What happens if a family member does not provide for you in their will?

It is always difficult when a loved one passes away. But this can be made significantly worse when someone discovers that they have not received the provision under the will that they expected. What can you do if you think you have not been properly provided for?

The law provides for certain family members to challenge a will on the basis that the will-maker did not adequately provide for them under the Family Protection Act 1955.

Who can make a claim?

The Family Protection Act entitles the following people to make a claim:

the spouse or civil union partner of the deceased;
a de facto partner who was living in a de facto relationship with the deceased at the date of his or her death;
the children of the deceased;
the grandchildren of the deceased;
the stepchildren of the deceased (if they were being maintained wholly or partly or were legally entitled to be maintained wholly or partly by the deceased immediately before his or her death); and
the parents of the deceased (in limited circumstances).

There is no provision for siblings of a deceased to make a claim.

What does it take for a claim to succeed?

To succeed, a claimant must convince the Court that the will-maker failed to “provide adequately for the claimant’s proper maintenance and support”. This does not just reflect economic need, but also the importance of recognising a claimant’s importance as part of the family.

It’s important to note that mere unfairness or disparity between beneficiaries is not sufficient to bring a claim under the Family Protection Act (for example, that one sibling got less than the others).

The success of a claim will depend on the particular facts of the case, but relevant factors include:

The economic need of the claimant;
The size of the Estate and the competing moral claims of other family members and beneficiaries under the will;
The duration and nature of the claimant’s relationship with the deceased;
Any gifts made to the claimant during the deceased’s lifetime; and
Whether there was a rift between the deceased and the claimant and, if so, who was responsible for that.

If successful, the Court is still limited to awarding no more than what is necessary to give adequate provision. The Court will not rewrite a will on the basis of what someone else considers to be fair.

Timeframe for a claim

In order to be effective, a claim must be brought against an Estate before the funds of the Estate have been finally distributed to the beneficiaries.

Where an executor has no notice of any claim against the Estate, the executor can distribute the Estate’s assets 6 months after probate is issued.

Under the Administration Act 1969, a potential claimant can prevent distribution of the Estate for 3 months if notice is given to the Executor that he or she intends to challenge the Estate. To get the most out of this 3 month window, notice of intention should be given just prior to 6 months after probate. This extension can only be obtained once, after which the Executor is safe to distribute if no Court proceedings have been served on the Estate.

Any claim must also be brought within 12 months from the date of probate (we explain probate in this article). A claimant can apply to the Court for leave to extend this timeframe, but extensions are rare and will only succeed if the Estate has not already been distributed.

How to make a claim

A Family Protection Act claim can be brought in either the Family Court or the High Court. The appropriate court will depend on the size of the estate, the complexity of issues, and whether there are already other proceedings relating to the Estate.

The documents required to initiate a claim differ depending on which Court is being used.

Once a claim is brought, it will need to be served on the Estate and other beneficiaries, who can then choose to oppose the application. Where a claim is opposed, the Court will usually ensure that the parties have the opportunity to attend some form of mediation to try and resolve the dispute without the need for a full hearing.

We have experience in both bringing and defending claims in both courts, and in resolving disputes between beneficiaries. Please contact us to see how we can be of assistance.

This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source.

If you are able to demonstrate that a deceased person failed to fulfil a promise to leave you something after they die, how much will the Court give you?

All claims under the Law Reform (Testamentary Promises) Act (“TPA claim”) are fact-specific. If a claimant succeeds in convincing a court that they have a valid claim (see this article for details on what that requires), the Court will make an award out of the assets of the Estate.

When assessing what size of an award is appropriate, the Court takes into account:

The value of the services or work;
The value of what was promised;
The amount of the estate; and
The nature and amounts of the claims of other persons in respect of the estate.

It can be difficult to assess the commercial or market value of the services performed, especially where they are intangible.

The Court will principally focus on the deceased’s perception of their value. However, there cannot be a major disproportion between the award and the value of the services.

The Court will also take into account any reciprocal benefits that the claimant received from the deceased – whether those are tangible things like payment of groceries, or intangible such as a return of companionship and support.

All TPA cases are heavily influenced by their unique context. Please contact us for specific advice. We have experience in both bringing and defending TPA claims.

For more details about what it takes to succeed in a TPA claim, see this article.

This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source.

What happens if someone promises to leave you something after they die, but then fails to actually do so? If you performed services for the deceased person in reliance on that promise then you may have a claim under the Law Reform (Testamentary Promises) Act 1949 (“TPA claim”).

