Insights for consumers
Under the KiwiSaver Act 2006, there are rules for releasing KiwiSaver funds after a member dies.
If the deceased’s estate, including the KiwiSaver balance, is below $40,000 (the small estate threshold), the funds can be released without a High Court grant of probate or letters of administration.
If the balance is $40,000 or more, court approval is required before applying to the KiwiSaver provider.
If you are applying for KiwiSaver funds from a deceased member’s account, check the account balance with the KiwiSaver provider first. This will help to determine whether you need to go through the court process.
A small estate complicated by investment growth
Amir* was the executor of his father’s will. Amir’s father died when the small estate threshold was $15,000. The estate, including his KiwiSaver account, was less than this amount. However, the KiwiSaver balance grew slightly after Amir’s father’s death, due to investment returns, resulting in an estate value greater than $15,000.
Applying the threshold – at the time of death, or time of application
When Amir asked the KiwiSaver provider to release the funds, the provider said they had to apply the $15,000 threshold at the date of Amir’s application, not at the date of his father’s death.
Amir disagreed and complained to FSCL. He thought the threshold should apply as at the date his father died, referring to the Administration Act 1964, which doesn’t stipulate the date.
The KiwiSaver provider explained that the Trust Deed that applied to the KiwiSaver Fund required them to use the threshold at the time of application, and they could not make an exception.
FSCL’s investigation and a threshold Increase
FSCL investigated Amir’s complaint and discovered that the small estate thresholds were about to increase to $40,000. This would allow small, straightforward estates to be quickly distributed without incurring court or legal costs, freeing up High Court time to deal with more complex and higher value estates. Raising the threshold reflects the reality that most estates include KiwiSaver balances in excess of $15,000 – increasingly triggering the need to go to court, with the associated court costs and legal fees.
Resolving the complaint
FSCL worked with the provider to help Amir prepare his application and supporting information, so his application could be successfully processed as soon as the small estate threshold increased to $40,000. Amir’s father’s estate was paid out the KiwiSaver balance without Amir having to obtain probate of his father’s will.
Amir was pleased that the threshold had increased. He thought it was a much more sensible amount than the previously low amount of $15,000.
He was relieved and appreciated the support he received with his application.
