Edmonds Judd

Estate

Helping your family before you pass away

Estate, Health Issues, Kids
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Get your family details noted now

When someone in your family dies, there are a myriad of things to organise – some of which must be done almost immediately.

One of those tasks is for the death to be registered within three working days of the deceased’s burial or cremation. The funeral director usually organises this. If, however, there is no formal farewell, your family will need to organise this themselves.

Whichever way the death registration is organised, a family needs a great deal of information at its fingertips. Unless one of your family members has an elephantine memory, it may be useful if the required information is documented well before you die! You are more likely to know family details than anyone else. It will also save time after your death when everyone is shocked and it’s easy to forget the most straightforward things.

The Notification of Death for Registration form requires this information:

  • The deceased: Their full name (both at birth and when they died – they could be different); sex; date and place of birth; age, date and place of death; usual home address and their occupation. If not born in New Zealand; how many years have they have lived here; and some ethnicity questions
  • Living children: Ages of each living son and daughter
  • Parents: Their parents’ full names (at birth and when they died); and occupations
  • Relationships: Spouse/partner full name, sex and age when the relationship was formalised; relationship details such as married, civil union, de facto, separated, divorced, etc; and age of the deceased at the time of a civil union/marriage. There is space for up to four relationships to be recorded, and
  • Other: There are boxes to tick if the deceased was a marriage/civil union celebrant, Justice of the Peace and if they held an honour or award.

There are also boxes about the cause of death, date and place of cremation, etc which cannot, of course, be completed until after a funeral.

Medical certificate of death

Different from the death certificate, this notes the cause of death and is provided by the deceased’s doctor or hospital doctor. The estate’s lawyer needs a copy of this document.

Although it may seem morbid, making sure these details are recorded will help your family as they come to terms with your death.

To get more information, go here.

 

 

DISCLAIMER: All the information published in Fineprint is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2022.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Gift or loan?

Estate, House, Kids, Latest news, Relationships, Retirement
0

The importance of properly documenting advances between family members

The trusty Kiwi “She’ll be right” approach is often manifested in a reluctance to formally document intra-family lending arrangements. Catch cries of “I trust the kids to sort things out between themselves after I’m gone” and “My new partner says she will never make a claim and I believe her” are common, but all too often lead to disputes down the track.

In this article, we look at three different scenarios that are based on Maddy’s story.

Maddy’s parents help out

In 2016, Maddy’s parents decide to help her buy her first home. The bank will not lend to Maddy without a 20% deposit; her parents offer to lend her $250,000 to make up the 20%. The bank’s rules also require her parents to sign a gifting certificate, confirming that they will not require repayment of the money. Despite that, Maddy and her parents agree verbally that the money is a loan, not a gift, and Maddy will pay them back when she can. This is important to Maddy’s parents, as they also want to help their younger daughter, Sarah, into her first home in a few years’ time once Maddy has enough equity in her home to repay them. Maddy takes out a bank loan, secured by a first ranking all obligations mortgage in favour of the bank and buys her first home. Exciting times.

Let’s look at three different ways in which the failure to document that loan could play out.

Scenario 1: Insolvency

Maddy also owns a hospitality business, which she operates as a sole trader. Maddy doesn’t really understand how it all works, but is pleased that having a mortgage means she gets better lending rates for the business, which improves her caé’s cash flow no end.

Unfortunately, in 2020 Covid hits. While the business manages to hang in there for some time thanks to the Covid business loan and the wage subsidy, the recent removal of all government financial assistance and the move to red level in the traffic light system tip the business over the edge. It owes more than $500,000 to the bank, as well as the debt to the government and various suppliers. Maddy’s creditors file bankruptcy proceedings.

Maddy receive a demand from the bank to pay the $500,000-plus it is owed, which means she must sell her house. There is just enough money left after doing that to repay the bank and all the unsecured creditors.

In an attempt to salvage something from the situation, Maddy argues that the amount her parents contributed to the equity was a loan and not a gift. Unfortunately, there is no documentation to support that; the only documentation is the signed gifting certificate. The creditors rightly say that there is no evidence the money was a loan, and therefore they require repayment of their debts in full.

Scenario 2: Succession

Maddy’s parents died shortly after lending her the $250,000 house deposit. Younger sister, Sarah, is shocked when the estate lawyer says that there is only a house property to divide; Sarah says that she knows her parents had more than $250,000 in the bank which they had lent to Maddy to help buy her house.

