Edmonds Judd

Kids

The plight of stepchildren

Estate, Kids, Relationships
0

Non-traditional family structures can result in unfair estate outcomes

When a parent dies and leaves their child or children out of their will, those children are entitled to bring a claim against their parent’s estate under the Family Protection Act 1955 (FPA). While a financially stable adult child may not have a claim to a large  proportion of their parent’s estate, they will usually still have a claim for ‘recognition.’

The same is not true for children claiming against the estate of a stepparent.

Stepchildren are only entitled to bring a claim against the estate of a stepparent in very limited circumstances – usually when they are financially dependent on their stepparent at the date of their death.

This can become a real problem when a parent dies, leaving everything to their spouse or partner, who is trusted to make provision in their own will for their stepchildren, but fails to do so.  Stepchildren are often left without a remedy, and this is an increasing source of perceived unfairness in a society where non-traditional family structures are becoming common.[1]

 

 

How does the law respond?

When someone inherits all their partner’s property, but ultimately fails to provide for their partner’s children in their own will, those stepchildren typically must look for alternative ways to bring a claim against the estate of their stepparent, outside of the FPA. Commonly this includes two possible actions:

 

  1. Making a mutual wills claim

Where the parent and stepparent originally had wills which left everything to each other, and then after the death of the second, made provision for each of their families, it might be argued that the wills were intended to be binding and that the stepparent was not intended to be able to change their will later on to leave out their stepchildren. If successful, a mutual wills claim would bind the stepparent’s estate to make the promised provision for their stepchildren.

The difficulty is often found in showing that there was an agreement between the parent and stepparent that the wills would not be changed. This may have been assumed, but it is rarely spoken about or expressed in writing. It can also be difficult when the stepparent clearly did not feel that they were bound by such an agreement.

 

  1. Testamentary promise claims

Claims are sometimes brought under the Law Reform (Testamentary Promises) Act 1949.  As the name suggests, these claims require some sort of promise to have been made.  The stepchild will need to show that:

  • They rendered services to their stepparent
  • Their stepparent promised to reward them for those services in their will
  • The promise was motivated by the services, and
  • The stepparent failed to keep their promise in their will.

Difficulties often arise in showing ‘qualifying services.’ Normal things that one might do for a close family member, such as helping in their older age, will not usually qualify. While some stepchildren have successfully argued that they abstained from making a claim against their parent’s estate, and that was a service to their stepparent, many children don’t ever seriously think about making such a claim, so it is hard to make that out as a ‘service.’

Promises are often vague, and New Zealanders do not always like to talk about money.

Even where there are services, and a promise to reward, in many cases the promise is found to have been motivated by the close relationship rather than the services themselves.

It can be very hard to make a successful testamentary promises claim.

 

 

Case example

In a 2015 case,[2] a child failed in several claims against his stepfather’s estate. The High Court said:

“While I have sympathy for the position Paul finds himself in, his personal claims against the estate appear to me to fall within the rock of the [Family Protection Act 1955] and the hard place of the [Law Reform (Testamentary Promises) Act 1949].”

There are also a variety of claims available to stepchildren such as a constructive trust, estoppel or unjust enrichment. These generally make similar arguments, but often fail for the same reasons as in the Blumenthal case.

Stepchildren often miss out because they wanted to do the right thing when their parent died, and they made the unfortunate decision to trust their stepparent to do the right thing later.

 

 

 

Will this change?

The Law Commission identified the plight of stepchildren in its 2021 Succession Review Issues Paper, but it did not propose any new avenue for stepchildren to bring claims against the estate of a stepparent, simply because they have ‘missed out’ on their parent’s estate.[3]

Further, the law reform project has stalled, leaving things in a rather unsatisfactory position for stepchildren who are more and more commonly in this situation.

This situation for stepchildren highlights the continued importance of having proper estate planning arrangements in place – particularly for blended families. There can be a significant financial and emotional cost when these things are not discussed and addressed while both parents and stepparents are alive and capable.