To succeed in a TPA claim, you would need to prove that:

You rendered services to, or performed work for, the deceased person during their lifetime;
The deceased person made a promise to you , either express or implied, to reward the claimant for the services provided;
There is a nexus between your services rendered or work performed and the promise; and
The deceased person failed to make the promised testamentary provision or to otherwise remunerate you .

What is a promise?

Promises are defined broadly in the Act. It includes statements or representations of fact or intention. The promise may be made either before or after the services were rendered or the work performed.

It is not necessary that the deceased person ever specified an amount or particular piece of property as the reward. In one case, the Court found that statements such as “I will see you right” and “I will look after you” were sufficient.

In determining whether or not a promise has been made, the Courts may place more emphasis on what you could reasonably have understood by the deceased’s statement than on what the deceased actually intended. However, promises made “in the heat of the moment” and fuelled by emotion may not amount to a promise in terms of the TPA.

Additional evidence of the promise, such as written statements or confirmation by others, will strengthen your claim that the promise was made. However, claims without supporting evidence can still succeed. The Courts also consider the circumstances in which the promise was said to have been made.

Did you perform services for the deceased?

Services can be a variety of things. Cases have recognised things like:

farm work and supervision;
housekeeping and domestic services;
financial advice and assistance with tax returns; or
companionship, affection and emotional support.

If the claimant is a family member, they must show that this kind of support was “something extra” over and above what could normally be expected of a relative.

For example, the Court has found that a stepson’s frequent calls and visits to his stepfather and “odd jobs” around the house were normal in the context of the relationship. By contrast, carrying out significant maintenance and improvements to a house and providing full-time care is usually considered to be beyond what is normally expected.

Were the services related to the promise?

You must show that the promises was made, at least in part, to reward the you for services or work, either performed in the past or expected in the future.

That connection may be expressly stated by the deceased or more commonly inferred from the circumstances. The greater the services or work, the more likely the court is to infer that the promise was made as a reward for the services or work.

All TPA cases are depend by their distinctive facts. We are happy to discuss with you the merits of a potential claim that you have, or that someone else has made against an estate.

For more details on how much you might receive in a successful claim, see this article.

This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source.

One of an executor’s duties is to obtain probate. But what is probate and how does it work?

Probate is the process by which a Court officially recognises a deceased person’s will and the executors of that will.

Probate is required to ensure that:

The will being relied on is actually the last valid will created by the deceased;
Those applying for probate are the executors named in the will; and
The executors will carry out the deceased’s wishes in line with the law.

Once the High Court grants probate, the executors are legally authorised to deal with the deceased’s property.

Is probate required?

Probate is required for an executor to deal with any asset which exceeds $15,000. If the deceased person did not have any assets in excess of $15,000, the executors do not need to apply for probate. If you are not sure whether an estate is in that category, we are happy to discuss this with you.

If the person died without a will, they are referred to as dying “intestate”. A different process, called seeking letters of administration, is required in that situation.

Have you got the right will?

The first step is to locate the deceased’s last will. A will is often held by the deceased’s lawyer or another entity like the Public Trust.
If you suspect that there is a will but cannot locate it, it is possible to ‘advertise’ for a will. This alerts lawyers and similar entities who will then check their records to see if they hold the will.
There are various legal requirements for making a valid will, including that it be in writing, signed by the will-maker and signed by two or more witnesses.
There is a process by which the Court can validate a document that does not meet the legal requirements but nevertheless sets out the deceased’s testamentary intentions.
A probate application generally requires the original will. However, there are some exceptions to this if the original will has been lost or destroyed.
You must also be confident that the deceased had sufficient mental capacity to make the will.
If you think any of these situations may apply in your situation, please contact us so we can help you work through your options.

Making the application

Once you have the correct will, one or more of the executors named in that will can apply for probate.

You will need to make an affidavit (a statement sworn before a lawyer, registrar or JP) which:

Contains evidence that the will-maker has died (such as a death certificate or an affidavit from someone who went to the funeral);

Contains evidence of where the deceased was living just before they died; and

States that the will is the deceased’s last will.

You may need to file an affidavit that deals with the physical condition of the will, for example if the will has a mark, is crumpled, or has staple holes. The Court will be concerned that the document has been tampered with or previously had something else attached to it. The lawyer who looked after the will can swear an affidavit about the original condition of the will.

