Passing away without a Will
- what happens to your Estate?
When a person passes away without a Will, the
Administration Act 1969 (Act) sets out how the Estate of the deceased will be
Firstly, the family (or other potential representatives) need to determine the
value of the assets in the Estate. Where the value is less than $15,000 the
process is more straightforward, and letters of administration are not
required. For Estates worth more than $15,000, letters of administration will
need to be obtained.
The Act sets out the process for applying for letters of administration
including who may apply, who the eventual beneficiaries will be, and what
share of the Estate they will receive.
Where the deceased leaves behind a surviving spouse, civil union partner or de
facto partner, this person is entitled to a grant of letters of
administration. If there is no surviving partner or spouse, the deceasedís
children may apply, or, failing children, a grandchild may apply. The Act
contains further provisions for circumstances where someone else has to apply.
Once an administrator is appointed by the High Court, that person then has
authority to deal with Estate assets, and those assets are then called in. For
example, real estate or shares can be sold, and funds in bank accounts in the
name of the deceased can be withdrawn so that all liquidated Estate assets are
held in the same account in anticipation of distribution. The Administrator is
then tasked to ensure that the Estate is distributed in accordance with the
Act. Section 77 of the Act provides an exhaustive list that determines who the
beneficiaries of the Estate are, and what they are to receive. For example, if
the deceased leaves behind a surviving spouse and children, the Estate is
divided as follows:
* Any jointly owned property (including jointly owned family homes and bank
accounts) will pass to the surviving joint owner regardless of the provisions
of the Act,
* All personal chattels will pass to the surviving partner,
* The *residue of the Estate* (everything left over after payment of all
Estate debts) is divided into shares. Firstly, the *prescribed amount* is paid
to the surviving partner absolutely (the prescribed amount is an amount set by
Government regulation, and can change from time to time. Currently, the
prescribed amount is $155,000),
* Anything then left over is split into thirds. One third of that remainder is
for the surviving partner, and
* Two thirds of the remainder is for the children.
Inside this edition
Passing away without a Will - what happens to
Changes to the
Companies Act 1993
Cyber Bullying - on
its way out?
Maga Carta - 800 years
Building contracts & retention sums
Building your new home - why include a
Depending on who does or does not survive the deceased, the
beneficiaries of the estate could also include siblings, parents,
grandparents, aunts or uncles. Where none of these classes of beneficiaries
exist, the Estate vests in the Crown. The Crown has a discretion under the Act
to provide for dependants of the deceased, and persons for whom the deceased
might reasonably have been expected to make provision.
These guidelines show the importance of executing a Will where the provisions
of the Act do not reflect your wishes. For example, you may wish to make
direct provision for nieces and nephews who are not explicitly provided for in
the Act, or apportionment of assets under the Act may not be in accordance
with your wishes. If you have any concerns you should speak with your lawyer.
New legislation is in the process
of being passed which will require -
Buyers and sellers (including
trusts and companies) of residential
property to provide their IRD number and other details when transferring
Those with tax residency in
another jurisdiction to also provide the equivalent of their IRD number in
Offshore persons to provide
evidence of a New Zealand bank account in order to obtain an IRD number.
These requirements will apply to
all residential land transactions by individuals, trusts or companies.
If you, your trust or company do
not have a current IRD number and you are contemplating a sale or purchase of
residential land you should obtain one. No transfer of residential land will
be able to be registered without IRD numbers being provided.
The Inland Revenue Department
advise it can take at least 10 working days to issue an IRD number.
A The Child Support Scheme is managed by
the Inland Revenue Department of the New Zealand Government (IRD) and operates
under the Child Support Act 1991 (the Act).
The Child Support Scheme (Child Support) is financial support paid by parents
who either do not live with their children or who share the care of their
children with another person.