 

[1] The Law Commission noted in 2021 that only 7% of children lived from birth to age 15 in households containing only nuclear family members: Te Aka Matua o te Ture | Law Commission Review of Succession Law: Rights to a person’s property on death (April 2021, Wellington, NZIPC 46) at [1.15].

[2] Blumenthal v Stewart [2015] NZHC 3187, affirmed on appeal.

[3] Te Aka Matua o te Ture | Law Commission Review of Succession Law: Rights to a person’s property on death (April 2021, Wellington, NZIPC 46) at [4.70].

 

 

 

 

DISCLAIMER: All the information published in Trust 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 Trust 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

Providing for your family in your will

Estate, Kids, Property, Relationships, Retirement
0

You have some legal obligations

We all want to look after our families – both during our lives and after we die. One way you can make sure that your family is looked after when you die is by leaving behind a clear, well-drafted will.

 

In New Zealand, we have considerable ‘testamentary freedom,’ meaning we can generally choose how we want to distribute our personal assets after our deaths. Testamentary freedom has been a fundamental feature of New Zealand law for many years. There are, however, limits to testamentary freedom. We see these limits in action when claims are made against a family member’s estate.

 

Claims against an estate

Claims against estates can be made under the Family Protection Act 1955 which provides that you have  a moral duty to provide adequate maintenance and support for certain family members after your death. They include your spouse, children and sometimes grandchildren. Even if you have family members with whom you have had a poor relationship during your lifetime, if you do not adequately provide for their maintenance and support in your will, there is a risk they could make a claim against your estate.

 

If you want to leave unequal shares of your estate to your family members, or leave a close family member out of your will entirely, it is important to state this expressly in your will and to provide your reasons for doing so. This can reduce the likelihood of a successful claim being made against your estate.

 

Protecting beneficiaries from their own folly

If you are concerned about how a particular family member (a beneficiary) may use (or misuse) their share of your estate, you should discuss this with us before your will is drafted. Leaving your family members with a significant lump-sum of cash is not the only way to provide them with their share of your estate. There are options such as establishing a protective trust for their share or appointing trustees to manage money on their behalf. These options may ease your concerns.

 

Family members having different needs

If your family members have different needs, you may want to consider adjusting their share of your estate. With family members who have significant health issues or support needs, your obligation to provide for them may be greater.

 

Earlier this year, the High Court made a decision in a case,[1] upholding an earlier decision of the Family Court. That decision increased the proportion of a father’s estate that was awarded to his unwell son by a small amount. His son had been unable to work for several years due to his illness, and incurred costs associated with managing his illness. When his father awarded him a smaller share of his estate than his sister, the court decided this had breached his father’s duty to him. The duty to provide adequately for maintenance and support applied, even though the relationship with his father had been strained and dysfunctional over several years before his father’s death.

 

Repercussions of not providing for your family

If any of your family members have been left out of your will or have not been adequately provided for, they could make a claim against your estate.

 

When such a claim is made, the court can review the circumstances and make an award from the estate to remedy failure to provide adequate maintenance and support. This is why it’s important to talk with us about the drafting of your will. We can help you adjust your will to minimise the possibility of a successful claim against your estate.

 

Estate claims can cause increased distress, conflict and delays during an already challenging time for your family. The legal costs associated with defending such a claim can also significantly reduce the value of your estate.

 

Important to think this through

If you’re tempted to write your wayward son, estranged daughter or irresponsible spouse out of your will, it’s well worth getting advice first. This may spare your family a claim against your estate, and the stress and expense that goes along with such claims.

 

 

[1] Emeny v Mattsen [2024] NZHC 291.

 

 

 

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 Fineprint 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

Who is responsible for managing someone’s affairs?

Estate, Health Issues, House, Kids, Property, Relationships, Retirement
0

Enduring powers of attorney and the transition from attorney to executor upon death

Enduring powers of attorney are legal documents that allow individuals to appoint someone to make decisions on their behalf in case they become incapacitated.

