Q: What happens to KiwiSaver money when you die?
This question was asked by a young guy at a KiwiSaver seminar I was attending.
Death isn't something we really like to think about and only half of us have a valid will, dropping to about 30 per cent for the under-40s.
Charlotte Lockhart, head of sales and marketing at Perpetual Guardian, says it is important to understand KiwiSaver is an investment that is in your name alone.
This means two things:
• It is not a joint asset with any partner you may have, unlike savings that you may have in a joint bank account, and therefore will be part of your estate when you die.
• As an investment, once it goes over $15,000 (as current legislation stands) you will need a will to have probate issued. For a technical explanation of probate, read on.
Even though many Kiwis may not have a house, children or other reasons for having a will, many will have a KiwiSaver balance over $15,000, says Lockhart.
The average KiwiSaver balance has already reached that benchmark.
"In cases of intestacy [when a person dies without a will], the court will appoint an administrator who will distribute your estate according the Administration Act 1969."
It can be a lengthy, costly and difficult process and there is no guarantee your assets will go to those you intended to inherit.
"This is why it's best to express your wishes in a written will," says Lockhart. "It will be a good move for providers to decide to put a will offer alongside their product to show they care. The first to do so will get a jump on their competitors," she says.
And then there is probate.
If a person who has died owned real estate, shares or other investments, probate is applied for at the High Court in Wellington unless the assets comprise no more than $15,000 in each case, in any bank account, superannuation fund, life insurance policy, wage or salary arrears or otherwise as provided by section 65(2) and (5) of the Administration Act 1969.
Probate is a document sealed by the High Court that formally acknowledges the appointment of the executors named in the will as the administrators of the estate.
The probate document is required to close bank accounts (where the balance exceeds $15,000) and transfer assets such as shares, investment portfolios and real estate to the executors so they may be dealt with as specified in the will.
Any assets owned in joint tenancy with other people will pass by survivorship and are not subject to probate or covered by the will.