Other evidence may be required in some situations, such as where the will-maker had a visual impairment or a shaky signature.

Time frames

Once all the necessary documents have been filed, the High Court will review them. The Court aims to process a standard application within 6-8 weeks, but this may take longer if the Court is busy or the application is complex.

If the Court has any concerns about the application, it may ask for further information or an amended application. This will impact the time it takes to receive probate.

Receiving the grant of probate

Once you have obtained probate, you can proceed to gather in the estate’s assets and act out the will’s directions. For more information about the duties of an executor, see this article.

The grant of probate is important for starting off the timeframe for potential claimants to bring various claims against the estate, such as those under the Family Protection Act or the Property (Relationships) Act, testamentary promises claims and claims by creditors.

We have assisted many people obtain probate and to manage their responsibilities as executors and are happy to talk with you about how we could help you.

This article is general in nature and is not a substitute for legal advice. You should talk to a lawyer about your specific situation. Reproduction is permitted with prior approval and credit being given back to the source.

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.

Possible solutions

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 Nicole Murphy – nicolemurphy@parryfield.com or give us a call on (03) 348 8480.

Used by permission, Copyright of NZ Law Limited, 2018

How might this impact you?

As much as we like to think we are living in the modern day, there are still a large number of relationships that follow the more ‘traditional’ practice of having one party act as the ‘homemaker’, while the other acts as the ‘breadwinner’. If the relationship breaks up, economic disparity is likely to be an issue. With the divorce rate in New Zealand sitting at around 50%, chances are you have friends and family members who have structured their relationship in this more traditional sense and have now separated. The result is often that the ‘homemaker’ is left in a worse position financially because they have been out of the workforce for a long time and will struggle to get back into their career. The breadwinner, meanwhile, who could focus on their career during the relationship, is now earning at their full potential. This is economic disparity – one party is advantaged over the other. One of the principles of the Property (Relationships) Act 1976 (PRA) is that a de facto relationship, civil union or marriage is a partnership of equals and that financial and non-financial contributions to that relationship are equal; the homemaker’s contributions are equal to the breadwinner’s. There is also a presumption of equal sharing of relationship property; but what about the earning potential of one party over the other? If that earning potential has increased during the relationship, should that be considered an asset of the relationship or relationship property?

Can we ‘fix’ the disparity?

Section 15 of the PRA allows for one party to be compensated if the income and living standards of the other party are likely to be significantly higher due to the ‘division of functions’ within the relationship – the role of breadwinner and homemaker.
Parliament acknowledged that an equal division of relationship property doesn’t always achieve fairness if one party is able to walk away with not only half the assets, but also a considerable income-earning ability, while the other has foregone theirs and supported the breadwinner in the process. While statistically the party left worse off after separation is almost always female, as the Prime Minister, Jacinda Ardern and her partner, Clarke Gayford have recently shown us, women can be breadwinners too and economic disparity can affect men. Same-sex couples can also be vulnerable to economic disparity, which can arise in any relationship where one party has been able to progress their career while the other looks after the home. The Law Commission recently reported that s15 has had limited success in achieving its objective. It found that sharing property equally doesn’t always result in an equal outcome. Following a separation, on average, mothers who are caring for children have their household income reduced by 19% while men in employment increase their household income by 16%. Economic disparity and how to address the issues arising from the more ‘traditional’ relationship roles is a significant focus of the Law Commission in its current review of the PRA.

Recent boost to claims

Economic disparity claims have been given a boost by the recent Supreme Court decision of Scott v Williams. This case involved a couple who structured their relationship in the ‘traditional sense’. Ms Scott, who had accounting and law degrees, put her career on hold to look after the couple’s children while Mr Williams built up a successful legal practice.
When they separated after more than 25 years of marriage their incomes were vastly different. The court ultimately found (after eight years of court battles) that in a long-term relationship, where there is the traditional split of roles between homemaker and breadwinner, and a significant disparity in income, an economic disparity claim can be presumed and compensation should be paid. The amount of compensation is determined on a case-by-case basis. There is no set method for determining the compensation, which does make it difficult for parties to agree. Since s15 made its way into law in 2001, there have been about 100 cases go through the courts on this point, with only around 40% having been successful. Economic disparity remains a difficult, complicated and emotional topic for separating couples to discuss and on which to agree.