 

There are two types of enduring powers of attorney that someone can put in place:

 

  1. Property: this grants authority over financial and property matters including managing assets, paying bills, and making financial decisions. A person could appoint more than one attorney to act jointly and/or severally and direct that the powers of attorney can immediately come into effect so that the attorney can manage their property while they have mental capacity and continue to act once they become incapacitated. They can appoint a successor attorney to act in the event the first attorney is unable or unwilling to act.

 

  1. Personal care and welfare: this delegates authority over personal matters like health care and consent to treatments. A person can only appoint one attorney at a time, and it can only come into effect when they have lost their mental capacity. A successor attorney can also be appointed.

 

Specific requirements and restrictions can be put on the attorney such as a requirement to consult with or provide information to another person or to only act in relation to specific property matters. The attorney can only act in accordance with the powers given by the enduring power of attorney document. These powers are only to be used when the person who appointed the attorney is still alive.

 

When a person dies, their enduring power of attorney comes to an end, shifting the responsibility of managing their estate to the appointed executors named in their will.

 

Although an attorney may have been appointed to manage the deceased’s affairs when they were alive, the same person may not be appointed as the executor of the deceased’s estate upon their death. It is essential for individuals to understand the transition of responsibilities from enduring powers of attorney to executors upon their death. The attorney will cease to act, and the executors named in the will or appointed by the court step in to manage the deceased person’s estate. This includes handling the distribution of assets, paying off any debts, and ensuring that the deceased’s wishes are carried out according to their will.

 

You should speak to your lawyer to ensure that your affairs are managed how you intend in the event you die or become incapacitated.

New Year – New Will

Estate, Health Issues, House, Kids, Property, Relationships, Retirement
0

The new year is an opportunity to reflect on your life and your wishes for the future, including how you want to provide for your loved ones when you pass away.

 

The most important aspects of your will include the people in charge of your estate (your executors), what happens to your assets, the guardian of your children and your funeral/burial wishes. If you do not have a will or a valid will, then you do not get to decide these aspects for yourself.

 

Having a will is particularly important for parents and those with assets worth $15,000 or more (including Kiwisaver).

 

If you have a will, you should review it regularly to ensure your will is practical, up to date and valid.

 

Is my will valid? Common traps

 

Marriage or Civil Union

Ordinarily, a will is automatically revoked when you marry or enter into a civil union. If you have a will but have since married or entered into a civil union (or intend to in the near future), then you should review or update your will to ensure it is still valid.

 

Divorce or Separation

A separation does not automatically revoke your will. If you have separated and your ex-partner is still in your will, any gifts to them will remain valid unless you have a separation order or a court order dissolving the marriage or civil union.

 

For this reason, your will should be updated as soon as possible post-separation.

 

Witnessing Requirements

There are strict requirements for a will, one of which is having two adult independent witnesses. To be independent, the witnesses cannot benefit under the will or be a spouse, civil union or de facto partner of a person who will benefit under the will.

 

For example, Jane has a will that leaves everything to her son and daughter. Jane prepares her will at home and has her friend and her son’s wife witness her will. Unfortunately, her son’s wife is not independent and therefore the gift to Jane’s son will be void.

 

Circumstances that should trigger a will review

 

If one or more of the following apply to you, it’s time to review your will:

 

  • Family births or deaths;
  • Aging – contemplating the possibility of residential care;
  • Family members moving overseas (especially if they are your executor, as this can add cost and complication to your estate administration);
  • Creation of a family trust;
  • Winding up of a family trust;
  • Buying a property;
  • Change in assets or financial status;
  • Change in relationship status;
  • Change in family dynamics (e.g. estrangement); and/or
  • Simply a change of wishes.

 

Most people will have multiple wills during their lifetime, simply because life is full of change. If you don’t have a will, it’s been a while since you’ve reviewed your will or you’ve had a change in circumstance, we encourage you to speak with your lawyer about your will.

What happens to your children when you separate?

Kids, Relationships
0

Goodwill and good process will help prevent turmoil

The time following a separation can be highly emotional – for you and your spouse or partner, and for your children.

