Edmonds Judd

Retirement

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

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.


Advance directives

Right to choose your healthcare

Healthcare choices can influence the quality of our lives. An advance directive can provide direction on the care you consent to, and do not consent to, when you are incapable of expressing your wishes.

An advance directive can be used when you do not wish to consent to a particular form of healthcare or where you wish to receive a certain form of treatment in situations where you are unable to provide instruction such as a blood transfusion or resuscitation. Your healthcare provider will consider your advance directive when you are unconscious, incapacitated or otherwise unable to provide informed consent.

Making an advance directive

There are a variety of ways to make a directive. There are online templates (see the footnote for one example[1]), you may wish to do your own using these as a guide (remember to sign and date!) or you may want to discuss this with us.

Is it valid?

Your advance directive must be expressed in clear terms. Although your advance directive may be made orally or in writing, a written directive will provide greater certainty and clarity.

Advance directives must be made at a time when you have mental capacity and are not unduly influenced by another person. You may have to show that you have received sufficient information from your healthcare provider to understand the implications of your decision, particularly in high-risk situations such as a critical accident. The information you will need to provide to meet these requirements will depend on the circumstances of your care.

You should send your advance directive to your doctor and other health professionals who look after you. Your family should also have a copy.

Not being able to use your advance directive

Your healthcare provider may respect your advance directive if they are aware of it. There are instances, however, where healthcare providers may not use your advance directive even if they are aware of it. An example is when a health professional is obliged to provide compulsory treatment for mental disorders under the Mental Health (Compulsory Assessment and Treatment) Act 1992.

There are also certain forms of treatment that you cannot consent to. For example, your healthcare provider cannot be compelled to assist in your death or to provide treatment that is not clinically available.

If your advance directive is uncertain, based on incorrect information or if it is unclear whether it applies to a given situation, your healthcare provider may decide to provide treatment if they believe it is in your best interests. In this instance, your healthcare provider must attempt to obtain your consent. This also applies if there is insufficient time to determine whether you have an advance directive, such as if there is an emergency or an accident. You will be given the appropriate medical care that is required at the time.

Enduring power of attorney

You may have appointed an attorney to make healthcare decisions on your behalf through an enduring power of attorney for personal care and welfare; your attorney must act in your best interests. As your advance directive is a representation of your interests, your attorney is likely to uphold the directive.

However, your attorney has a discretion on whether to uphold your directive. Ultimately, whether your advance directive will be respected will depend on its certainty and on the circumstances of your care. If your attorney decides that treatment or a refusal for treatment will better protect your welfare and best interests, they may instruct your healthcare provider to act contrary to your advance directive. It is, therefore, critical to discuss this with your attorney to ensure they understand your healthcare preferences.

How can we help?

With more healthcare options available, it is important that you have the best opportunity to decide what healthcare you would like to receive. Although there is no requirement for a lawyer to be involved in the process, we can help to ensure that your advance directive is clear, certain and applicable in most circumstances.

If you have not received treatment or have received treatment that you did not consent to, you can lodge a complaint with the Health and Disability Commissioner. If you need further guidance, please do not hesitate to your lawyer.

[1] www.myacp.org.nz/your-plan

 

 

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


Bank of children

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


Make a new will and EPAs when you separate

Many people who have endured a relationship break up know it can be exhausting – mentally, emotionally, physically and, ultimately, financially. You could be forgiven, then, for thinking the priority is to get the agreements signed or Court Orders made. However, what is often overlooked as one of the first steps, and yet so imperative to protect your assets and your new spouse, partner or children in the future, is updating your will and enduring powers of attorney (EPA) to reflect your new relationship status.

 

Why update your will?

There are some very good reasons why you should update your will if you separate, including:

  • Your ex-spouse/partner may still benefit under your will as it continues to be effective after you separate unless:
  • You remarry or form a civil union
  • You make a new will, or
  • The court orders otherwise.
  • If your marriage or civil union hasn’t been formally dissolved, everything remains the same (which is why you need to change your will after separation). If your marriage or civil union has been dissolved, however, your ex-spouse/partner can neither be an executor nor a beneficiary.