Sarah appeals to Maddy, saying that they both know their parents lent Maddy the money. Maddy disagrees, pointing to the bank gifting certificate: she says that it was clearly a gift and she refuses to pay anything back. Lacking any evidence of the arrangements between her parents and Maddy, Sarah is forced to reluctantly accept a lesser inheritance than she believes she was entitled to.

Scenario 3: Relationship property

Maddy’s boyfriend Tom moved into her new home shortly after she bought it. Their relationship broke down four years later in 2020 and Tom claims half the equity in the home under the Property (Relationships) Act 1976.

Maddy accepts that the home is their ‘family home’ and that the equity must be divided equally. She argues, however, that in addition to the bank loan they need to take into account the $250,000 owed to her parents.

Tom says that is the first he heard of any loan from Maddy’s parents, and points to the gifting certificate that he found when he was cleaning out some drawers. Maddy is unable to produce any evidence to support her argument that money is owed to her parents, and has to divide the equity without factoring that in.

The lesson

In every scenario outlined above, a dispute could have been avoided, or minimised, had Maddy and her parents entered into a simple agreement recording the existence of the loan. A deed of acknowledgment of debt, prepared at the time that Maddy bought her house, could have been produced for a minimal fee, thus preventing a multitude of unintended consequences later on.

If you are lending money within your family, do contact us to ensure the loan is documented in a way that protects everyone — both now and in the future.

 

 

DISCLAIMER: All the information published in Rural eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

When there is a will, what is the way?

Estate, Health Issues, Kids, Latest news, Retirement
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A parent dies, but the child is unaware of the death

A child (of whatever age) can make a claim[1] against the estate of their parent under the Family Protection Act 1955 (FPA) if their parent dies and makes insufficient provision for them in their will. What happens, however, when a parent dies and their children aren’t aware of the fact?

This situation can be a tricky position for the executor of a will. Executors are obliged to carry out the terms of the will, and they have duties toward the beneficiaries. However they also have duties toward prospective claimants against a will. When an executor is aware that a person intends to make a claim against an estate, they owe a duty of even-handedness toward that person; this includes ensuring that they do not actively and dishonestly conceal relevant material about the estate from potential claimants who seek information about the estate.[2]

This means that if a child has, for example, engaged a lawyer to act for them and indicated that they intend to make a claim against an estate, the executor must provide information to them and consider their position when administering the estate. The executor cannot sneakily pay out all of the estate assets without telling the child or their lawyer.

There is no general duty, however, on an executor to search for all possible claimants against an estate, nor to inform those people of the fact of death or of their right to make a claim against an estate.

In a 2018 case concerning a relatively small estate, the High Court commented that when assessing an executor’s obligations, ‘regard must be had to the cost and difficulty’ of locating possible claimants or interested parties.[3]

This means that if a child is estranged from their parent and may not be aware that their parent has died, an executor does not have to find them and tell them — particularly if the estate is small and a significant cost would be incurred.

By the time the child finds out about their parent’s death, the estate might have been distributed and the child may no longer be able to make a claim.

The extent of an executor’s obligations toward those of whose claims an executor should be aware has not yet been decided by the New Zealand courts. This might be the case where there is a very large estate and the executor knows a child is impoverished and receives nothing under the will. The child might have contacted the executor at some point, but has not indicated they intend to make a claim against the estate. It is not clear, legally speaking, whether the executor has obligations to that child before distributing the estate and, if so, what those obligations are.

The Law Commission’s report

In December 2021, the New Zealand Law Commission released its final report on the law of succession, along with its recommendations for the government, including a new Succession Act. The report includes recommendations regarding an executor’s duty toward prospective claimants against an estate.

One of the two options that the Law Commission recommends in respect of claims by children is that only children under 25 years old or with a disability be able to make a claim for further provision from an estate. This would limit the ability of adult children to bring claims, which they can currently do under the FPA.

The Commission also recommends that the law should require an executor to notify prospective claimants of relevant information related to their rights. If the first recommendation is accepted, this would mean an executor only needs to notify children under 25 years old or with a disability that the death has occurred and of their rights.

Where a prospective claimant is not known or cannot be found, the Commission proposes that an executor’s duty will be satisfied where they take reasonable steps to search for and give notice to that person. This means that if an executor is unaware of a child, and reasonable searches for information do not disclose the child’s existence, the executor won’t be liable for failing to provide notice or information to that child.

Alternatively, and if the government decides to allow all children to continue to make claims against an estate, the Law Commission does not recommend that executors be required to notify children of the death and/or of their rights. This would continue the current situation.

