Edmonds Judd

estate

Refusing an inheritance

What options does a trustee have?

What is the trustee of an estate supposed to do when a beneficiary will not accept their inheritance?

This was the question faced by Mr Holland, executor and trustee of the estates of Margaret Glue and her husband, Ian Glue.[1] Margaret died in 2005, leaving a life interest in her estate to her husband Ian, and her remaining estate to her two sons. Ian died in 2009, also leaving his estate equally to his two sons, David and John.

 

Best efforts to contact beneficiary

John received his inheritance shortly after Ian’s death in 2009; John died in 2019. David, however, was unable to be contacted, despite Mr Holland’s efforts to contact him for well over a decade. His inheritance was worth approximately $300,000 as at August 2022. Mr Holland had written to David advising him of his inheritance and asking for a bank account number so the funds could be deposited.

David lived in London. Mr Holland had arranged for a professional investigator to confirm that David lived at the address known to him, and where correspondence had been sent. It was confirmed that David did live at that address; this was understood to be local authority housing (similar to ‘council housing’ in New Zealand).

 

Actively avoiding contact?

There was a suggestion that David may have wished to avoid receiving his inheritance as it could have disqualified him from living in that property. Welfare or social housing benefits are means-tested in many countries; it is common for these to become unavailable if a recipient’s assets exceed a certain threshold.

It is possible that David did not want to receive his inheritance because he thought he would be better off with stable and affordable housing, rather than receiving his inheritance that would then be dissipated on more expensive housing and eventually leave him in the same position. There was no specific evidence on the point, however, as David would not engage with the trustee, so this was only conjecture.

 

What next?

Mr Holland had held the inheritance for more than a decade and he wanted to be freed from his trustee obligations to David. Mr Holland applied to the High Court for an order[2] asking for permission to distribute the inheritance to John’s children, on the basis that David was ‘missing’ and his entitlement should be disregarded. Mr Holland swore an affidavit that he had known Margaret and Ian Glue for many years, and they would have wanted their descendants to benefit from their estate. He thought that Margaret and Ian would have preferred that the beneficiaries of John’s estate (i.e. his children) receive the inheritance, than for the money to sit indefinitely in case David eventually decided to accept it.

The High Court noted that section 136 of the Trusts Act 2019 applied to beneficiaries who are ‘missing.’ It said that David was ‘decidedly not missing’; he could be found, but he simply would not engage with the trustee or accept his inheritance. Initially the court proposed that the money be paid to the Crown to be held in case David ever made a claim, but it was persuaded that this was not what Margaret and Ian would have wanted.

The High Court found that even though David was not missing, section 136 applied anyway because:

  1. The trustee had taken reasonable steps to bring the inheritance to David’s attention, over more than 10 years
  2. More than 60 days had passed since the trustee’s last attempt to contact David, and
  3. In the circumstances, it was reasonable to disregard David’s position and direct that the inheritance be paid to John’s estate (and therefore to his beneficiaries), as though David did not exist.

 

The lessons in this case

While it is unusual for a beneficiary to fail to claim their inheritance, it can happen, and they may have good reasons for doing so. That can, however, make things difficult for an executor or trustee who is holding funds on their behalf.

This case is a good reminder that a trustee who is in this situation may have other options and will not be forced to hold the funds indefinitely.

[1] Re Holland [2023] NZHC 464.

[2] Under section 136 of the Trusts Act 2019.

 

 

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


It can sometimes be confusing when we talk about an attorney (for an Enduring Power of Attorney – EPA) and an executor who is appointed in your will and who looks after your estate when you die. The difference, as outlined below, is literally a matter of life and death.

 

An EPA

An EPA is used when you may not be able to make decisions for yourself. For example, you may become very unwell, or unable to communicate important decisions (you could be away from email or phone access for some time), leading in either case to an inability to make important decisions. Your attorney is the person you trust to act in your best interests – with your property and your wellbeing.

 

There are two types of EPA – property, and personal care and welfare. Your attorney can be the same person/s or you can choose different people for these two roles.

 

An attorney’s role

Your property attorney can manage your finances, they can sell your house if necessary and even buy Christmas and birthday gifts for specific people. Your personal care and welfare attorney can make decisions about your medical care, help choose a rest home if you need to move, and consult with other family members about your health.

 

Most importantly, your attorney makes decisions in your best interests; they only have as much power as you give them in your EPA. Your personal care and welfare attorney cannot, for example, withhold life-saving medical treatment; it is absolutely up to you to decide what your attorney can, and cannot, do.

 

Who needs an EPA?

EPAs aren’t just for the elderly. They are also for the young man who has had serious injuries in a car accident  and struggles with his memory, and for the 50-year-old who is working offshore and wants her partner to sign documents on her behalf.

 

Without an EPA, nobody can make decisions on your behalf if you can’t make them for yourself. Your parents, spouse or children don’t automatically have this right. The only way around this is to spend thousands of dollars working through the Family Court to get an attorney appointed.

 

A will

A will is the document that states where you want your assets to go after you die. Your will appoints an executor, or several executors; they will carry out the wishes that are stated in your will.

 

Executor’s role

An executor works with us to administer your estate and carry out the terms of your will.

 

Your executor calls in your assets and pays any money you may owe. They ensure, for example, that your daughter gets your engagement ring, your life insurance pays off your mortgage and they invest the rest of your money until your children turn a specified age and can get their inheritance.

 

Get your affairs in order

Without a will, your assets will be distributed according to the intestacy rules that govern who gets what from what your estate. Without a will, your family may not get what they expect or what you want which could be very upsetting for them.

 

The only wrong time to get a will and an EPA is when it’s too late. Take back the power to decide where your assets go when you die, and save yourself and your family much heartache. Get in touch with us about preparing your will and EPA today.

 

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