 

In this fraught environment, disputes can easily arise about the day-to-day care arrangements for your children or other vital issues such as where they will live, schooling, medical care, religious/cultural choices and so on. These are formally called guardianship matters.

 

In cases where the children are safe in their respective parent’s care, there are numerous ways in which care arrangements can be resolved and guardianship decisions made, without the need to involve the Family Court. A co-parenting relationship extends well beyond the uncertain period following a separation.

 

The best case scenario? Parents agree to ongoing care arrangements and guardianship matters between themselves and cooperatively focus on what is in the best interests of their children.

 

These best case scenarios, however, are not always possible, especially when disputes arise at a sensitive or acrimonious time for separating parents.

 

Can’t reach agreement?

What happens if parents cannot agree? Either parent can initiate the Family Dispute Resolution (FDR) process:

  • This is a mediation service, without lawyers, that deals specifically with care and guardianship disputes
  • A mediator is assigned to work with both parents, individually and/or collectively, to achieve an agreement, and
  • If agreement is reached, this can be documented in a mediated agreement.

 

If parents cannot reach agreement from the FDR process, then either parent can pursue the matter through the Family Court. Importantly, FDR is a prerequisite to attend the Family Court, unless there are urgent concerns for a child.

 

Some parents rely on third party assistance:

  • In many instances, parents can reach agreement after receiving (and following) advice and guidance
  • Using a third party can give conflicting parents an objective perspective, particularly at such an emotional time, and
  • Such support can be obtained through lawyers, counsellors and/or personal support networks such as family and/or friends.

 

Formalising the arrangements

Once you’ve reached agreement, some parents like (or it may be necessary) to have their children’s care arrangements formalised. This can be done with a parenting agreement; this document outlines the specific care arrangements and/or relevant guardianship provisions for children that both parents sign and (should) adhere to.

 

Alternatively, parents can consent to the terms of their agreement with a parenting order; this is a court-sealed document that collates the agreed terms and can be enforced if there are unconsented breaches.

 

Whatever the care provisions, it is in a child’s best interests for arrangements to be tailored to their age, stage and needs. Such arrangements should evolve with each child’s needs and stages and be regularly reviewed. Lawyers and counsellors who specialise in family and child disputes are often well equipped to provide advice on age appropriate arrangements and options.

 

Last resort is the Family Court

A Family Court hearing can be an expensive process – not only financially, but it can also take a significant toll emotionally and on the time of both parents, their children and their support networks. It also involves placing the decision regarding your children in the hands of a third party, the judge.

 

Obviously, having the parents cooperate and reach agreement is always going to be the best outcome for a family. However, there will be some situations where using the Family Court is necessary and preferred, such as when parents cannot reach agreement, where there are safety concerns for a child in either (or both) parents’ care or if urgent intervention is required (for example, preventing a child from being taken out of New Zealand).

 

If you are separating and need guidance about arrangements for your children, it’s important to get advice from a specialist family lawyer. Please don’t hesitate to contact us if this happens to you.

 

 

 

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 Fineprint 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

Decision in ‘Alphabet case’ could change succession landscape

Kids, Property, Relationships, Trusts
0

Significant issues raised

In June 2023, the Supreme Court heard the ‘Alphabet case.’ To understand the significance of what is at stake in this case, it is worth considering the facts that gave rise to the litigation and the High Court’s decision.

 

Abuse of A, B and C by Mr Z

Mr Z and Ms J married in 1958 and separated in 1981. They had four children: G (1960-2015), A (b 1961), B (b 1963) and C (b 1971).

Mr Z severely abused Ms J and the children physically, psychologically and sexually. A was repeatedly raped between the ages of seven and 13, but she did not disclose the abuse to anyone until 1983. She did not tell her mother until 1991. A was unable to face taking action against Mr Z.