Conclusion

The Law Commission’s recommendations may dramatically change the law about who can claim against their parent’s estate. If the government takes up those recommendations, the Law Commission also proposes that an executor’s duties should change, and that an executor be required to notify children under 25 or disabled children that their parent has died and what their rights are. This could lead to an increase in estate litigation, though in a smaller group of eligible claimants than is currently the case.

 

[1] Minor children, however, will need someone to bring the application on their behalf.

[2] Sadler v Public Trust [2009] NZCA 364, (2009) 28 FRNZ 474 at [35] and [41]; as referred to in Re Application by Lane (in their capacity as trustees and executors of the estate of the late Carson) [2017] NZHC 3144.

[3] Rattray v Palestine Children’s Relief Fund [2018] NZHC 466.

 

 

 

DISCLAIMER: All the information published in Rural eSpeaking is true and accurate to the best of the authors’ knowledge. It should not be a substitute for legal advice. No liability is assumed by the authors or publisher for losses suffered by any person or organisation relying directly or indirectly on this newsletter. Views expressed are those of individual authors, and do not necessarily reflect the view of Edmonds Judd. Articles appearing in Rural eSpeaking may be reproduced with prior approval from the editor and credit given to the source.
Copyright, NZ LAW Limited, 2021.     Editor: Adrienne Olsen.       E-mail: [email protected].       Ph: 029 286 3650

Estate laws due for a shake-up

Estate
0

Law Commission proposals

The laws about the administration of estates are being reviewed by the Law Commission. Much of what has been proposed so far is uncontroversial but there are some recommendations that may prove unpopular, although they are likely to be refined during the Parliamentary process.

The Law Commission has called this project Succession Law — that is the system of rules that governs who gets a person’s property when they die and rights to make a claim against an estate. There are two main laws that govern this area of the law: the Administration Act 1969 that rules the way estates are administered and the Family Protection Act 1955 that is the law about claims against estates. Both these statutes are out of date.

Other laws under review include:

  • Rules about who gets what if a person dies without a will (intestacy)[1]
  • Part of the relationship property law concerning the right to bring a claim after one spouse/partner has died[2], and
  • Testamentary promises legislation (bringing a claim against an estate for work or assistance for the deceased in reliance on a promise to reward them in the will)[3].

Intestacy

At present, if someone dies without a will, leaving a spouse/partner and children, the spouse or partner receives the household and personal items, $155,000 (with interest) and one-third of the rest of their estate. The children share the other two-thirds. This can mean that the surviving spouse or partner does not even get to keep the house unless it is jointly owned.

One option being considered is that the surviving spouse/partner would inherit the entire estate if the deceased’s children are all from that relationship. In other situations, the spouse/partner would get half and the children would get the other half.

Family protection

Probably the most controversial proposals concern the Family Protection Act. This legislation allows a spouse or partner, or the children or grandchildren (and sometimes dependent stepchildren), to bring a claim against the estate. Over the last 20 or so years, judges have become quite cautious about allowing such claims. A spouse/partner or dependent children will usually have a good claim, especially if there is a genuine need. An adult child who is self-supporting may, at best, have a ‘recognition claim’ that is usually a small percentage of the estate that acknowledges them as a member of the family.

The Law Commission proposes that adult children who are not in any need should not be able to claim or should get only a small item, or taonga in some cases, from a parent’s estate. In theory this may sound fine. If asked however, “Should your family be allowed to contest your will?” most people would say “No”. But, if they were asked, “Should you be allowed to contest your parent’s will if you’ve been left out completely?” most people would say “Yes”. The reality is human beings make mistakes sometimes and their wills are no exception. Being able to fix up an unreasonable will is an important safeguard for families.

Blended family issues

One issue not fully considered by the Law Commission is second marriages/relationships and the rights of stepchildren. A typical example would be:

  • John and Mary get together later in life. They each have children by a previous marriage.
  • They share all of their property and money, and they each make a will leaving everything to each other.
  • When John dies his children are in a difficult position. They hope Mary will include them in her will along with her own children. After all Mary has inherited everything John worked for, but they can’t be sure she won’t change her mind and leave her estate only to her own children.
  • John’s children can bring a claim under the Family Protection Act but this may wreck their relationship with Mary. If they don’t bring a claim now, they will have no right to claim after Mary dies.

There is also a proposal to include some ‘claw back’ rules in the Family Protection Act. This could mean that anything you put in your trust, or give away shortly before your death, could be treated as part of the estate in order that a claim could be made.