If you have separated and believe economic disparity is an issue, please talk with us to discuss whether this is a claim that may affect you, and how you either negotiate or defend such a claim. A contracting out agreement (colloquially known as a ‘pre-nup’) may assist, if prepared properly from the outset. Please feel free to contact Nicole Murphy – nicolemurphy@parryfield.com or give us a call on (03) 348 8480.

Used by permission, Copyright of NZ Law Limited, 2018

What is a De Facto Relationship?

If you are in a de facto relationship, there could be significant financial implications for you if you separate, or if your partner (or you) dies. The principal piece of legislation which deals with the division of property belonging to couples or married couples is the Property (Relationships) Act 1976 (the PRA). Substantial reforms in 2001 extended the scope of the PRA to cover de facto relationships. But what exactly constitutes a de facto relationship in the eyes of the law?

The PRA states that the basic criteria for a de facto relationship are:

There must be a relationship between two people
The relationship maybe heterosexual or homosexual
Both parties must be aged 18 years or over
They must not be married to each other, although they may be married to someone else, and
The parties must ‘live together as a couple’.

Living together as a couple

The PRA sets out a list of matters to be taken into account in considering whether two people ‘live together as a couple’. These matters are:

The duration of the relationship: the longer that two people have been associated together, the more likely it is they will be found to be living together as a couple
The nature and extent of common residence: two people may live together (in terms of the PRA) even if they do not reside at the same address. But the more time they spend together at the same place, the easier it will be to regard them as a couple
Whether a sexual relationship exists
The degree of financial dependence or interdependence, and any arrangements for financial support between them
The ownership, use and acquisition of property: coownership, particularly of the common residence, is a sign of living together as a couple. The same can be said of using property in common, such as a car, and buying items together
The degree of mutual commitment to a shared life: commitment is an important test of whether there is a de facto relationship. Certain objective criteria such as a common address is important, but there must also be a subjective element of their commitment to a shared life
The care and support of children: where two people have a child it does not follow that they are necessarily de facto partners. However, children of a relationship will often be relevant in identifying a further level of commitment by the couple
The performance of household duties; for example, the sharing of domestic duties may indicate a commitment to a shared life, and
The reputation and public aspects of the relationship; if two people appear together in public and attend events together as a couple this can provide evidence they are a couple.

This is not an exclusive list; any other circumstances can be considered. There will be situations where some circumstances are more relevant than others. Also, no one specific factor is a necessary condition to determine whether or not there is a de facto relationship.

There have been cases where the court has found there to be a de facto relationship even though the two people are not residing together. That said, whilst cohabitation isn’t absolutely necessary for a de facto relationship to exist, it is a very persuasive factor.

What is not a de facto relationship?

Various relationships can easily be identified as falling outside the definition of a de facto relationship. For example, a boyfriend/ girlfriend relationship where both people have independent lives and do not cohabit does not have the hallmarks of a de facto relationship, even if it is a close, personal and sexual one.

If two people’s relationship is not a de facto relationship (or they’re not married or not in a civil union) they fall outside the scope of the PRA. If these people have issues relating to property, they must therefore use some other legal remedy to try to resolve their property-related dispute.

The question that often arises in these cases is just when a relationship shifts from being a more casual type of relationship to a qualifying de facto relationship to which the PRA applies. In each case, that will involve a detailed consideration of the above factors, and possibly others.

How we can help

If you need further advice about how the PRA could apply to you, and possible steps you may be able to take to contract out of it, please be in touch.

Used by permission, Copyright of NZ Law Limited, 2017

This article is not a substitute for legal advice, and you should talk to a lawyer about your specific situation. Should you need any assistance please contact Hannah Carey – hannahcarey@parryfield.com or call us at Parry Field Lawyers (348-8480).

This article discusses the Family Court system in New Zealand and in particular focuses on contact rights for children after a separation. Thanks to Kim for suggesting this topic on our Facebook page.

No family situation is the same as another so this short article can only offer general guidance. If you have a specific question we recommend talking to a lawyer as there is often no set answer and the right solution will depend on your special facts.

However, as a starting point, the Family Court will not need to be involved where the parents of a child can agree on how the child will be cared for after the parents separate. The Family Court usually only gets involved if there is no agreement.

If there is a dispute over care of a child, an application can be made to the Family Court. However, before this, the Court will generally require the parents to complete a “Parenting through Separation” course and that a Family Dispute Resolution process involving mediation has been done, which is where the two sides come to an agreement using an independent mediator.

