Talking trusts: The importance of a will.

Chris and Charlene had been together for ten years, married for three.

Each of them had been married before and had children from those earlier relationships. Charlene didn’t have a trust, but Chris had a trust which his accountant had set up for him some years before. It owned the home in which he and Charlene lived, as well as a number of investment properties. Chris had been gifting to the trust at $27,000 per year while gift duty was still in force, but the trust still owed him a significant amount. He had had conflicting advice on what to do about this and so had then done nothing. Chris also had a Kiwisaver scheme in his own name. It was invested with a reputable investment company and had grown steadily over the years.

Separate assets

Chris and Charlene had agreed to keep their assets separate, but they had agreed that if Chris died before Charlene, Charlene would be able to continue to live in the trust’s home, the investment properties would be kept to provide her with an income until she died. The Kiwisaver was earmarked for Chris’s children – something for them to receive immediately upon his death so that they didn’t have to wait until Charlene died before they received anything from him.

Sadly, Chris suffered a massive heart attack over the Christmas break and died. Charlene was distraught but was relieved that they had always been very open with each other as to what was to happen with their assets if one of them died prematurely.

A will versus trust wishes

However, unfortunately, Chris had not made a will after he and Charlene had married. He had mistakenly thought that because he had a trust his will was not important. When Charlene went to consult with her lawyer, she was horrified to hear that Chris’s wishes in relation to his personal assets would not be adhered to. Because he had died intestate (without a will) she, as his widow, was entitled to the first $155,000 and then a third of the balance of this estate. Chris’s estate included the debt the trust owed him which he had never gifted. This debt was significant. All the investment properties would need to be sold in order for Charlene to pay out Chris’s children.

If only Chris had taken proper legal advice regarding his affairs, his wishes would have been adhered to.