The Act provides a formula to work out the amount of child support payable. In
a nutshell, it uses the adjusted taxable income of both parents and subtracts
standard amounts for personal living costs and the parentís other children,
while taking into account the care each parent provides for the children and
the costs of raising them. A care cost percentage is then determined by the
Child support is not mandatory for parents or carers who do not receive a sole
parent or unsupported child benefit from Work and Income New Zealand, as those
parents or carers can make arrangements between themselves. However, if an
arrangement cannot be agreed, those parents and carers can seek the assistance
of the IRD to determine the amount of child support payable.
On 1 April 2015 the first set of major changes were introduced to the 20 year
old formula used to calculate child support. We summarise the major changes as
* Both parent's now receive assessments that take into account both of their
respective incomes and it provides allowances for any other children of their
own who live with them (taking into account the age of those children and the
defined current cost of raising children in New Zealand).
* The parent's assessments no longer provide allowances for partners or
children living with that parent who are not their own.
* The threshold of the amount of care recognised by the IRD has been reduced.
Previously the child support formula only took into account if a parent cared
for a child 40% of the time; however, this has now been reduced to 28% of the
time or 103 nights or more a year, or two nights a week.
From 1 April 2016, further changes will be
incorporated. We summarise the major changes as follows:
* The qualifying age for children eligible for child support will reduce from
under 19 years to under 18 years, unless the 18 year old child is still
enrolled in and attending school.
* Changes to penalties and write off rules for child support. These include:
replacing the current 10% initial late payment penalty with a two stage late
penalty payment of 2% on the day after due date and a further 8% eight days
after the due date, reduction in incremental penalty charges, and relaxing the
rules pertaining to writing off penalties and interest in particular events.
* Introducing two further grounds for administrative review of IRD decisions
to the current 10 grounds, which take into account re-establishment costs and
It is estimated that of the approximate 137,000 parents paying child support,
33,000 will have their amount increased under the new changes and a further
46,000 will pay less, with 58,000 being unaffected. If you are unsure as to
how these changes may impact on you, we suggest that you contact your lawyer
to discuss your situation in detail.
Company directors should be
aware of the changes to the Companies Act 1993 (the Act) that became law on 24
June 2014. Some changes took immediate effect while others will be implemented
later this year. This article focuses on two key changes: new criminal
offences and registration of companies.
New criminal offences
One change, now in force, was the creation of new criminal offences for
serious breaches of directors' duties. It is now an offence where:
* A director acts in bad faith and not in the best interests of the company
and knows that this will cause serious loss to the company (section 138A of
* A director dishonestly incurs debt for the company when the company is
insolvent, or the director knew the company would become insolvent (section
380 of the Act).
These changes were introduced following the widescale collapse of finance
companies between 2006 and 2012. The collapse of these companies left many
'mum and dad investors' stripped of their nest eggs. There was concern
following the collapse of these companies that it was sometimes not possible
to take action against directors for their reckless or dishonest conduct
(although many were prosecuted under provisions in the Securities Act,
Financial Reporting Act and the Crimes Act). In introducing the new offences,
the Government sought to balance the effect of potential criminal liability
deterring people from becoming directors or taking business risk, against the
need to deter dishonesty and prevent the substantial harm resulting from
breaches of directors' duties.
The new offences require that the mental elements of dishonesty, bad faith,
knowledge and belief must be proved beyond reasonable doubt. These are high
thresholds, and should put honest directors at ease.
Registration of companies
Other changes to the Act relate to the registration of companies. For
companies that were formed before 1 May 2015 (existing companies), these
changes are being introduced in a staggered way.
Since 1 July 2015 existing companies have been required to provide the
Registrar of Companies the dates and places of birth of all directors and
details of any Ultimate Holding Company (if applicable). The personal details
of directors will not be publicly available, however details of any Ultimate
Holding Company will be publicly available.
From 28 October 2015, existing companies
will need to ensure they have at least one director that either lives in New
Zealand, or who lives in Australia and is also the director of a company
Australia. Details of that Australian company must be provided to the
Registrar (which includes ACN, name and registered office address). This
requirement already applies for all newly incorporated companies.