Looking ahead

If you are concerned about family disputes after you die, you could consider ringfencing your property by putting it into a trust, for example. It is by no means certain that claw back rules will come into law at some stage but, if they do, anything put into the trust years before is unlikely to be caught by a possible claw back rule.

Above all, make sure you have a will or make sure your current will is up-to-date. The default intestacy rules may not fit your circumstances; if you have a will, you get to decide who will benefit.

[1] Ss77 to 79 Administration Act 1969.

[2] S 88 Property (Relationships) Act 1976.

[3] Law Reform (Testamentary Promises) Act 1949.

New edition of To Trust or Not to Trust

Estate, House, Relationships
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With the new Trusts Act 2019 that came into force on 30 January 2021, we now have a new edition (the 4th) of To Trust or Not to Trust: a practical guide to family trusts.

To Trust or Not to Trust has chapters on:

  • Establishing a family trust: is this for you?
  • Trusts Act 2019
  • Protection given by a family trust
  • Transferring assets
  • Decisions to be made
  • Completing your estate plan
  • Family trust administration
  • What will a family trust cost?

This new edition lists trustees’ mandatory and default duties and obligations. It sets out the changes the Trusts Act brings to some provisions for beneficiaries, and explains that trustees who are no longer mentally competent can be more easily replaced.

If you are thinking of how you would like your assets protected, this guide is a very good starter for you to understand how a family trust works. For those of you who already have family trusts, this 4th edition provides an update on the changes the new legislation has brought.

If you would like to talk more about asset protection or your current family trust, please don’t hesitate to contact us.

Reverse mortgages

Estate, Latest news, Retirement
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Increasing in popularity

The current combination of increasing living costs, rising house prices and low interest rates has seen more than property-seekers signing up to home loans. On the other side of the coin, some older homeowners are seeking ‘reverse mortgages’ from their lenders in order to release the growing equity in their property.

What is a reverse mortgage?

A reverse mortgage is a lending structure that allows you to access the equity you have accumulated in your home or other property. With a reverse mortgage, you borrow money from a lender using your existing home as security in order to, for example, supplement your living costs or complete renovations rather than for the purpose of acquiring a new property.

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Trustees’ expenses

Estate, Latest news, Retirement
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Should be reimbursed, but no need for extravagance

When trustees incur expenses, they are not expected to be out of pocket in carrying out their responsibilities. Trustees are entitled to use trust money or to get a refund from the trust fund if they incur expenses in carrying out their duties. Trustees’ expenses, however, must be fair and reasonable. A recent case shows why it is also important to be sure that you can trust your trustee not to take advantage of the right to claim expenses.

Carrying out a trustee’s obligations and responsibilities can take up much time and some expenses can be incurred in doing this. Trustees are not usually entitled to charge a fee for their time, unless the trust deed or will allows them to do this. The trustees are, however, at least entitled to have their expenses met from the trust fund, provided the expenses are fair and reasonable. If the trustee has to pay for anything personally, the trustee is entitled to be reimbursed.

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New trusts legislation now in force

Estate, Latest news, Relationships, Retirement
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Disclosure of trust information to beneficiaries

The Trusts Act 2019 came into force on 30 January 2021. One major topic of discussion arising from the new Act has been the provisions governing disclosure of trust information to beneficiaries. 

The purpose of the new disclosure provisions is to ensure that beneficiaries have sufficient information to enable the terms of the trust and the trustees’ duties to be enforced against the trustees. Historically, in some trusts, disclosure of information has been very limited, and beneficiaries often do not find out they are beneficiaries, or that they are entitled to trust information, for many years. This makes it difficult for beneficiaries to know who to contact, or what kind of information to request, to ensure the trustees are doing their job properly.

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The finite supply of water

Estate, House, Latest news, Your Own Business
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Water easements

Water is an absolute necessity for any type of farming or horticultural activity. Historically viewed as an infinite and expendable resource, water is now seen as having a finite supply and must be dealt with as a commodity. The right to access water from a source, such as a spring or well, and the right to use that water are different, but related, issues.

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Over the fence

Estate, House, Latest news
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Crown Pastoral Land Reform Bill – submissions open

Introduced to the House in July by the then Minister of Land Information, the Hon Eugenie Sage, the Crown Pastoral Land Reform Bill was drafted in early 2019 following consultation on enduring stewardship of Crown pastoral land. Submissions are now open for you to have your say on this proposed legislation.

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