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The importance of being prepared…

As financial advisers, a huge part of our role is helping people plan… plan to buy a first home or an investment property, plan for retirement, plan for financial decisions such as starting a business or family, and just as importantly, plan for when things go wrong…

I know it’s not fun to think about what would happen if we died, or became disabled or seriously injured, or diagnosed with cancer or a major illness. I personally spend way too much time dreaming about what I would do if I won lotto, the reality is I have a 1 in 383,838 chance of winning… however I have a 1 in 4 chance of being diagnosed with cancer, ugh grim I know.

It’s no secret many of us Kiwi’s are guilty of having a “she’ll be right” attitude, and whilst sometimes ignorance may be bliss, the fallout of not being prepared can be catastrophic, especially for our loved ones.  So, let’s get real and have the hard conversations…

So what does it look like if we die prematurely and are unprepared…

One of the most important things you can do, which is often ignored or put in the too-hard basket is estate planning.  This includes things such as wills, trusts, and enduring power of attorneys.  For most people it is as simple as having a will in the event you were to pass away.  So, let’s look at what happens if you die without a will…

If you die without a will, it is called dying intestate… As an upfront and honest person, I am going to be blunt, dying intestate and leaving your loved ones to navigate that process and pick up the pieces after losing you is a serious stitch up, and makes an already horrific thing that much worse.

If you have assets worth more than $15,000 (that includes things like KiwiSaver), your estate must go through a legal process and be distributed as per NZ law, this can take anywhere from 6-24 months.

Once the court has appointed somebody to administer your estate, they then have to figure out how to get affairs in order, i.e. clear or close debt, pay bills, close bank accounts, close and cancel utilities and services, gym memberships, phone plans, and so on.  Even things like accessing social media accounts can become a nightmare. 

Then it comes to distributing the estate, without a will this is done in accordance with NZ law and dependent on your situation.  Are you single, in a relationship, have children etc?  You can find out more about how this is distributed here

Now I would be lying if I said wills were perfect and fool proof, because they aren’t.  They can be argued or challenged in court and can still become complicated in some instances, but most of the time they are pretty seamless and having one is always so much better than not.  

Let’s look at an example and the difference that being prepared can make…

John and Jane are in their late 30’s and have two young kids.  John is the main income earner as Jane looks after the little ones.  They own their own home, have exciting plans for their future and life is good. 

Scenario 1

 John unexpectedly passes away.  John and Jane never got their wills sorted or spoke about what would happen if either of them were to pass away. John does have life insurance, but Jane unfortunately isn’t a policy owner so cannot access the funds and it is instead paid into his estate.

Jane deals with the loss of her husband, whilst looking after the little ones.  As John’s income has stopped but Jane cannot just access his life insurance or estate, she must figure out how to come up with the money to pay the mortgage or risk losing the house that she and John made their home.

It takes 10 months for John’s estate to be administered and distributed, and for Jane to be able to access any of the funds.  Jane went from a stay-at-home wife/mum to a single mum working part-time and relying on financial support from friends and family to get by.

Scenario 2 

John unexpectedly passes away.  Jane owns John’s life insurance policy and can claim against his insurance, providing her with immediate financial relief.  She has the funds for his funeral and to cover the mortgage and household expenses for the next 5 years. Jane can go through the grief of losing her hubby without the added financial stress. 

John and Jane had wills in place and his entire estate was seamlessly transferred to Jane within a few weeks.  Above that, John had made sure that if anything ever happened to him, Jane would have everything she needs to make things as stress-free as possible.  He had all the information about their financial affairs in one place, he kept a log of passwords for everything, and he even had funeral instructions that Jane could follow.

This “example” is something we see all too often, and the key difference is literally just having a will, some good insurance advice, and some forward thinking. 

Hopefully, you’re picking up what I’m putting down here…. It PAYS to have a plan. 

So how do we recommend you start to get your affairs in order?

  1. Chat with our team… At the Money Men, our mission is not to just provide financial advice but to educate and empower our clients. There are lots of great advisers out there that will have these robust and detailed “what if” conversations, but there are also plenty that will just sell you an insurance policy and be on their merry way… It’s important to find an adviser that is going to really understand you, and the risks you may face and who takes the time to facilitate and drive these conversations.

  2. Get legal advice… Seeing a lawyer can sometimes be daunting, mostly because they can be expensive. Do some research and find a practice that works for you. There are plenty of law firms that will give you upfront costs and not charge for every phone call.  You can expect to pay roughly $400-$600 for a straightforward will.  If you have a business or need to establish a trust, then there are more costs but think of it like this… the more complex your situation the more likely you are to be doing something right and the more you have to protect.

  3. Check out My Will Wishes… We came across Anna’s My Will Wishes book and can’t speak more highly of it. It’s the perfect missing piece of the puzzle people need to get down all the important things that don’t go into a will.  Having something like this makes an enormous difference in helping loved ones through their loss and allows you to have a say in what you would want. We give all our clients a copy of this when sorting their insurance and the feedback we get is amazing!