 

Those people whom you would like to benefit (such as your new spouse or partner, children or grandchildren) may have to share your estate with your ex-spouse/partner unless they can persuade them to waive their entitlement under your will by entering a deed of family arrangement. If your ex-spouse/partner refuses to waive their entitlement then your family would need to resort to a claim in the Family Court for additional provision from your estate, such as:

  • A claim by your new spouse/partner, children or grandchildren under the Family Protection Act 1955, or
  • A claim by your new spouse/partner under the Property (Relationships) Act 1976.

 

None of the above options will be easy, and all of them could be lengthy, litigious and expensive. If you wish to ensure those people you would like to benefit when you die do in fact benefit, your first task should be to instruct your lawyer to make a new will that reflects your newly separated situation.

 

Appointing a testamentary guardian?

If you separate, you can ensure someone you trust will look after your children’s best interests and welfare after you die by appointing a ‘testamentary guardian’ in your will. Your testamentary guardian will have the power to make guardianship decisions about your children.

 

This is particularly important if any other legal guardians (such as your children’s other parent or existing court-appointed guardians) are not so suitable.

 

Appointing a testamentary guardian gives that guardian the right to apply for day-to-day care, it does not necessarily mean they will have the day-to-day care of your children after you die. However, if the testamentary guardian was the primary caregiver prior to your death, and it is not in the children’s best interests and welfare to be placed in the care of any other legal guardians, then the court may well grant the testamentary guardian day-to-day care.

 

A testamentary guardian should be someone you consider a good role model for your children. That person should be in the best position, financially and emotionally, to help care for them, be in good health and be able to ensure continuity of care for your children so they are not uplifted from their education, social group or community. Make sure you talk with your proposed guardian to ensure they can tick all these boxes before making this appointment in your will.

 

Why update your EPA?

If you appointed your ex-spouse/partner as your attorney in respect of EPAs for personal care and welfare and/or property, this is also not automatically revoked when you separate. It’s a similar situation as overlooking making a new will when you separate – retaining an out-of-date EPA could create a very awkward family reunion if your ex spouse/partner remains responsible for making decisions about your personal matters (which doesn’t include decisions about your children) if you lose mental capacity.

 

If you do not revoke your EPA after you separate, and subsequently lose mental capacity, unless the appointment of your ex spouse/partner ceases (because your ex dies, becomes mentally incapable, bankrupt, or files a notice in court under the Protection of Personal and Property Rights Act 1988), the only option to remove an attorney is for your family to apply to the Family Court.

 

The better option? Revoke your EPAs and make new ones with your lawyer at the same time you update your will.

 

Do it sooner rather than later

Understandably, the idea of more legalities after a separation can be daunting and easily pushed to the back of your mind. Ignoring these issues may be easy to justify after the rigours of a separation. Ultimately, however, by not being thorough post-separation, which includes re-arranging your estate planning, you are leaving a potentially complex and expensive legal headache behind for your loved ones and much uncertainty for your children.

 

Get onto this sooner rather than later – the risk isn’t worth it.

 

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


Gift or loan?

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


Comparing with Britney Spears’ conservatorship

In the Spring 2021 edition of Trust eSpeaking, we looked at whether someone in New Zealand could end up in a similar situation to American entertainer Britney Spears. Britney was under a conservatorship (or guardianship) arrangement that was established against her wishes.

Britney Spears’ conservatorship has now been formally ended. Since then, she has made a number of specific allegations against her conservators including these four points:

  1. She was paid $2,000 per week, despite earning millions per year; this was less than her conservators were paid
  2. Her conservators were unwilling to allow her to marry
  3. Her conservators required her to use contraception so she could not become pregnant, despite her wanting to start a family, and
  4. Britney was forced to work long hours, against her wishes, and despite her sometimes being very unwell.

