Dealing with Property in a Deceased Estate in NZ

When someone passes away, their property does not simply transfer to the next person in line. There is a legal process that must be followed, and depending on the circumstances, it can be straightforward or surprisingly complex. This guide is for families navigating this difficult time; it explains what happens, who is responsible, and what you need to know about property in a deceased estate.

Understanding Probate and Letters of Administration

Before anyone can deal with a deceased person's property, the High Court must grant legal authority. If the person left a valid will, this authority is called probate. If there is no will (dying "intestate"), the court instead grants letters of administration.

Probate confirms that the will is valid and gives the executor (the person named in the will) the legal power to manage the estate. Letters of administration serve a similar purpose but are granted to an administrator, typically the next of kin, when there is no will.

Without probate or letters of administration, banks will not release funds, Land Information New Zealand (LINZ) will not transfer property titles, and the estate cannot be properly distributed. This is not optional; it is a legal requirement.

What Happens to Jointly Owned Property?

Property ownership in New Zealand comes in two main forms: joint tenants and tenants in common. The distinction is crucial when someone dies.

Joint tenants: The surviving owner automatically inherits the deceased's share. This happens by operation of law (called "right of survivorship") and does not require probate. The surviving owner simply needs to register the death with LINZ to update the title. Most married couples own their home this way.

Tenants in common: Each owner has a distinct share that does not automatically pass to the other. The deceased's share becomes part of their estate and is distributed according to their will or intestacy rules. Probate is required to transfer this share.

Check the property title to confirm which ownership structure applies. Your solicitor or a LINZ search can provide this information.

What About the Mortgage?

A common misconception is that mortgages are cancelled when the borrower dies. Unfortunately, this is not the case. The debt remains, and someone needs to deal with it.

If the property was jointly owned and mortgaged, the surviving owner typically remains liable for the full mortgage. The bank will expect repayments to continue as normal. If you are the surviving owner and cannot afford the payments alone, contact your bank immediately to discuss options.

If the property forms part of the estate, the executor must manage the mortgage situation. Options include:

• Continuing payments: If there are sufficient estate funds or the beneficiary intends to keep the property and can qualify for the mortgage.
• Refinancing: The beneficiary applies for a new mortgage in their own name, paying out the existing loan.
• Selling the property: The mortgage is repaid from the sale proceeds, with any remaining equity distributed to beneficiaries.

The Executor's Role and Responsibilities

Being named as executor is a significant responsibility. Executors have legal duties including:

• Applying for probate and gathering estate assets.
• Paying the deceased's debts, including mortgages, rates, and other obligations.
• Maintaining estate property, including insurance and basic upkeep.
• Filing final tax returns and paying any tax owing.
• Distributing assets to beneficiaries according to the will.

Executors can be held personally liable if they distribute assets before paying debts, fail to maintain property properly, or otherwise breach their duties. This is serious, and if you are uncomfortable with the responsibility, you can renounce the role or seek professional help.

Many executors engage a solicitor to handle the legal aspects, and this is often wise. Estate administration is detailed work with consequences for getting it wrong.

Selling Property in a Deceased Estate

If the estate property needs to be sold, the executor has authority to do this once probate is granted. The process is similar to any other property sale, but with some differences:

The executor signs the sale and purchase agreement and any other documents on behalf of the estate. They will need to provide evidence of their authority (the grant of probate) to the purchaser's solicitor.

Deceased estates are sometimes sold "as is, where is" without the usual vendor warranties about the property's condition. This reflects that the executor may not have detailed knowledge of the property's history or any defects.

Capital gains tax does not generally apply to property inherited in New Zealand, but if the property was subject to the bright-line test before death, this may still apply. Tax advice is important for estates involving property.

Transferring Property to Beneficiaries

If a beneficiary is keeping the property rather than selling it, the executor will arrange for the title to be transferred. This involves:

• Preparing a transmission application (to register the executor on the title).
• Preparing a transfer from the executor to the beneficiary.
• Registering the transfer with LINZ.

Legal fees for this process typically range from $1,000 to $2,000. LINZ registration fees also apply.

Disputes and Complications

Not all estates proceed smoothly. Common complications include:

• Family disputes: Disagreements about who should inherit, whether the will is valid, or how the estate should be managed.
• Claims against the estate: Under the Family Protection Act or Law Reform (Testamentary Promises) Act, certain people can challenge a will if they were not adequately provided for.
• Missing wills or unclear instructions: Sometimes the will cannot be found, or its terms are ambiguous.
• Debts exceeding assets: If the estate is insolvent, there are specific rules about the order in which creditors are paid.

If any of these situations apply, seek legal advice promptly. Disputes that are addressed early are often easier and cheaper to resolve than those left to fester.

Taking Care of Yourself

Dealing with a deceased estate while grieving is exhausting. Give yourself permission to take time, delegate where possible, and ask for help. Professional advisers, including solicitors, accountants, and real estate agents experienced in deceased estates, can take much of the burden off your shoulders.

Remember that there is no rush. While some matters are time-sensitive (like mortgage payments), most estate administration can proceed at a measured pace. Do what you can, when you can.