What happens to your money (or debt) when you die?
The short answer is if you have very little to your name, an uncomplicated life, and you have a will, the money goes to whomever you choose. That could be your children, partner, next-door neighbour, or even to charities such as the SPCA or Red Cross.
The long answer is full of buts.
If you die "intestate", which means without a will, your money doesn't necessarily all go to your spouse, partner or children.
There's a law called the Administration Act 1969 which sets out who gets the money. The first $155,000 plus personal possessions and furniture go to your spouse or partner. The remainder is split a third to the spouse/partner and two thirds to the children if there are any.
Woe betide the blended family that doesn't get very good legal advice.
It can and does happen that money one partner expected would go to his or her children ends up in the surviving partner's hands and passes down to the step-children instead.
Under current laws, says Richard Broad, head of legal at Perpetual Guardian, the surviving partner can choose whether he/she inherits as per the will (or intestacy rules) or under the Property (Relationships) Act by going to the Family Court.
Most couples want to look after their current spouse/partner and some choose to leave their other half a life interest in their estate, says Broad.
That means the surviving partner gets to stay in the home and receive income from any investments until he/she dies. Where the partner is much younger this can mean decades before the children or other beneficiaries inherit, which doesn't always go down too well.
How the estate is managed in the meantime can become a bone of contention as well.
Children written out of wills
You may have spawned a feckless grasshopper and want to write that child out of your will.
After your death, however, said child can make a claim under the Family Protection Act 1955 (FPA) if you don't provide proper maintenance and support, says lawyer Kimberlee Smith of Cavell Leitch.
After death, sometimes the children and others fight over what they expect and consider fair. Equal can look very different to siblings.
The bank of mum and dad
Broad says an increasingly common problem is where the deceased parents have guaranteed one child's home loan.
When it comes to selling the family home the other siblings find the bank won't let them.
If their brother or sister can't get a guarantee from elsewhere or sufficient funds to release their parents' estate and won't sell their own home, then little can be done. This can cause bitterness with the siblings who want their inheritance.
If you have a family trust that owns your property, it doesn't die.
The assets in the trust no longer belong to you and therefore aren't subject to the will.
The trust continues to control how the money and property is used in the future, which does stop your beneficiaries blowing your hard-earned savings Lotto-style.
When you die while an undischarged bankrupt the Official Assignee can claim from your estate, including your KiwiSaver money, for the value of the debts.
Luckily KiwiSaver isn't complicated. A few thousand KiwiSaver members die each year and the government doesn't take the money as many people believe. It's paid into your estate. If the total is less than $15,000 it can be paid directly to a spouse, partner or other authorised person.
Not everyone dies with money to their names. If you have debt it doesn't necessarily die with you, says Broad.
If you have signed up for joint accounts, mortgages or credit cards your spouse is usually jointly liable for debt and it passes to them. Sometimes former spouses find to their horror that they had failed to get the bank to release them from the other party's debt when they parted and can be chased for lending they knew nothing about.
Even if that isn't the case there is a six-month period after your death for creditors to make a claim on your estate to recover the money they are owed. So your beneficiaries won't get paid instantly.
That's because creditors such as the Inland Revenue Department and banks will expect to get their money first before the rest is handed out.
When people inherit properties, says Broad, they sometimes get a surprise that the mortgage comes with it if it wasn't paid off by life insurance.
"You might have an uncle who is very generous in giving you a property, but you end up with the mortgage as well," he says.
Too often, says Broad, couples could have wiped out this debt had they had sufficient life insurance.
"I have seen circumstances where there was no life cover and [the survivor] has had to trade down."