Why having a will matters

As we all know, a will is an essential legal document that outlines your wishes after your death. It allows you to decide how your assets will be distributed and who will manage your estate. Without a valid will – known as dying intestate or intestacy – your estate will be divided according to legislative rules. This could result in outcomes that don’t reflect your intentions and may cause unnecessary delays, legal costs and family conflict.

What happens if you die intestate?

Dying intestate triggers the application of the Administration Act 1969, which sets out who will inherit your assets and requires an application to the High Court. The application of these rules depend on which family members survive you:

• A spouse or partner with no living parents or children: Your spouse or partner inherits the entire estate.
• A spouse or partner and living parents (but no children): Your spouse or partner will receive all personal chattels, the first $155,000 of the estate (known as the statutory legacy) and two-thirds of the remaining estate. The remaining one-third goes to your parents.
• A spouse or partner and children: Your spouse or partner receives all personal chattels, the first $155,000 and one-third of the remaining estate. The other two-thirds is shared equally among your children.
• Children only (no spouse or partner): Your estate is divided equally among your children.
• No spouse, partner or children: Your estate goes to other next of kin, following a priority list (e.g. parents, siblings, nieces/nephews).
• No surviving relatives: Your assets pass to the Crown (Government).

Even with a will, administering and distributing an estate can be a time-consuming and costly process – especially if disputes arise among beneficiaries or the will is contested.

The probate process

If you have a will and your assets exceed $15,000, your estate’s executors must apply for probate. Probate is the official process by which the High Court validates your will and authorises the executors to manage your estate. This legal procedure can take six weeks to six months – or even longer in some cases – to complete.

A recent legislative update has increased the probate threshold from $15,000 to $40,000, effective 24 September 2025. Distribution of estates worth less than this threshold may benefit from a simplified process that does not require a formal grant of probate.

Administrative requirements for estates

Every estate, regardless of value, must have an IRD number to ensure that the tax affairs are managed – even if there is no income to report. Executors are responsible for:

• Applying for the estate’s IRD number.
• Filing any necessary tax returns (sometimes “nil returns”) for both the deceased person and the estate, and / or applying for non-active status for the estate.
• Notifying Inland Revenue once the estate has been fully distributed and closed to request that its accounts be closed for the deceased taxpayer.

These steps ensure the estate meets its tax obligations and avoids any issues with Inland Revenue during the administration phase and closure of the estate.

Executor responsibilities and liability

An executor is legally responsible for managing and distributing an estate in accordance with the will (or intestacy laws, if there is no will). This role carries both practical duties and potential legal liability.

Key responsibilities include:

• Applying for probate (if required).
• Identifying, securing and managing estate assets.
• Paying any debts, taxes and outstanding liabilities.
• Distributing the estate to the rightful beneficiaries.
• Keeping detailed records and communicating clearly with beneficiaries.
• Acting impartially and in good faith.

Executors must act prudently and cautiously. Many reduce personal risk by waiting at least six months after probate before distributing any assets. However, where possible, it is optimal to wait at 12 months. At this point, executors are generally protected from further claims from creditors, beneficiaries or individuals contesting the will – provided they have acted properly and in accordance with the applicable laws.

Managing estate assets

Many estates include income-generating assets, such as bank accounts and / or investments. In most cases, the will provides straightforward instructions – typically to liquidate assets and distribute the proceeds. When the estate is simple, solicitors and accountants can often act quickly to release funds, pay outstanding liabilities and file final tax returns.

If there are delays – such as disputes, unresolved tax matters or outstanding paperwork – unclaimed funds are usually placed in interest-bearing bank accounts administrated by the estate’s solicitor. These funds are held safely until all matters are resolved, after which distributions can be made and any remaining tax obligations settled.

Some estates need to remain open for several years. This may happen if:

• The will grants a surviving partner a life interest in the estate’s income.
• A beneficiary is a minor and funds must be held in trust until they reach a specified age.
• The estate has an interest in ongoing business activities or assets unable to be liquidated.

In these cases, the executor must prepare annual financial statements and tax returns until the estate is eventually wound up.

Tax considerations and recent changes

It is important to know up front which tax rates will apply to estate income. The current tax rate applying to an estate (assuming income is not distributed to beneficiaries) is either 33% or 39%. An estate will be subject to a 33% tax rate in the year the estate is created (the year of death) and the subsequent three income years. Following that time if the estate has not been wound up, it will either be subject to a 39% tax rate or a 33% rate if the annual taxable income is $10,000 or less.

Conclusion

Having a valid, current will is crucial for ensuring that your wishes are honoured and your loved ones are cared for after your death. An accurate will can also help minimise potential costs, family disputes and delays in administering your estate. Staying informed about changes in probate thresholds, tax regulations and your responsibilities as an executor or beneficiary will help ensure that the process runs as smoothly as possible. If you don’t yet have a will or your circumstances have changed, consider consulting a legal professional to ensure your wishes are clearly documented.

Engaging an accountant to prepare estate tax returns and liaise with Inland Revenue will also help ensure that tax obligations are met, documents are completed correctly, the proper processes are followed and compliance is managed efficiently.

Contact your local Baker Tilly Staples Rodway office if you’d like help from one of our tax or business advisory specialists. We’re here to help smooth the path for you and your loved ones.