Mr Z died in 2016 leaving an estate valued at $46,839. He had, however, settled a trust two years previously for the express purpose of preventing his family from “chasing” his assets, to which he had gifted his home and investments worth $700,000. The children were not beneficiaries of Mr Z’s estate or the trust; rather, the trust’s beneficiaries were the children of Mr Z’s former partner.

 

Children’s claims

That should have been the end of the matter because the Family Protection Act 1955 (FPA), that allows children to challenge their parents’ wills, only applies to assets a deceased owned in their personal names; it doesn’t apply to trust assets.

However, the children argued that their father owed them a fiduciary duty and, that because of the abuse, he continued to have obligations to them even after they became adults. They said that Mr Z had breached that duty when he gifted his home and shares to the trust in order to prevent his children from claiming against those assets under the FPA.

 

In the High Court

In the High Court,[1] Justice Gwyn agreed with the children and said they could bring claims under the FPA against the assets that had been transferred to the trust.

The trustees of Mr Z’s estate and trust appealed to the Court of Appeal.

 

Court of Appeal divided over case

The Court of Appeal[2] accepted that Mr Z owed a fiduciary duty to his children and that he breached that duty when he abused them. The issue was whether Mr Z continued to owe those fiduciary duties to his adult children at the time he gifted his assets to the trust.

The majority of the Court of Appeal judges disagreed; they said that the appropriate remedy for the breach of fiduciary duty was equitable compensation (and the children had run out of time to make that claim).

However, one judge said that in some circumstances the inherently fiduciary relationship between a parent and a child may continue after a child becomes an adult (for example, in the case of a severely disabled child).

The judge (who was in the minority, so their views don’t affect the final outcome) decided that A’s position, owing to the abuse she suffered, was analogous to that of a disabled child. Mr Z therefore had a continuing duty to take steps to remedy, as best he could, the enormous harm he inflicted on A, not only when she was living in his care, but also during her adult life. This meant he was required to protect her interests when considering gifting his principal assets to the trust, and failed to do so.

 

Decision awaited

The Supreme Court will tell us whether Mr Z owed a continuing fiduciary duty to A into her adult life because of the abuse he perpetrated on her. Many commentators believe that it is stretching the concept of a child/parent fiduciary duty too far.

If legal principles cannot evolve, however, a situation may emerge where extraordinarily meritorious claimants are left with no effective relief, simply because too much time has passed, and/or because their parent transferred their assets into a trust to prevent claims after they have died.

That raises two questions:

  1. Should time count against people such as A, who have been so seriously abused by a parent?
  2. Should parents be allowed to transfer their assets into a trust in order to prevent their children making claims after their death?

[1] [2021] NZHC 2997.

[2] [2022] NZCA 430.

 

 

DISCLAIMER: All the information published in Trust 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 Trust 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

School boards of trustees

Kids, News, Uncategorized
0

Significant obligations and responsibilities

Every three years, state and state-integrated schools hold elections for parent and staff representatives to join the governing bodies for their schools – the board of trustees (BoT).

School trustees are, however, sometimes confused or unsure about their role, and their obligations and responsibilities. The BoT is not like the PTA committee that co-ordinates parent helpers, organises school events, fundraises, etc.

A BoT role is like that of a company director. Although a school is not a commercial business, it should have robust governance processes in place that align with those of a well-run commercial business.

Health and safety aspects

The BoT is responsible for the governance and management of the school. It has discretion to manage the school within the parameters of the laws of New Zealand.

Alongside this governance approach, the Education & Training Act 2020 (E&TA) sets out the BoT’s obligations under the health and safety workplace laws. The Ministry of Education advises that:

School boards and early learning organisations are considered a PCBU (Person Conducting a Business or Undertaking) and must, so far as is reasonably practicable, provide and maintain a work environment that is without health and safety risks.

(Ministry of Education website)

A BoT is the legal entity that is the PCBU. If there is a health and safety failure at a school, the BoT could potentially face prosecution by WorkSafe under the Health and Safety at Work Act 2015 (HSWA).

