Most people's largest solely-owned asset is usually their KiwiSaver. Photo: NZ Herald/Mike Scott
A rule change should make it easier to access someone's KiwiSaver account when they die.
KiwiSaver money becomes part of an estate after a person's death. When they have a will, it is distributed according to the wishes of the will.
A partner may have a claim to it as relationship property, too.
If there is no will, the KiwiSaver money still forms part of their estate, but is distributed according to the legal formula for intestacy. This gives money to spouses, children, parents and other relatives, roughly in that order.
Public Trust principal trustee Michelle Pope said providers would have different approaches to distributing KiwiSaver investments.
"Some will release funds to the estate executor or administrator before probate is granted, while others will require probate first.
"Waiting for probate to come through can present challenges in family situations, where funds might be needed right away, say, to pay for a funeral and other estate funds are limited."
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A rule change that took effect at the end of September has increased the threshold at which a High Court has to approve probate, from $15,000 to $40,000. This means estates below that amount can be paid out without the legal process.
Justice Minister Paul Goldsmith said the previous threshold was set before KiwiSaver was introduced.
Most estates now include KiwiSaver balances of more than $15,000, but the court process can result in a significant proportion of smaller estates being eaten up in court costs and legal fees.
In the last five years, the High Court processed about 17,500 applications a year.
Generate customer service manager Dan Alden said the new limit felt more appropriate.
"Accessing funds after someone has passed away can be a difficult time for families, so simplifying the process is encouraging," he said. "That said, it's still important that checks and safeguards remain in place to protect people's money.
"The probate process isn't unique to KiwiSaver - similar procedures apply when accessing any financial accounts after someone's death to ensure funds are released securely and to the right people."
A Ministry of Justice briefing said the feedback from stakeholders had been most people's largest solely-owned asset was usually their KiwiSaver. Assets that are owned jointly, such as a house, do not need probate.
Fisher Funds KiwiSaver head David Boyle said the change would help people with smaller estates.
"The key is making sure they have an updated will to make sure the funds go to the family members they want to receive them."
In one case, a man who was executor of his father's will sought help accessing his KiwiSaver.
His father died while the threshold was still $15,000, but after he died and before his son claimed his KiwiSaver, its balance lifted beyond $15,000.
The man asked the KiwiSaver provider to release the funds, but the provider said it had to apply the $15,000 threshold at the date of the application, not the death.
The son complained to Financial Services Complaints Ltd, a dispute resolution service for financial services providers.
Because the threshold was about to increase to $40,000, FSCL said it would provide the solution the man needed.
"[His] father's estate was paid out the KiwiSaver balance, without [him] having to obtain probate of his father's will," FSCL said.
"[He] was pleased that the threshold had increased. He thought it was a much more sensible amount than the previously low amount of $15,000."
Pope said, in general, the administration process would take time. Before anything could be paid out to beneficiaries, the estate must pay any debts and expenses, along with dealing with any claims that may be made.
"In terms of releasing funds, KiwiSaver funds generally come through quickly, once the provider has the documentation they need."
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