New Zealand Law Society - Passing Wealth on Death: Will-Substitutes in Comparative Perspective

Passing Wealth on Death: Will-Substitutes in Comparative Perspective

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Reviewed by Greg Kelly

It was with some reluctance that I added this book to my pile of summer reading; textbooks usually miss the cut over the break. I found, however, it to be informative, interesting and easy to read.

As some practitioners will be aware there has been something of a “non-probate revolution” taking place over recent years in the United States and countries such as New Zealand and Australia.

In America in the 1930s the term “will-substitutes” was coined and the term attained greater international attention in the 1980s. The term “will-substitute” has been used to describe documents or arrangements that ensure assets do not pass into a person’s estate; probate therefore is not needed. Examples include life insurance policies (with nomination of the payee), various pension and retirement plans, joint bank and savings accounts, family trusts, foundations and forms of property joint ownership with right of survivorship.

The purpose of this text is to compare the use of will-substitutes in a number of jurisdictions: the United States, Canada, England and Wales, Scotland, New Zealand, Australia, Italy, France, Germany, Switzerland and Liechtenstein.

The New Zealand commentary has been written by Professor Nicola Peart, a well-known commentator on trust law in this country. The book also contains “overarching perspectives” which describe the benefits and effects of will-substitutes for business owners, international investors, creditors and executors facing the claims of family members and carers.

In some countries the use of will-substitutes has additional benefits such as the minimisation or avoidance of tax, estate claims and the significant cost of obtaining probate. In the US, for example, probate costs can be very high. However, the book also demonstrates that in many cases will-substitutes, such as pension/retirement plans, are primarily used for retirement or asset planning — the avoidance of probate being an incidental benefit.

This book is interesting because it compares the various products or structures used in different countries and shows the enormous variation in the extent to which different devices are used. For example, despite our similar backgrounds, the difference between Australian and New Zealand will-substitutes is marked. Australian pension plans are a significant source of wealth and operate very differently to New Zealand’s KiwiSaver scheme. New Zealand’s focus on inter vivos trusts and the Property (Relationships) Act regime is unique.

While the book clearly has academic merit, I think it is also of practical use to practitioners in at least two ways. First, the various different will-substitutes described in the text certainly opened my eyes to the numerous alternatives that are available to clients when they are considering estate and asset planning and I think it is important that, as advisors in this area, we be aware of these options.

Secondly, it is becoming increasingly common for clients to have assets in more than one country. While there is risk in providing advice about the laws in another jurisdiction, nevertheless it can be very helpful if a practitioner has an overview of the regimes in place overseas. This can assist in providing better advice on the disposition of New Zealand assets and guidance as to where clients should go for specialised advice in relation to overseas assets.

I recommend practitioners giving estate, trust and asset planning advice read this text while tax lawyers will also find it interesting. The various chapters are written by different authors and I found all of them easy to read.

Hart Publishing, 978-1-849466-98-1, June 2016, Hardback and e-book, 381 pages, $165 (GST and postage included).

Greg Kelly is principal of Greg Kelly Law Ltd in Wellington, a specialist will, estate and trust legal practice. He is an author or contributor to a number of established legal texts on trusts and wills and has presented papers at numerous seminars and conferences.

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