While the Government mulls reforming the law concerning wills and inheritance, the best avenue for resolution is to look outside the courts for other forms of dispute resolution
Opinion: New Year’s resolutions aren’t all about cutting back on wine, reading more books or quitting smoking. This is also the time when people naturally tend to think about their estate planning.
It looks like some will be thinking harder than usual in 2023. The Government has indicated it will be looking at aspects of the law regarding entitlements to and claims against estates – something that’s relevant not only to those drawing up their own wills, but also to those who may be involved in disputes over what they regard as their fair share.
In particular, the focus will be on disputes involving adult children who are not happy with aspects of a parent’s will.
These are the disputes that over the past seven decades have been resolved under the Family Protection Act of 1955.
In New Zealand, there is generally a moral duty on a parent to make adequate provision for the proper maintenance and support of their children under their will. But a child who is “disinherited” (whether as a minor or an adult), has always had the option of making a claim against a parent’s estate under the FPA.
Ever since then, however, and especially in recent years, there has been legal discussion over whether this is the best approach, especially in light of how different the landscape is in 2023 to the time in which the existing rules were drafted.
Clearly, social arrangements and expectations have significantly changed since the mid-1950s, leading to changes in judicial interpretations of precisely what the Act requires in terms of adult children who feel short-changed (or left with no change at all) by a deceased parent.
The newfound focus coincides with important recommendations made by the Law Commission regarding claims by adult children unhappy about a parent’s will.
Up until now, as Law Commission deputy president Helen McQueen told Newsroom, reform “has happened gradually over different times, so we’ve ended up with a piecemeal family of statutes. It’s hard to get a full picture”.
Among the questions the Commission considered was the relevance of whether the deceased had helped the child financially during their lifetime. And what if the deceased and the child had fallen out?
What if the deceased wished to support charitable causes because their children are financially secure?
In light of such questions, and the changing times, the Commission recommended limiting claims to situations where it was felt a will had “unjustly” failed to provide for a child (or grandchild) in financial need, or indeed ignored them altogether.
It also recommended considering limiting claims to those children aged under 25 or who have a disability. This would create something of a new playing field in New Zealand, where many of the most contentious court cases involve claims of adult offspring who are not under 25, not disabled, and not in acute financial need.
The Government has since said it will consider this and the relationship property review, and decide whether it is necessary to reform the law.
A recent case, D and E Ltd v A, B and C, illustrates how fraught those deliberations might be. The case involved the adult children of a man who – the offspring claimed – placed all his assets in a trust so as to ensure the children were effectively disinherited.
Mediation also provides greater opportunity for healing family wounds, rather than creating new ones.
The High Court accepted the children’s allegations that their late father had sexually and physically abused them in their youth. The Court agreed that their father owed them what is known as fiduciary obligations (a duty to act in their best interests), and that his abuse was a breach of that duty. The Court went further and found that transferring his assets into trust 30 years later was also a breach of this duty, so that the assets were available in his estate to be subject to a claim by the children for further provision.
The trustees appealed to the Court of Appeal, which also grappled with the same technical legal issues of parental duties, whether proven abuse heightened the right of claim and to what extent that right might last.
In the end, by a 2-1 majority the court set aside the High Court outcome, meaning the trust remained valid, and the estate was in effect left empty of assets.
It would be an optimistic commentator who confidently predicted that this is the final word on the matter. The Supreme Court has granted the children leave to appeal. The father died in 2016. By 2023 the children might finally learn whether the trust assets will be available for them to claim against in yet further court proceedings.
As the Government continues to mull the ground rules, probably the best avenue for resolution for anyone caught up in one of these increasingly familiar, emotionally and financially draining, family wealth disputes is to look outside the courts for other forms of dispute resolution.
As the Arbitrators’ and Mediators’ Institute of New Zealand (AMINZ) emphasises, avenues such as confidential professional mediation are relatively inexpensive, usually much faster and an altogether more efficient way of solving most of these cases. Mediation also provides greater opportunity for healing family wounds, rather than creating new ones.
In cases where resolution by agreement is impossible it is still feasible to have family wealth claims resolved outside of the courts. Arbitration is a private legal process where a legally qualified decision maker is appointed by the parties to make a binding decision. The Trusts Act 2019 introduced arbitration as a method of resolving claims involving trusts, and AMINZ considers that formal recognition of arbitration as a means of resolving claims by those who do not consider that they have been provided for in a will, would help alleviate the distress and expense of resolving claims against estates.
Settling estate disputes by way of these proven avenues is a resolution worth making at any time of the year.