Blended Families - Wills and Trusts 10 Jul 2018
Can it be fair for everyone?
Making sure everyone you care about gets a fair share of your property after you die is an issue most of us grapple with. This may also have additional complications when you have a blended family. It’s not always as easy as just writing your Will and specifying who gets what. There are several statutes that give family members and/or your new partner’s family, a right to contest your Will. The two main statutes are the Family Protection Act 1955 (FPA) and the Property (Relationships) Act 1976 (PRA).
Leaving it all to your partner?
A common way of structuring your affairs is to leave everything to your partner or spouse, knowing they will provide for your children as well as their own in their Will. These are often called ‘mirror Wills’. Unfortunately, this structure doesn’t always satisfy all the children involved, as we have seen in several recent court cases. You also run the risk of your partner or spouse changing their Will at a later date after you have died.
• Claims from the children: The FPA allows family members to make a claim against your estate if they believe they have not been properly provided for. This can happen even if your spouse has a ‘mirror Will’ which will leave the whole estate to your children as well as their own when they die. An example of this blended family situation is the Chambers case, which has recently received media attention. Lady Deborah Chambers QC was left everything by her husband, Sir Robert Chambers, on the understanding that when she died, her estate would be split into four parts, going equally to Sir Robert’s two sons and to Lady Deborah’s two daughters. One of Sir Robert’s sons successfully brought a claim against his father’s estate under the FPA, despite having his own lucrative income and not being in any financial need.
• Your spouse could change their Will: If your partner or spouse outlives you by some time, there is the possibility that they may change their Will as their circumstances change. They may remarry, have a new relationship, or more children may be brought into the family. This could mean that the portion of your estate that you envisioned being left to your biological children is now eroded by your partner leaving more to new partners or children than you had never anticipated.
Leaving it all to your children?
In light of these two options, it may be tempting to consider leaving your estate entirely to your children. Unfortunately, doing this can bring similar problems. Your partner could bring the same claim that your children could under the FPA or they could make an application under the PRA.
Property (Relationships) Act 1976
The PRA allows your partner to make an application to have your estate divided as relationship property, rather than in accordance with your Will. Under current law, you have a duty to provide for the partner you leave behind. If an application is made under the PRA, any relationship property is divided accordingly and the balance of the estate is distributed according to your wishes. Again, this may leave your loved ones with a different portion than you envisaged. You also need to know that jointly-owned property is automatically transferred to the survivor and does not form part of your estate.
To find a solution that works best for your family and fits your wishes, do discuss this with us as one size definitely doesn’t fit all. Some options are:
• Contracting out agreements: you come to an agreement with your partner which overrides the PRA;
• Setting up trusts in your Will or before you die: if established correctly, trusts can be effective in defeating claims through the FPA and the PRA; and
• Life interest Wills: leaving your spouse an interest in your property during their lifetime, but that interest will expire on their death and the property will be distributed to your children. The above points merely brush over some issues in what is an incredibly murky and complex area of law. If you are in a blended family situation, let’s discuss the options in order to structure your affairs in a way that works best for you and your family.
How can we help?
We have dedicated teams based in our Riccarton, Hokitika and Rolleston offices who give advice on a variety of different asset protection, succession planning, family and relationship property matters. If you have any questions arising out of the issues raised in this article, please feel free to contact Lois Flanagan - firstname.lastname@example.org or Nicole Murphy - email@example.com or give us a call on (03) 348 8480.
Used by permission, Copyright of NZ Law Limited, 2018