Law Commission proposals
The laws about the administration of estates are being reviewed by the Law Commission. Much of what has been proposed so far is uncontroversial but there are some recommendations that may prove unpopular, although they are likely to be refined during the Parliamentary process.
The Law Commission has called this project Succession Law — that is the system of rules that governs who gets a person’s property when they die and rights to make a claim against an estate. There are two main laws that govern this area of the law: the Administration Act 1969 that rules the way estates are administered and the Family Protection Act 1955 that is the law about claims against estates. Both these statutes are out of date.
Other laws under review include:
- Rules about who gets what if a person dies without a will (intestacy)[1]
- Part of the relationship property law concerning the right to bring a claim after one spouse/partner has died[2], and
- Testamentary promises legislation (bringing a claim against an estate for work or assistance for the deceased in reliance on a promise to reward them in the will)[3].
Intestacy
At present, if someone dies without a will, leaving a spouse/partner and children, the spouse or partner receives the household and personal items, $155,000 (with interest) and one-third of the rest of their estate. The children share the other two-thirds. This can mean that the surviving spouse or partner does not even get to keep the house unless it is jointly owned.
One option being considered is that the surviving spouse/partner would inherit the entire estate if the deceased’s children are all from that relationship. In other situations, the spouse/partner would get half and the children would get the other half.
Family protection
Probably the most controversial proposals concern the Family Protection Act. This legislation allows a spouse or partner, or the children or grandchildren (and sometimes dependent stepchildren), to bring a claim against the estate. Over the last 20 or so years, judges have become quite cautious about allowing such claims. A spouse/partner or dependent children will usually have a good claim, especially if there is a genuine need. An adult child who is self-supporting may, at best, have a ‘recognition claim’ that is usually a small percentage of the estate that acknowledges them as a member of the family.
The Law Commission proposes that adult children who are not in any need should not be able to claim or should get only a small item, or taonga in some cases, from a parent’s estate. In theory this may sound fine. If asked however, “Should your family be allowed to contest your will?” most people would say “No”. But, if they were asked, “Should you be allowed to contest your parent’s will if you’ve been left out completely?” most people would say “Yes”. The reality is human beings make mistakes sometimes and their wills are no exception. Being able to fix up an unreasonable will is an important safeguard for families.
Blended family issues
One issue not fully considered by the Law Commission is second marriages/relationships and the rights of stepchildren. A typical example would be:
- John and Mary get together later in life. They each have children by a previous marriage.
- They share all of their property and money, and they each make a will leaving everything to each other.
- When John dies his children are in a difficult position. They hope Mary will include them in her will along with her own children. After all Mary has inherited everything John worked for, but they can’t be sure she won’t change her mind and leave her estate only to her own children.
- John’s children can bring a claim under the Family Protection Act but this may wreck their relationship with Mary. If they don’t bring a claim now, they will have no right to claim after Mary dies.
There is also a proposal to include some ‘claw back’ rules in the Family Protection Act. This could mean that anything you put in your trust, or give away shortly before your death, could be treated as part of the estate in order that a claim could be made.
Looking ahead
If you are concerned about family disputes after you die, you could consider ringfencing your property by putting it into a trust, for example. It is by no means certain that claw back rules will come into law at some stage but, if they do, anything put into the trust years before is unlikely to be caught by a possible claw back rule.
Above all, make sure you have a will or make sure your current will is up-to-date. The default intestacy rules may not fit your circumstances; if you have a will, you get to decide who will benefit.
[1] Ss77 to 79 Administration Act 1969.
[2] S 88 Property (Relationships) Act 1976.
[3] Law Reform (Testamentary Promises) Act 1949.