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

An executor usually applies for probate where there is a will. If there is no will, or the executor refuses or cannot act, an eligible person may need to apply for letters of administration. Govt.nz notes that an estate worth less than $40,000 may not require a High Court application.

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.

Whether a court grant is required depends on the estate and asset-holder requirements. Confirm the process with the relevant bank, LINZ practitioner and estate lawyer before attempting to transfer or distribute assets.

Govt.nz says probate or letters of administration usually take 6 to 8 weeks, and may take longer at busy times. It says a simple estate can take up to 6 months to administer, while complex estates often take longer.

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.

Order the current Record of Title and ask a property lawyer or conveyancer to explain the registered owners, rights and restrictions and the steps needed after the death.

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.

Mortgage liability and repayment obligations depend on the signed loan, guarantee and security documents. Notify the lender, keep track of payment dates, and obtain legal and financial advice before assuming who is liable or that a loan can be transferred.

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.

Some people have life insurance or mortgage protection insurance that pays out on death. Check the deceased's documents for any policies. This can significantly simplify matters by providing funds to repay the mortgage.

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.

Govt.nz says an executor may pay for legal help for specific wills-and-estates work or refuse the role. Obtain advice appropriate to the estate, particularly before property transfers, distributions or disputed steps.

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.

New Zealand has no inheritance tax, and IRD guidance says inherited residential property is generally excluded from the bright-line test. Other property tax rules may still apply in unusual cases, so get tax advice before selling or developing estate property. 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, valuation, lender and LINZ costs vary with the estate and transaction. Ask the relevant professionals for an itemised estimate before proceeding.

If you are inheriting a property with a mortgage, talk to the bank early. They will want to know your intentions and will need to assess whether you qualify to take over the loan. Do not assume approval is automatic.

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, obtain legal advice promptly about deadlines, evidence, duties and the appropriate court process.

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.

Timeframes vary and some steps may be urgent, including secured-loan payments, insurance, rates, property security, tax or court deadlines. Ask the estate lawyer and relevant providers what must be handled first.