Understanding Child Inheritance Rights and New Zealand’s Pension System

Many individuals question their rights and obligations when it comes to inheritance, especially regarding their children. In New Zealand, a recent inquiry highlighted the complexities surrounding whether a child automatically inherits from a parent’s estate, even if not mentioned in a will. Susan Edmunds, host of the upcoming podcast “No Stupid Questions,” seeks to clarify these issues, encouraging listeners to submit their queries about money and the economy.

Inheritance Rights Under New Zealand Law

Under the Family Protection Act, children can contest a will if they believe they have been unfairly excluded or not adequately provided for. This legal framework allows them to make a claim against the estate, which can lead to significant court proceedings. According to the Law Commission, at least 93 such claims were filed in the decade leading up to March 2020. The court evaluates whether the deceased had a duty to provide for the child and if that duty was breached.

It is typically easier for parents to allocate different shares of their estate to each child rather than entirely exclude one. The Law Commission has suggested potential reforms to limit claims to children under 25, those with disabilities, or individuals facing financial difficulties. This could alter the landscape of inheritance claims significantly.

Moreover, if a person dies without a will, the distribution of their estate is governed by the Administration Act. In such cases, a surviving spouse or partner is entitled to personal possessions, the first $155,000 of the estate, and one-third of the remainder. The remaining two-thirds is divided equally among children. If there are no children, the partner receives the possessions and a substantial portion of the estate, while parents inherit under certain circumstances. If no immediate family exists, the estate may eventually go to the Crown.

Understanding New Zealand’s Pension System

In a related context, a 72-year-old New Zealand resident recently expressed concern about the adequacy of his pension. Living alone and reliant on government support, he highlighted the increasing struggle to maintain a basic standard of living. His pension of $31,600 represents about 38 percent of what he believes to be the average wage of $84,800 per year.

The level of the New Zealand Superannuation (NZ Super) is adjusted annually to reflect inflation and average wages. Currently, the after-tax rate for single individuals is approximately 40 percent of the average wage, which aligns with the pension amount this resident receives. For couples, the after-tax rate reaches about 66 percent.

To provide context, the annual rate for a single individual living alone is around $27,998 after tax, slightly lower than the pension received by the concerned resident. Comparatively, in Australia, the maximum pension for a single individual is about $27,333, and in the UK, the full state pension is roughly £12,000.

As discussions surrounding inheritance rights and pension adequacy continue, the insights provided by Susan Edmunds and the broader financial community may help individuals navigate these complex issues. Engaging with these topics through platforms like the upcoming podcast can empower listeners to better understand their rights and financial realities.