Could any of these things have happened in New Zealand under the Protection of Personal and Property Rights Act 1988 (PPPRA)? This legislation allows for the appointment of property managers and welfare guardians to make decisions for people who are unable to make decisions for themselves.

The PPPRA also contains what is known as the ‘minimum intervention principle’. When making orders, the court must make the least restrictive intervention possible in a person’s life. Any orders which are made must enable that person to exercise and develop any capacity they may have, to the greatest extent possible.

Let’s look at the four major issues brought up by Britney to illustrate how they would be dealt with in New Zealand. We will call the property manager, Aroha; the welfare guardian, Sam; and Jane is the person whose affairs they manage.

Spending allowance

In New Zealand, Aroha could provide an allowance for Jane. An allowance will help ensure Jane does not spend all of her money and jeopardise her future wellbeing; this allowance will usually be proportionate to Jane’s assets and income. If Jane asks for an increased allowance, the funding for which is available and can be responsibly released, Aroha may well release that money in accordance with the minimum intervention principle.[1]

Aroha can be reimbursed for her out–of-pocket costs, but will not usually be paid for her time administering Jane’s affairs unless the Family Court directs this.[2] Usually only lawyers or other professionals would be paid to act as property manager — not family members.

Marriage

In New Zealand, marriage is not just a social issue; it is a decision that has significant consequences for property under the Property (Relationships) Act 1976. Sam, as Jane’s welfare guardian, may not sign marriage documents on Jane’s behalf nor apply for a divorce for Jane. Marriages have been declared void on the basis that a person did not have sufficient capacity to understand the implications of their decision, particularly the property consequences.[3]

If Jane wants to marry, and given Sam cannot sign marriage documents on her behalf, Jane could approach the Family Court for a capacity assessment and a determination as to whether or not she had capacity to understand the consequences of her decision.

It is possible that Jane may still be able to enter into a de facto relationship; as with a marriage this may also have consequences relating to any property Jane holds.[4]

Medical decisions

Sam can make medical decisions for Jane. It is possible for Sam to decide that Jane should use contraception. If there are concerns about Jane becoming pregnant, the court will usually order long-term reversible contraception rather than sterilisation, in accordance with the minimum intervention principle.[5]

If Sam thought it was important for Jane to use contraceptives, Sam should consult Jane to discuss her wishes. The court might hear from all parties if Jane did not use contraception.

If there was no risk of sexual activity then contraception might not be necessary. If Jane was in a relationship and wanted to have children, the court would consider her capacity to make that decision and direct accordingly.

Working

Jane’s property manager (Aroha) and welfare guardian (Sam) are required to have her best interests at heart. If Jane does not want to work, and is financially secure, it is unlikely that either Aroha or Sam could force Jane to work against her will – even if Jane could generate a substantial income for herself.

Could Britney’s situation arise in New Zealand?

It seems much less likely that someone in New Zealand such as Jane would end up in Britney’s position.

The safeguards discussed in the Spring 2021 edition of Trust eSpeaking would go a long way towards protecting Jane from suffering at the hands of Aroha or Sam. Many of Britney’s specific complaints simply are not permitted under New Zealand law, and others would depend on her capacity. If Britney had capacity to make any specific decision, she would be able to make it herself.

 

[1] Section 28, Protection of Personal and Property Rights Act 1988.

[2] Ibid, Section 50.

[3] X v X [2000] NZFLR 1125; see also Re W [1994] 3 NZLR 600.

[4] See the discussion in E v E (High Court Wellington, CIV-2009-485-2335, 20/11/2009,
Simon France J) at [30]-[35] and [57]-[60].

[5] See the discussion in Darzi v Darzi [2014] NZFC 359 at [32]-[37], although sterilisation was ultimately ordered in that case.

 

 

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


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 Childrens Relief Fund [2018] NZHC 466.

 

 

 

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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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