The best possible policies, and rigid adherence to them, may still not prevent accidents or injuries from occurring. The potential always exists that actions may be taken that do not comply with the policies and issues that arise. In this situation, it would be fair to say that responsibility would fall on those responsible for those non-compliant actions if the obligations of the BOT are shown to have been fulfilled.

Even if the BoT delegates responsibility for these policies, it has over-arching responsibility for the school staff who are operating under those policies. The BoT must take an active role to ensure that any people under its control are safe, and that suitable guidelines are in place to identify and mitigate the risks being faced. Ultimately, it remains an obligation of the school and BoT to be responsible for their students’ safety.

EOTC risks

Out of school activities or education outside the classroom (EOTC) should be managed and controlled by reference to the BoT-approved health and safety policies.

To be effective, the policies must have measurable risk assessment components. For example: what are the risks and how serious is each risk? What is the likelihood of students and accompanying adults being hurt? How can these risks be managed by the activity leader? Does the school’s policy have a tool for assessing risk and the seriousness of the risk?

When things go wrong on an EOTC trip and a participant is badly hurt, there will be investigations by the police and WorkSafe and, if someone dies, the coroner. It is equally possible that, as the result of those investigations, charges could be laid if breaches have occurred.

Prosecutions

Two recent cases[1] have shown that even with a successful WorkSafe prosecution, the fines awarded have either been reduced to $0, or set at a notional figure and payment has not been sought.

Regarding personal liability of BoT members, both the E&TA and HSWA contain exclusions of personal liability for board members provided that any act or omission was carried in good faith with the performance, or intended performance, of the BoT.

Trustees must fully understand their role

The BoT role is not one to be considered lightly, although training and guidance is available so trustees fully understand their responsibilities. BoTs are full of amazing and dedicated people who are doing their best for their community. A crucial part of that role is ensuring the everyday safety of the students and employees at their school.

Trustees must be aware that with the role comes responsibility and accountability. BoTs must manage their duties accordingly and fulfil all legal requirements.

[1] WorkSafe v Tauraroa Area School Board of Trustees [2022] NZDC 21558 and WorkSafe v Forest View High School Board of Trustees [2019] NZDC 21558

 

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 Fineprint 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

Who are the ‘children of the settlors’?

Kids, Property, Relationships, Trusts
0

Make it clear in the trust deed

In the recent case of Re Merona Trustees Ltd[1], the High Court was asked to determine who the beneficiaries of a trust were as it was not clear who was intended by the phrase the ‘children of the settlors’ that was in the trust deed.

Background

The trust settlors, Merv and Rona, had two daughters together – Lilly and Miffy. Rona also had two sons from a previous marriage when she was very young – Rob and Ray. When Rona’s first marriage broke down, and in the absence of social welfare benefits, she could not afford to keep her sons, and they both went to live with different extended family members. Rob had occasional contact with Rona and, after Rona’s marriage to Merv, Rob was raised by them both. Ray, however, was raised by extended family and had no contact with Rona. It was only as an adult that Ray came to know Rona and the wider family.

Interpreting the trust deed

Rona died in 2013. Merv died in 2020. After Merv’s death, a question arose as to who were the beneficiaries of the trust they had settled.

The question for the High Court was interpreting the trust deed that referred to ‘the children of the Settlors’. Did it mean:

  • The two natural children of Merv and Rona together, being Lilly and Miffy
  • The two natural children of Merv and Rona, as well as Rona’s son Rob, who was raised as a member of Merv and Rona’s family, or
  • The two natural children of Merv and Rona, as well as both of Rona’s sons, Rob and Ray?

High Court hearing

The court heard two main competing arguments.

The trustees primarily argued that ‘the children of the settlors’ meant Rob, Lilly, and Miffy; the ‘children’ did not include Ray. They said that the context in which the trust was established was highly relevant to the interpretation of the trust deed. In particular, a predecessor trust had been established in 1986 before Ray connected with Rona as an adult. The trust in question was settled in 2002, when Rob, Lilly and Miffy were in their forties and fifties.