All this information will be required in order to file an annual return.
Failure to file an annual return will result in steps being taken to remove
the company from the register.
These changes have been made in an attempt to protect New Zealand's
international reputation, by seeking to reduce the misuse of the New Zealand
company registration process by overseas individuals and groups, who have used
companies incorporated in New Zealand to facilitate crime.
Other changes include enhancing the powers of the Registrar of Companies and
changes to the provisions about changing control of companies, to align the
Act with the provisions of the Takeovers Code.
For more information about how these changes might affect you, contact your
lawyer for advice.
The Harmful Digital Communications Act 2015 (the Act)
became law on 2 July 2015. Sections 22 - 25 and Part 2 apply immediately, with
the balance of the Act taking effect on a date to be determined, but no later
than 2 July 2017.
Taking immediate effect - criminal liability
It is an offence to post a digital communication that causes harm to a victim,
if the poster intended to cause harm, and if an ordinary reasonable person in
the victimís shoes would have been harmed by that post. A conviction can see
individuals receive up to two years in prison or a fine of up to $50,000,
while companies can be fined up to $200,000.
The Act provides limited protection from liability to websites (such as
Facebook) that could host harmful content, provided the content was posted by
a user, not by the host itself. To gain this protection the host must strictly
comply with the procedures in the Act. For example, they must make it easy for
a user to make a complaint. They must also attempt to forward a complaint to
the author of the post, and unless the author objects, the post must be
removed within 48 hours of the complaint (in some circumstances up to 96
hours). It is not an offence to ignore this procedure; the host simply loses
Part 2 of the Act amends other laws, including
making it a criminal offence to motivate another person to commit suicide, and
extending the meaning of harassment (in the Harassment Act 1997) to include
situations where offensive material is posted online and remains there for an
Taking effect at a later date - civil remedies
The balance of the Act, not yet in force, contains two
additional remedies for victims. Firstly, the Act puts in place a statutory
body to assist with and investigate complaints, and if necessary, negotiate
with website hosts to remove harmful posts. Again, it is not an offence for an
individual or a host to ignore complaints or the statutory body.
Secondly, if the statutory body cannot negotiate the removal of
a post or has not deterred a poster from repeat action the District Court can
order that specific content be removed, that conduct be stopped, or that a
correction, apology or right of reply be published. These orders can be made
against the original poster as well as the website host. If necessary, the
Court can order that the identity of an anonymous author be revealed to the
Court. These remedies are in addition and separate to the criminal offences
discussed above. Failure to comply with an order can see individuals receive
up to six months in prison or a fine of up to $5,000, while companies can be
fined up to $20,000.
Commentators recognise that the Act addresses an important and
real need - protecting the vulnerable and limiting harmful behaviour.
Opponents have criticised the Act as being too wide, leaving it open to abuse.
Ignoring a complaint, however frivolous, means a website host loses protection
from liability. It is feared that some hosts might therefore remove all
content subject to complaints simply because it is easier or safer for them to
do so. Critics fear illegitimate complaints could be used to unfairly target a
person, publication or field of discussion, increasing compliance costs for
hosts and limiting freedom of speech. Of course, time will tell how this plays
Maga Carta - 800 years on
On 15 June 1215, King John of
England gave into the demands of a group of powerful and disgruntled barons
and fixed his seal to a document that would later become known as Magna Carta,
or "the Great Charter".
The Charter was essentially a peace treaty between the King and his barons at
the time; the need for which had arisen because of what the barons perceived
to be abuses of power by the King that had ran roughshod over their own feudal
rights. Since the death of his brother Richard the Lionheart some 15 years
previously, King John had lost control of Normandy to the French and had
heavily taxed the church and his barons in order to fund a war to recover it.
When those attempts eventually failed at the battle of Bouvines in 1214 the
barons had had enough and demanded a charter to protect their liberties.