Generally after those processes have been followed then an application can be made to the Family Court for a Court Order about the care of the children. This will cover day to day care of the child as well as times for contact for the other parent. Contact rights can be set for particular days and times if one parent has care of the child for most of the time. If the parents cannot agree on the care of the child, then a Family Court judge will need to make the decision about care and contact after hearing from all parties.

If you have a specific situation we would be happy to discuss that further with you.

We would also comment:

– if there is a risk of violence, or has been violence, then this will impact on the form that contact takes eg contact may be supervised;
– if a Parenting Order is not being followed then an application may be made for it to be enforced;
– a Parenting Order can later be varied but usually not within 2 years of the making of the original Order.

It is worth noting that there are other terms which are specific to the Court process which can be confusing such as “directions conference”, “pre-hearing conference”, “in-chambers” etc – if you have a specific question then it is best to ask someone at the Court or your lawyer to explain what they mean.

We hope this article has helped to shed some light on the Family Court System in New Zealand and the steps where there is disagreement over the care of a child after the parents separate.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Should you need any assistance, please contact Hannah Carey at Parry Field Lawyers (348-8480) hannahcarey@parryfield.com

The Family Dispute Resolution Act (the Act) was passed on 24 September 2013.

Under it the Government has introduced a mandatory “user-pays” pre-court alternative dispute resolution – Family Dispute Resolution (FDR) – in parenting or guardianship matters. The Government has also made it discretionary for judges to refer parties to FDR after proceedings have commenced (once only).

Who does what in FDR?

The Family

Pre-court: Mandatory attendance:

The parties to a parenting or guardianship dispute must attend an FDR prior to filing any court applications. They are barred from making applications to court except in limited circumstances.

The parties will attend the mediation with or without lawyers, depending on their means, whether they are State-subsidised. It is understood that the state does not provide funding for attendance of lawyers.

After commencement of proceedings: ‘Once-only’ FDR:

Parties can be directed to attend at FDR after proceedings have been commenced, if a judge thinks there is a ‘reasonable’ prospect of reaching an agreement. Parties’ consent is only needed if they have attended an FDR in the last 12 months. The parties will attend the mediation with or without lawyers, depending on their means.

The Child

There will be no State-funded lawyer, or other representative, to represent the views of the child at FDR.

The FDR Provider

The FDR provider is a mediator, who is required to be specifically trained and accredited to an approved dispute resolution organisation.

The FDR provider is obligated to determine if it is appropriate to start FDR. If it is, the FDR provider will identify the matters in issue between the parties, facilitate discussions on the guardianship and parenting issues, and assist the parties to reach an agreement
on the resolution of those matters that best serves the welfare and best interests of all children involved in the dispute.

The FDR provider is effectively a “gate-keeper” to court/access to justice due to obligations with the FDR form and who he/she provides it to and how.

FDR form

It is troubling to require the mediator to provide an opinion going forward where the parties are not legally represented in FDR itself (and may not have had the benefit of legal advice), and the FDR provider may not be legally trained or have any Family Court legal expertise/experience. It makes the quality of that opinion concerning.

The FDR practitioner can refer parties to three hours preparatory counselling for FDR, to parenting through separation, and for legal advice to State-paid legal counsel where appropriate. The form cannot be given outside these circumstances outlined.

The form remains a potential barrier to access for justice for parents and guardians.

Client Cost

The fee for FDR was originally stated as being $897.00 GST inclusive. Currently the cost is unknown but will be confirmed in regulations when they are made.

FDR is ‘user-pays’, and both parents are jointly responsible for payment. Payment is a private fee paying arrangement if the parent does not qualify for a State subsidy.

The State will not pay for a lawyer to attend the FDR mediation with a parent/guardian even if they qualify for a State subsidy. The State will only provide four hours of “legal support prior to court”.

When does FDR ‘go live?’

March 2014 is picked as the likely implementation date for the majority of reforms. Family dispute resolution forms and the key FDR provider role/obligations linked to these, may come into force later (October 2014). These are the key ‘gate-keeping’ forms that determine access to court (for those otherwise barred except by compliance with mandatory FDR).

However, given the bulk of the Family Court reforms appear to be scheduled for introduction in March 2014, mandatory pre-court FDR would seem likely to be introduced at the same time as a package.

Conclusions and Concerns

Changes as a result of the government’s Family Court Review will be in place early in 2014.

