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Regional gap in estate planning reveals Aucklanders on thin ice

New research has revealed a gulf between regions in estate planning, sparking concerns about Aucklanders’ low level of financial protection.

Saturday, November 19th 2016, 12:37PM 1 Comment

The Future of New Zealand’s Estate Planning, an independent research report commissioned by Perpetual Guardian, found Auckland residents were at the bottom of the list in almost every estate planning category. This is a major issue, given that around one in three New Zealanders live in our largest city.

Perpetual Guardian chief executive Grant Kemble says the company commissioned the survey to gather more accurate information about New Zealanders’ estate planning and financial protection, including insights around Wills, Trusts, estates and EPAs. “The results of the survey show New Zealand has a lot of work to do in some of these areas, but people in some regions are better prepared than others.”

Wills

One of the biggest gaps between regions was the number of people who had Wills. While 61% of New Zealanders have Wills overall, this dropped to under half (45%) in Auckland. In contrast, none of the other four regions (Wellington, Other North Island, Canterbury and Other South Island) had under 66% of residents with Wills. The best performer was Other South Island, where three quarters of adults (76%) have Wills.

Aucklanders were also less likely to know where their parents' Will is stored. Only 60% of Auckland respondents said they knew this information, compared to the national average of 67%. Residents in the South Island outside of Canterbury were the most knowledgeable, with 81% knowing where to find their parents’ Will.

Kemble says the results show there is a lot of work to be done nationally to increase the number of New Zealanders with Wills, but the biggest challenge is in Auckland. “There are several reasons why Auckland may be lagging the rest of the country in Wills. Auckland has a younger population than many of the regional centres, and our research also shows people aged 18-30 are much less likely to have Wills. Also, around 40% of Aucklanders were born overseas, which could be a factor in the lack of estate planning.”

EPAs

The Perpetual Guardian-commissioned survey also revealed a concerning lack of awareness nationally about Enduring Powers of Attorney (EPA), with Auckland again getting the wooden spoon. Barely half of all Aucklanders (52%) know what an EPA is and only 32% have one. This compared to 65% and 36% respectively, nationwide. Canterbury was the best performer in this category, with three out of four residents knowing what an EPA is and nearly half (44%) having one.

Aucklanders were also less likely to be someone else's attorney, either for property and finance or health and welfare. Mr Kemble says the survey shows there needs to be a nationwide education campaign, with a particular focus on Auckland. “With the recent changes to the legislation around EPAs, now is an ideal time to get the message out to the New Zealand public about what they are and why they are so important.

“Our survey shows young people are much less likely to have an EPA, or to even know what one is. However, illnesses and accidents can happen at any time, for people of any age. Perpetual Guardian’s message to New Zealanders is that every adult in the country needs an EPA. It is very important that your affairs are looked after if you can no longer look after them yourself.”

Trusts

With an estimated 500,000 Trusts nationwide, New Zealand has one of the highest numbers of Trusts per capita in the world. The survey revealed that as well as being the nation’s capital city, Wellington is also the "Trust Capital" of New Zealand with one-quarter of respondents having Trusts. This compared to the nationwide average of just under one in five residents (18%) with Trusts. Only 15% of Aucklanders had Trusts.

The survey highlighted worrying gaps in knowledge and compliance among Trustees. While more than four out of five Trustees felt confident they had done everything they needed to be compliant, only 42% were aware of recent changes to legislation and court cases that affected the role of a Trustee. The survey also revealed many Trustees were not taking fundamental compliance steps such as keeping minute books and having annual meetings.

Kemble says it is important that Trustees keep up to date with all the latest compliance requirements and law changes. “Trust law can be very complex so Trustees should seek the advice of independent Trust specialists. Together with NZ Trustee Services, Perpetual Guardian has created TrustGuard, a service designed to help Trustees check they are compliant in a simple, easy-to-follow process.

“With nearly one in five adult New Zealanders having Trusts, there are a lot of people potentially exposed if they do not update their Trust management to modern best practice. We are committed to making this process easier, so that Trustees know their Trusts will work they were designed to.”

Estates

The lack of proper estate planning is of particular concern for Aucklanders, as the survey reveals they have the largest estates in the country. More than one in five Aucklanders (21%) said their estates were worth over $1 million, compared to the national average of only 14%. Meanwhile, Canterbury residents were the most likely to have small estates, with around half (49%) having estates worth under $500,000.

Perpetual Guardian’s Consumer Advocate, Charlotte Lockhart, says the small estates in Canterbury may simply be a reflection of regional property prices compared to Auckland. "Regardless of the size of the estate, having a Will is important.”

Lockhart says the number of large estates in Auckland reflects the city’s status as New Zealand’s biggest business centre, but high house prices are also a factor. “With the average house price in Auckland now over $1 million, simply owning a home in the city means you have a good chance of leaving behind a large estate. However, you still need to have smart financial planning and a Will. Not having a Will means there is a risk of family disputes and even court action over your legacy. The bigger the estate, the bigger the risk is that this will occur.”

KiwiSaver

Amid the eye-opening results in the Perpetual Guardian-commissioned survey, one bright spot for Auckland was around KiwiSaver. Aucklanders were the most likely to be currently contributing to the scheme, with almost two-thirds making an active contribution (65%). No other region had more than 50% of residents contributing to KiwiSaver. Other North Island, which includes Waikato and Northland, scored lowest at only 43%.

The survey also looked at the size of balances. More than eight years since the scheme launched, the majority of members still have small fund sizes. Four out of five members had under $50,000 invested in the scheme, with 44% still at $15,000 or under. Lockhart says the low number of people contributing to the scheme is a big reason for balances being so small.

“KiwiSaver has been a huge success in many ways, but only half of Kiwis (52%) are making an active contribution. There is a chance KiwiSaver may one day become compulsory, but in the meantime there needs to be a concerted effort at all levels to get more Kiwis putting money regularly into KiwiSaver.

Work to do

Kemble says the over-arching message from the research is that New Zealanders need better financial planning and protection. “Many New Zealanders are leaving themselves exposed by not having Wills or EPAs, not contributing to KiwiSaver and not making sure their Trusts are up to date with the latest compliance requirements. As New Zealand’s leading fiduciary services provider, Perpetual Guardian has a big part to play in educating the public on these issues."

Questions to ask clients:

  • Do you have a Will?
  • Do you know where your parents’ Will is stored?
  • Do you know what an EPA is?
  • Do you have an EPA?
  • Are you an attorney for someone else’s EPA? (health/welfare and property/finance)
  • Do you have a Trust?
  • How big is your estate?
  • Are you currently contributing to KiwiSaver?

Tags: Perpetual Guardian

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Comments from our readers

On 23 November 2016 at 12:15 pm AFA Muggins said:
People living in poverty don't care about wills. EPAs or Trusts.
People living below the average income level in all probability are the same.
New Zealand is a very expensive place to live, and many people are struggling to get by.

What used to be called the middle class is being wiped out. Priorities change.

"“With the average house price in Auckland now over $1 million, simply owning a home in the city means you have a good chance of leaving behind a large estate" ....

Or, a lot of debt.

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