As a result, Magna Carta was a reactionary rather than revolutionary document
at the time. Hurriedly written in continuous text, it is identified as having
a preamble and some 63 clauses that were intended to address the baronsí
concerns in return for them swearing renewed oaths of fealty to the King. The
grievances in question were very specific feudal concerns of the day, and so
many of the King's promises lost relevance over time and the clauses came to
be repealed. What these clauses had collectively shown though was that there
were laws that even the King was bound to observe and as a result Magna Carta
became an early symbol of liberty against oppression.
Magna Carta strongly influenced the creation of
the United States Constitution. It also remained strongly influential in
England where one of the original clauses (cl 39), which provided the right
for trial by jury, was included in the Petition of Right in 1628. This
particular clause (renumbered cl 29 in a subsequent version of Magna Carta
reissued by King Edward I) is also still part of New Zealandís law today and
states that *No freeman shall be taken or imprisoned... but by lawful judgment
of his peers, or by the law of the land.*
In immediate terms, the Charter can be seen as a failure in that it did not
result in the peace that was hoped for. King John and the barons reneged upon
their commitments almost immediately and the Charter was annulled by the Pope.
This situation caused civil war to break out the same year and ultimately led
to the death of King John the following year in 1216. After John's death the
rebellious barons were eventually defeated and Magna Carta was reissued by
Johnís son, King Henry III, on a number of occasions throughout his reign and
then by his successor King Edward I in 1297.
June this year marked the Great Charter's 800th anniversary and has led many
politicians, historians and lawyers from common law countries around the world
to once more acknowledge Magna Carta's impact and commemorate its place as a
cornerstone document in the development of the rule of law. Its enduring
legacy in western democracies remains clear - that there are limits to the
powers of those who rule.
Building contracts & retention sums
Many building contracts will be
drafted with progress payments falling due throughout the building process and
with the final payment being due on "practical completion". Practical
completion is usually when the job is mostly completed, except for minor
cosmetic works, and before the Council issues their Code Compliance
Certificate (CCC). A CCC confirms the works have been completed in accordance
with the building consent.
To protect your position as owner, we recommend at a minimum that the contract
is checked and amended in two ways. Firstly, the progress payments should only
be enough to cover the work that had been completed up to the date of that
payment. Secondly, the final payment should not be paid until after the
Council has issued their CCC. This is because the final inspection can
determine that more work is required before the CCC is provided. If your
builder has already been paid in full, they can be reluctant (or slow) in
completing that final work for you.
The Act also provides implied
warranties in all works, that:
* the work will be completed within a stated or reasonable time and will be in
accordance with the plans, the building consent, all laws and legal
requirements and with all reasonable care and skill in a proper and competent
* supplied materials will be new (unless otherwise agreed) and suitable for
the purpose for which they will be used.
Building your new home - why include a sunset
When building a new home, there are several important steps
in the process that have potential to delay final completion date. In some
circumstances for example you may be waiting for a subdivision and new title
to issue, or there may be an issue with the build that delays or prevents the
issue of the Code Compliance Certificate (CCC).
Delays do not automatically give you a right to cancel a contract. It is
important therefore to protect your position in the event of unforeseen
A "sunset clause" sets a date by which something must happen - this may be
issue of the certificate of title for the property or the CCC. Where the date
set down passes and the title or CCC hasn't been issued, you can cancel the
agreement and avoid being locked into an agreement indefinitely.
If you have any questions about the newsletter items,
please contact me, I am here to help.
Scannell & Co - 122
Queen Street East, Hastings
(06) 876 6699 Fax: (06) 876 4114 Email:
information in this newsletter is to the best of the authors' knowledge true
and accurate. No
liability is assumed by the authors, or publishers, for any losses suffered
by any person relying directly or indirectly upon this newsletter. It
is recommended that clients should consult S J Scannell & Co before
acting upon this information.
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