Even in 2002, after coming to know Ray, Merv and Rona presented to their professional advisors as a couple with three children – Rob, Lilly, and Miffy. Their accountants recorded Merv, Rona, Rob, Lilly and Miffy as the beneficiaries of the trust. The family’s lawyers also understood Rob, Lilly and Miffy to be Merv and Rona’s three adult children. Merv and Rona also signed memoranda of guidance in relation to the trust, that were effectively instructions to the trustees as to their wishes. These memoranda recorded their wish that ‘our children’ benefit from the trust; Rob, Lilly, and Miffy were named, but Ray was not.

Finally, Rona’s will left a bequest each to Rob, Lilly, and Miffy as her children, and an equal but separate bequest to Ray who was described as her ‘birth son.’ She also left him a letter which asked that he be content with this bequest. The court found that by implication, she did not see him as eligible to benefit from the family wealth which was otherwise held in the trust.

On the other side, Ray’s lawyers argued that Ray was also a beneficiary of the trust. They said that once Ray had been reunited with Rona, they developed a close relationship with each other and the wider family. Although Ray was not close with Merv, Ray was included in family gatherings including at Christmas and birthdays. Ray was treated equally with Rob, Lilly, and Miffy in Rona’s will, and he was a part of the family.

The High Court considered that Merv and Rona had brought Rob up as a child of their own, and that it was ‘inconceivable’ that they would have intended to exclude him as a beneficiary of the trust. The documents signed at the time, and subsequently, showed that Merv and Rona thought that Rob was a beneficiary of the trust. In the context of their family, ‘the children of the settlors’ plainly included him. The only question was then whether Ray was also included.

Decision

The court found that the language of the trust deed could be interpreted to include Lilly and Miffy as natural children of the settlors, as well as Rob, who was raised within the family unit as though he was a natural child of both Merv and Rona.

The wording of the trust deed, however, could not be interpreted to include Ray. While Ray enjoyed a good relationship with the family when they reconnected, he was not raised as a part of Merv and Rona’s family unit.

Care must be taken

This decision emphasises the importance of clarifying who is intended to be a beneficiary of a trust at the outset. This is particularly necessary in the context of blended families where there may be reasons to differentiate between classes or groups of children.

In this case, the lawyers and accountants were not necessarily aware that Rob was not a child of Merv and Rona. It is possible that if they had known at the outset, the trust deed would have been drafted in a way that made it clear who the beneficiaries were.

If you are concerned about the wording of your trust deed and how it may affect your children, please be in touch to review your trust deed.

[1] Re Merona Trustees Ltd [2022] NZHC 1971.

 

 

DISCLAIMER: All the information published in Trust 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 Trust 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

Bank of children

Estate, House, Kids, Property, Relationships, Retirement, Trusts
0

Children helping their parents

Most of us have heard of the expression ‘Bank of Mum and Dad’ where parents help fund their children to get onto the property ladder or with another investment.

 

What happens in the reverse situation, however, where children become the ‘bank’ and assist their parents financially?

 

Why would this happen?

In recent years, parents may have assisted their children in allowing their property to be used as security for borrowings by their children, they could have helped fund the deposit for a child’s first property or provided financial support in a number of other situations.

 

Sometimes, the boot is on the other foot when parents retire or have their income reduced. That may be the time for children to repay the favour and assist their parents.

 

Family-wide discussion

If children are considering helping out their parents financially, we recommend that you have a family-wide discussion on what sort of assistance could be provided.

 

It is important that the entire family is aware of any proposed arrangements, especially if not all of the children are going to be involved. Those children who are assisting may become part-owners of their parents’ property as part of the agreement.

 

There are various family arrangements that could apply but some children may already own their own home. Other children may already be living with or intend moving in with their parents. All of these circumstances will need to be considered.

 

Contact your parents’ lender

Presuming the transaction will be funded by a loan, rather than cash from the children to the parents, the next step is for the parents to contact their lender (usually their bank) to discuss its requirements. The lender may require the current lending for the parents to be discharged and an updated finance application in the name of all of the joint owners with new loan documents. Often, the lender requires the added security and details of a child’s income for the application.

