Edmonds Judd

Estate

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 Both these statutes are out of date.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.


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

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

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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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

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

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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Building a fence in town

As the daylight hours extend, so too does the list of summer jobs that have been building up over the past year. On that list for many will be replacing those rickety old boundary fences that surround your house. Before you rip them all down, we have a case study that clarifies why it’s so important not to rush.

John’s fence

John believes that his boundary fences should be rebuilt; he approaches his three neighbours to discuss this.

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Property briefs

Allowing for Covid-related settlement delays

When New Zealand headed into Covid Level 4 in March, real estate transactions stalled because of difficulties completing essential elements of settlement, such as the legal paperwork, giving of vacant possession and the inability of moving companies to access the property. In response, a number of buyers and sellers adjusted their agreements to delay settlement until alert levels decreased.

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