Edmonds Judd

family

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


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

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


When Lotto winners fall out

The importance of who gets what

Winning a Lotto prize is always a reason to celebrate; dreams can be realised and life can be more comfortable. Banking a lump sum can, however, give headaches to families as they not only grapple with newfound wealth, but also how it could be distributed amongst family members. A recent case[1] concerned a family that fell out over its $250,000 Lotto win.

The family comprised Mrs Kaniamma Winter, her children Angeline Narain and Ajnesh Chinappa, and Ajnesh’s wife, Vilashni Chinappa.

In January 2009, Angeline bought a Lotto ticket. That ticket was in Mrs Winter’s possession when she went shopping with her daughter-in-law, Vilashni, and checked the ticket numbers at a Lotto shop. Even though Mrs Winter said the ticket was her daughter Angeline’s, she completed a claim form in her own name on the spot; Mrs Winter used Vilashni’s bank account details as she could not remember her own.

When Lotto deposited the winnings, Vilashni transferred $220,000 to a bank account in the names of Mrs Winter and Angeline, leaving $30,000 in her own account. Mrs Winter signed a gifting certificate for this $30,000; this sum was then transferred to the joint bank account that held the rest of the winnings.

 

Property purchase

The family, then living in a Kāinga Ora property, decided to use their Lotto winnings to buy a six-bedroom home in Papatoetoe. The deposit of $36,000 was paid from the joint bank account (in the names of Mrs Winter and Angeline), but the property was purchased in the names of Ajnesh and Vilashni Chinappa, who borrowed $288,000 to assist with the purchase. The balance of $37,046.70 that was required to settle was paid from the joint account.

The four family members moved into the property and lived there harmoniously. Angeline contributed generously to the maintenance costs and improvements – until Angeline’s new partner, Daniel Prasad, moved in. When relations within the family broke down, Angeline registered a caveat; the Chinappas responded by trespassing Mrs Winter, Angeline and Daniel from the property. The three were forced to rent elsewhere for 10 years while the Chinappas enjoyed exclusive occupation of the Papatoetoe property. The situation deteriorated to the point that the Chinappas filed court proceedings in the High Court.

 

High Court

The High Court, “faced with completely contradictory narratives” about who owned the Lotto ticket, the status of the gifting certificate and other contributions, found that:

  • Angeline owned the Lotto ticket
  • Angeline had contributed 20% of the purchase price of the Papatoetoe property
  • It was reasonable for Angeline to expect an interest in the property
  • Angeline had contributed generously to furnish and upgrade the property, and
  • The gifting certificate was drafted solely to meet the bank’s requirements, the money was not intended to be a gift and it could not be used to suggest the ticket was Mrs Winter’s.

The High Court awarded Angeline a 50% interest in the house, after deduction of the mortgage amount, on the basis of a constructive trust. The decision to award 50% rather than 20% was made on the grounds that Angeline had not had the benefit of occupation for 10 years. The Chinappas appealed this decision.

 

Court of Appeal

The Court of Appeal agreed that Angeline owned the Lotto ticket, had contributed 20% of the purchase price, and made further direct and indirect contributions to the property. Angeline’s indirect contributions to the property, however, were not materially greater than that of the Chinappas, meaning Angeline could not reasonably expect a greater share than the 20% (of the full market value) she contributed under a constructive trust.

 

A twist in the tail

The Court of Appeal then took a very interesting step that was to award occupation rent to Angeline. This was to compensate Angeline for the 10 years the Chinappas had excluded her from occupying the property that was in breach of her reasonable expectation that she would both own a share in the property and be able to occupy it.

The Chinappas were directed to compensate Angeline by paying her occupation rental, calculated at 20% of the market rental for the property, for the period of her exclusion. At the average weekly rental for Papatoetoe, that would amount to an additional $67,600 – a much lower amount than that awarded by the High Court.

 

Multi-generational housing is becoming increasingly common as it provides an excellent opportunity for families to support each (for example, through providing child care and, later, elder care). Caution is needed, however, to ensure there is a written agreement that records:

  • The basis on which funds are contributed to the purchase, maintenance and outgoings on the property
  • Who is occupying the property, and, most importantly
  • How the parties will exit the arrangement.

If you are considering multi-generational housing, do talk with us early on so we can advise on an agreement that is fair to all parties.

[1] Chinappa v Narain [2022] NZCA 183.

 

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