 

See your lawyer

To prevent any future difficulties and dissention in the family, it is important to arrange suitable documents such as a property sharing agreement. This records each party’s responsibility for who and how the family will use the property, loan repayments, maintenance of the property, rates, insurance and a sale process for the property should there be a breakdown in the parties’ relationship or if one of the parties wishes to sell.

 

A property sharing agreement will be the guiding document for the arrangement. As well as ensuring you have a will in place, the agreement can cover what will happen to the parent’s share of the property when they die. The last thing parents want is a falling out between their children.

 

Other things to consider

Other considerations for both parents and children include:

  • The children’s ability to use KiwiSaver funds in the future to purchase their own home
  • Current and future relationships of the children
  • Parents moving into a rest home and how subsidies could be affected
  • The alternative of a reverse mortgage, and
  • Review of wills and enduring powers of attorney.

 

Conclusion

With increases in interest rates and the rise in the cost of living, more retiring parents may face the difficulty of retaining their family home. Rather than the option of a sale, children may be able to assist with the retention of their parents’ home and keeping past memories alive.

 

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 Fineprint 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

Shared parenting

Kids, Property, Relationships
0

Relocating the children without consent

Deciding to move to a new location can be exciting and bring a sense of renewal, particularly after a long cold winter and enduring these Covid years.

 

However, if you are separated with children, what happens to ongoing parenting arrangements in these situations? Can you move with your children without agreement from the other parent?

 

If you do this, it is referred to as a ‘unilateral relocation’, and it can result in applications filed and court orders sought. Both parents are considered a guardian of the children, regardless of how much contact one of the parents may have. There are certain decisions about a child that are ‘guardianship decisions.’ You must discuss these with the other parent. Topics to talk about include where a child lives, where they go to school, any medical decisions and so on.

 

The process

Whatever the reasons for you considering a move, the best option is to discuss this openly and honestly with the other parent. Understandably, the idea of your children moving away can be difficult for the other parent.

 

It may be that you can reach an agreement between the two of you. If it becomes difficult, you can get help initially with mediation forums outside of the Family Court.

 

If you cannot agree, you can file an ‘application to resolve a dispute between guardians’ in your local Family Court and the court will decide for you. The court will look at specific factors, including:

  • What is in the best interests of your children
  • Your children’s relationship with you both
  • What contact arrangements would look like for the other parent, as the court recognises the importance of your children having a relationship with both of you
  • The ages of your children, and
  • Your children’s views on the move.

 

Don’t want them to move?

If your children have not yet moved, and you don’t want them to, you can file an application in the Family Court to stop the children from being moved within New Zealand. You can also ask the court for an ‘order preventing removal’ to stop the children from leaving New Zealand. These applications can be filed on a ‘without notice’ basis, where you ask the court to consider the application without first hearing from the other party.

In this application, you ask the court to make an order that states the children cannot be removed from a specified location (within New Zealand or from New Zealand). With this order in place, it limits your children being removed until further investigations could occur or agreement is reached.

 

What if they are moved anyway?

If the children are relocated without your consent, you can apply to the Family Court for the children to be returned to where they had been living. You would file again for a guardianship order that your children reside in a particular place, and then file for a parenting order. The court will generally favour the status quo location of your children, which is where they were

living for the most recent period before they moved. In determining these applications, the court will always consider what is in the welfare and best interests of the children. This is a paramount consideration.

 

Children’s best interests come first

It is important that your children are happy and settled, and that their interests come first. Ideally both parents will work together to ensure arrangements for their children’s welfare are agreed harmoniously. If, however, agreements can’t be reached, there are options for court intervention. It is wise to try and avoid that as it can be very expensive and take a long time. Most of all, it can affect your children’s relationship with both parents – and no one wants that.

 

If you are concerned about where your children are living, or that they could be moved without your consent, please be in touch with us straight away so we can avoid too much heartache for everyone.

 

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 Fineprint 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