What Your Will Does and Doesn't Cover
Most people picture a Will as a list that says who gets everything you own. In reality, some of the biggest things in your life might not be controlled by your Will at all.
Your family home, joint bank accounts and some life insurance policies can pass to someone else automatically depending on how they have been set up, regardless of what your Will says. Other things, like KiwiSaver and sole assets, are the opposite: they form part of your estate.
Knowing which is which can help you understand what your Will is really doing. This blog explains some common myths in plain language. It is general information only, not legal advice, and a legal professional can help with questions about your own situation.
Myth 1: "I need to leave my half of the house to my partner in my Will"
This is one of the most common things we see. Someone owns their home with their partner, and they add the house to their Will as a gift to that partner. Often that partner is already the person receiving everything else.
Whether this gift does anything depends on how the house is owned. In New Zealand, there are two main ways two people can own a property together.
Joint tenants: This is how many couples own their home. You both own the whole property together, rather than each owning a set share. When one of you passes away, the other automatically becomes the sole owner. This is called "survivorship".
Because this happens automatically, the house generally does not form part of your estate, and your Will does not control it. That means if you have left the house to your partner in your Will, it will already go to them, with or without that gift.
Tenants in common: This is where each owner holds a set share, such as half each. If you pass away, your share does form part of your estate and is passed on according to your Will.
How do I know which one I have?
Your record of title shows how the property is held. If you are not sure how to read it, a lawyer or conveyancer can help.
Things to be aware of if you gift your house
If you leave your house as a gift to someone who is already your main beneficiary, here is how that gift may work in practice.
- It may not do anything. If the house is owned as joint tenants, the gift has nothing to act on, because the house never enters your estate.
- They may already receive it. If your partner is receiving your remaining estate (everything left after debts and gifts), your share of the house would usually go to them anyway as part of that.
- Life changes. If you sell that house and buy a new one, or move into a rest home, a gift of "my house" may no longer have anything to pass on.
Myth 2: "My KiwiSaver goes straight to my partner anyway"
Many people assume their KiwiSaver works like a joint account, or that they can name a beneficiary. In New Zealand, that is generally not how it works.
When a KiwiSaver member passes away, their savings are usually paid into their estate. That means your KiwiSaver is generally passed on according to your Will. If you do not have a Will, it is passed on under the law, which may not match what you would have wanted.
This is one reason a Will can be so important, even for people who feel they do not own much. For many New Zealanders, KiwiSaver is one of their largest assets. You can read more about what happens to your KiwiSaver if you don't have a Will.
Myth 3: "Is my life insurance covered by my Will?"
It depends on how your policy is set up.
- If you own a policy on your own life, the payout often goes into your estate and follows your Will.
- If someone else owns the policy on your life (for example, your partner), the payout generally goes directly to them.
- Some policies let you name a beneficiary, in which case the payout may go straight to that person.
If you are not sure how your policy works, your insurer or adviser can tell you who the payout would go to.
Other things your Will may not cover
- Joint bank accounts. Like jointly owned homes, these usually pass straight to the other account holder.
- Assets owned by a family trust. If something belongs to a trust, it is generally not yours to leave in your Will. The trust deed sets out what happens to it.
- Business assets. Shares in a company or a partnership may be covered by a shareholders' or partnership agreement as well as your Will.
A quick summary
| What you own | Does it usually follow your Will? |
|---|---|
| Home owned as joint tenants | No, it passes to the other owner |
| Your share of a home owned as tenants in common | Yes |
| Home in your name only | Yes |
| KiwiSaver | Yes, it is usually paid into your estate |
| Life insurance you own on your own life | Often, unless a beneficiary is named |
| Life insurance owned by someone else | No, it goes to the policy owner |
| Joint bank accounts | No, they pass to the other account holder |
| Assets owned by a trust | No, the trust deed decides |
Every situation is different, and there can be exceptions to the above.
Even where an asset forms part of your estate, New Zealand law allows certain people, such as a partner or children, to make claims that can change how it is shared.
Why this matters
Understanding what your Will does and doesn't cover helps you see the full picture.
If you have made your Will with Footprint and would like to take another look at it, get in touch with our team. If you do not have a Will yet, visit myfootprint.co.nz to get started today.
This article is general information only and is not a substitute for legal advice. Every situation is different; a qualified legal professional can help if you have specific concerns about your circumstances.
