Mak­ing changes to your will

Kapi-Mana News - - CONVERSATIONS - ALAN KNOWSLEY LE­GAL MAT­TERS

Ed wrote in and asked: ‘‘I’d like to in­clude a char­ity in my will, but don’t want to have it rewrit­ten at great cost. Is there an easy way to make changes to my will?’’

If you want to make a small or mi­nor amend­ment to your ex­ist­ing Will, you can do so by mak­ing a Cod­i­cil. This is a short doc­u­ment that amends your Will, such as adding an ex­tra clause leav­ing money to a char­ity.

You should seek le­gal advice about mak­ing a Cod­i­cil, to en­sure that it does not in­val­i­date your Will. You should also con­sider whether the change would be best made by mak­ing a new Will.

While on the sub­ject of gifts in Wills, there are sit­u­a­tions when mak­ing a gift can cause prob­lems for the per­son re­ceiv­ing the gift. When you make a Will, you ex­pect that the money you leave to peo­ple in your Will will ben­e­fit those peo­ple.

How­ever, if some­one in their Will has left money or prop­erty to a per­son who is bank­rupt, rather than help­ing out that per­son, that in­her­i­tance will in­stead go to the bank­rupt per­son’s cred­i­tors. This sit­u­a­tion re­sults from the In­sol­vency Act, which places a bank­rupt per­son’s prop­erty with the Of­fi­cial As­signee. In these cir­cum­stances the bank­rupt would only get the re­main­der of any in­her­i­tance, if any is left, after all debts are paid.

A sim­i­lar prob­lem arises if the in­tended ben­e­fi­ciary un­der the will is in­ca­pable of man­ag­ing money, per­haps due to an ad­dic­tion to drugs or gam­bling. Money given to them will dis­ap­pear on their ad­dic­tions rather than pro­vide any last­ing sup­port for them.

Ob­vi­ously the above sit­u­a­tions are ones that some­one mak­ing a Will wants to avoid. There are ways a Will can be drafted to pre­serve the ben­e­fit of leav­ing an in­her­i­tance like this by shield­ing the as­sets from any cred­i­tors or by be­ing wasted away.

The In­sol­vency Act also pro­vides that any prop­erty held in trust for another per­son does not go to the Of­fi­cial As­signee in bank­ruptcy. So mak­ing in­her­i­tances in favour of cer­tain trusts can act as a safe­guard to en­sur­ing an es­tate still ben­e­fits those the will-maker in­tended, de­spite the ben­e­fi­ciary’s fi­nan­cial sit­u­a­tion.

A ‘‘tes­ta­men­tary dis­cre­tionary trust’’ is a way of do­ing this. This type of trust be­gins at the point of the will-maker’s death. Prop­erty from the de­ceased per­son will pass to the trust, rather than to the in­di­vid­ual (bank­rupt)’s pos­ses­sion. The trust will hold and use that prop­erty only for the ben­e­fit of the per­son or per­sons named; it will en­sure that prop­erty is not ex­posed to an in­di­vid­ual ben­e­fi­ciary’s cred­i­tors.

Dis­cre­tionary trusts are also a good way of pro­tect­ing ben­e­fi­cia­ries against other sit­u­a­tions, such as where a per­son (for ex­am­ple a child of the will­maker) is suf­fer­ing from an ad­dic­tion or men­tal ill­ness. Putting the prop­erty in a tes­ta­men­tary dis­cre­tionary trust can en­sure on­go­ing ben­e­fit for the per­son in­tended, rather than have the prop­erty po­ten­tially squan­dered through gam­bling, ad­dic­tion or gen­eral in­abil­ity to man­age money.

Tes­ta­men­tary dis­cre­tionary trusts can also be use­ful where the money is in­tended for a per­son in a high risk pro­fes­sion, (such as doc­tors, busi­ness peo­ple or di­rec­tors of com­pa­nies) who may, in the course of their work, be­come li­able for large claims against them. How­ever, tes­ta­men­tary dis­cre­tionary trusts are com­plex. The par­tic­u­lar clause in your Will and the trust deed de­tail-ing the terms of the trust need to be care­fully drafted by your lawyer.

There also are other ways of pro­tect­ing chil­dren or other ben­e­fi­cia­ries of your Will who are bank­rupt or who have other is­sues such as ad­dic­tions, in­clud­ing giv­ing them a life in­ter­est (a right to live off the in­come from par­tic­u­lar prop­erty dur­ing the per­son’s life time) or set­ting up a trust for a per­son dur­ing their life­time.

If you have a sit­u­a­tion where you want to leave prop­erty to some­one in your Will who will not, for what­ever rea­son, be able to man­age or re­ceive the money them­selves, you should take le­gal advice to en­sure you pro­tect those peo­ple as far as possible.

Col­umn cour­tesy of Rainey Collins Lawyers, 0800 733 484.

If you have a le­gal in­quiry you would like dis­cussed, email Alan: aknowsley@rain­ey­collins.co.nz.

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