, your solicitor or anyone you like. The making of a will is not very expensive. Different law firms charge around $100 to $150 to make one for you. Some firms do not charge anything provided they are made executors. The executor is one who executes the will after your death. The reason for not charging to make a will is that they will charge at the time of execution which may be very expensive.

So you can decide to pay for preparation of a will and appoint your family member or friend as executor. But there are risks involved. He or she may not be very capable, may be grieving over your death, and may get involved in family disputes. On the other hand using a lawyer or trustee company is though more expensive, it avoids above problems.
You may choose to name a friend or relative as executor and a professional as reserve executor. If the relative or friend is unable or unwilling to act after your death, the roll passes on to professional.

It is for you to decide which option you choose.

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Ravi Mehta is an Auckland based Financial Advisor and can be contacted on ravi.mehta@pfsl.co.nz A disclosure statement under Securities Markets Act 1998 relating to his services is available on request and is free of charge.