Below are some examples of estate “planning” gone wrong.

Do any of these sound familiar, based on your circumstances or the circumstances of your loved ones? 

PAUL HAS A WILL. BUT HE SIGNED IT 25 YEARS AGO.

Paul recently passed away. He had a will. But it was prepared 25 years ago. A lot has happened in the past 25 years. He has been married twice, and had two children, one from each relationship. 

Naturally, Paul’s 25 year old will has no relationship to his original intentions were. 

JACK AND JILL PREPARED THEIR OWN WILL, BUT DIDN’T EXECUTE IT CORRECTLY

Jack and Jill prepared a will. But they only get one person to witness their wills when they signed it.

The court might accept the document as their will, but at the cost of thousands of dollars in fees, and time and stress for their loved ones during a time that is already terribly difficult.

JAMES WANTED TO ENSURE HIS CHILDREN ARE TAKEN CARE OF, BUT DIDN’T HAVE SUFFICIENT LIFE INSURANCE IN PLACE

James had young children from both of his marriages. He was determined to ensure that his children from both relationships were provided for in a similar fashion. His wills made sure this happened. 

However, James’ net worth at the time of his death was not significant. This meant that although his children were provided for in a similar fashion, they each received only a very small amount.

This meant that James’ broader goal – that his children would be taken care of if he passed away – was not achieved.

ABRAHAM WAS PREPARED, BUT HIS FAMILY WASN’T

Abraham did very well for himself and accumulated considerable wealth. Just months before his untimely passing, he had prepared wills that reflected his testamentary intentions.

However, Abraham had a “no money talk with family” policy. His two daughters, who were surprised to find had been nominated as his executors, have no idea where to start in terms of determining what his assets were and where they were located. The process of determining the extent of Abraham’s estate will take months, if not years.

Furthermore, they had no idea how wealthy Abraham was, and are completely unprepared to deal with their windfall. 

PENNY AND DAVID PREPARED THEIR OWN WILLS, BUT DIDN’T FACTOR IN THEIR TRUST ASSETS

Penny and David thought it would be straightforward to prepare their own wills. What they didn’t consider is that the majority of their assets were held in their family trust, and their will had no bearing on how their trust assets would be dealt with. 

SEAN’S LIFE INSURANCE IS OWNED BY HIS ESTRANGED WIFE

Sean and Sue were happily married (and free of any health issues) when they arranged their original life insurance policies. Twenty years on, Sean is in a new, de facto relationship, and has young children from the relationship he wants to make sure are provided for if he passes away.

Unfortunately, Sean has had some health issues in this time and cannot easily get life insurance. His original policy is still in place, but because Sue was nominated as the owner of the policy, she determines who is nominated as a beneficiary under the will and is not prepared to make any changes that put her in a worse position. 

As a result, if Sean were to pass away, not all of his dependants would be provided for in the same way as they would if he had ownership of the life insurance policy and could make changes to his beneficiary nominations.

JUNE’S GIFT TO HER GODSON IS FRUSTRATED

June had earmarked her shares in Acme Ltd to go to her godson, Bruce. Her will specifically provides for these shares to go to Bruce. 

However, as a result of financial advice that June received, she divested these shares and put this investment in a managed fund along with a significant amount of her other funds. At the time she did this, June hadn’t given any thought to the provision she’d made for Bruce, and hadn’t told her financial adviser (who hadn’t asked whether she had an arrangements of this nature). 

Now that June has passed away, the shares that Bruce was going to get no longer exist and it looks like he will get nothing. 

JULIAN’S WIFE AND HIS BUSINESS PARTNER ARE IN A DIFFICULT SITUATION

Julian and Oscar were old friends who started a business together, 50/50. The business has grown into a small but profitable business, reliant on both Julian’s and Oscar’s complementing skills. 

Julian and Oscar had not given any thought to what might happen if one of them died unexpectedly. And unfortunately, that’s what happened to Julian.

Olive, Julian’s wife, now finds herself as a 50% owner of a business she has only had limited involvement in. Oscar isn’t in a position to buy her out. Nor does he know how he can continue operating without Julian’s contribution, and he does not have the ability to bring someone on board to take Julian’s place.

KATE HAS LOST CAPACITY AND THROWN HER FAMILY INTO DISARRAY

Kate is a widow. After showing signs of forgetfulness, she agrees with her daughter Mabel, who lives nearby, that it’s time to move to downsize. She struggles to adapt to the new environment and deteriorates quickly. 

By the time Mabel and her two brothers, Tom and John, have agreed that Kate does not have the ability to make lifestyle or financial decisions, it’s too late for Kate to sign enduring power of attorney documents. 

As a result of this, her children need to go through the expensive and stressful process of having a guardian and property manager appointed by the court. 

Furthermore, Kate has kept her cards close to her chest since her husband (who was previously “head of the family” in all such matters) passed away. Mabel, Tom, and John have no idea what Kate would have wanted – or even who she would have wanted to nominate to act on her behalf.

Making the situation even worse, is that although John and Mabel have always gotten on, they’re not on the same wavelength on a lot of things. John also lives in Australia and has a different perspective on his mum’s situation compared to Mabel’s perspective. The relationship between the two has become volatile, and Tom’s previously-strong relationships with his two siblings have also fallen to pieces.

Sonnie Bailey

Sonnie is an Authorised Financial Adviser (AFA) and former lawyer with experience in the financial services and trustee industries. Sonnie operates Fairhaven Wealth (www.fairhavenwealth.co.nz).