Unless the matter is very urgent, parties will be required to seek dispute resolution before making any application to the Family Court. That process is expensive and it is unclear what will happen if one party refuses to pay their share or to engage in the
process. All those working in the Family Court system are very concerned how families will be affected. Every family situation is different.

Parties can no longer choose to be legally represented in all Family Court proceedings, so vulnerable parties may be without support when they need it most.

The Law society also has concerns about the ability of court staff to provide services to the vast influx of self-represented people without any knowledge of the legal system the legislation will create.

Our advice

Family life has become increasingly complicated in the past 20 years. We move about more and separation and re-partnering is a commonplace occurrence leading to many blended families.

We strongly recommend time spent talking to a family lawyer about the particular concerns. Obtaining reliable information and understanding the legal situation can often save time, money and much heartache later.

This will be particularly so once the changes to the Family Court come into force in 2014.

Should you need any assistance with this, or with any other Family matters, please contact Hannah Carey at Parry Field Lawyers (348-8480).

You may have heard that trusts are a good protector of homes against relationship property claims. Indeed they may be – but they are not watertight protection. There are various ways that a trust can be attacked. It is therefore important to be aware of these situations so that you are less likely to fall victim to one of them.

Transfers of relationship property to a trust

If you have:

Transferred “relationship property” to a trust since the beginning of your marriage or de facto relationship; and
That transfer has defeated the claim of your partner i.e. they cannot claim an interest in it because it is now owned by a trust rather than their partner

then the Court can require you to compensate your partner or order the trust to pay income to him/her.

One of the key pitfalls to be aware of is that a family home is always classified as relationship property. So, if you decide to protect your home and transfer it to a trust after you are already living together with your partner in the property, this may be too late. The home has already become the family home and your partner may have an entitlement under this scenario.

Transferring property in order to defeat your partner’s claim

This is a broader test than the previous one. If there has been a transfer of property made (it is not restricted to trusts) in order to defeat any person’s relationship property claim, then the Court can overturn this transfer.

The property need not be relationship property at the time it is transferred to the trust. What is needed is:

That the home would have been relationship property on separation if it had not been transferred into a trust. Therefore, a transfer shortly prior to the beginning of a de facto relationship or marriage may even satisfy the test, as long as the intention requirement (below) is met; and
When you transferred your home to a trust, you must have had knowledge of the consequences of that transfer i.e. that you might be depriving your partner (or soon to be partner) of a share of an asset which they may have an entitlement to. You do not need to have a conscious desire to remove that asset from the Court or your partner.

Your trust is declared a “sham”

The Court can declare a trust to be a sham if there is evidence that the settlor (the person who effectively set up the trust) never really intended the trust to take effect.

This is a hard test to prove as most people do not set out with this intention. However, the following factors could assist with a sham trust argument:

The home has been transferred to the trust at less than full market value;
The settlor continues to treat the trust property as his own;
There are no trustee meetings;
The other trustees are rarely consulted;
No occupational rent is paid to the trust if the home is used by the settlor (though the trust might receive occupational rent by way of the settlor meeting trust debts, such as a mortgage);
The trust bank account is rarely used; or
The settlor does not ever turn his/her mind to the interests of other beneficiaries.

If the Court declares the trust to be a sham, it does not exist. The property in the trust will be treated as the settlor’s own property, which in turn can potentially be categorised as relationship property.

Illusory trust

An illusory trust is when a trust is declared to not exist because the settlor is able to control the trust entirely for his/her benefit. In particular, there is no way for the beneficiaries to hold the trustees accountable. Under the trust deed, the trustee (who in this case will also be a settlor and beneficiary) may have unrestricted powers, even though this may be contrary to the interests of other beneficiaries.

If the Court declares that the trust is illusory, it will have the same effect as a sham trust. The property will return to the ownership of the person who settled the trust.
The way to ensure that this argument is never raised is to consult with your lawyer about trustee powers at the time when the trust is being formed to ensure that they are balanced and reasonable.

Constructive trust

Finally, a Court can declare a “constructive trust” over a trust asset if:

Your partner has made a contribution (in more than a minor way) to maintaining and enhancing the property;
At the time, you both expected that your partner would share in the property and this expectation is reasonable; and
The contribution must greatly outweigh the benefits received. i.e. the contributions your partner made (money, time, labour etc) need to exceed the benefit of occupying the property.

This argument is more likely to be raised where the parties have lived in the trust property on a long term basis and the partner has made significant contributions during this period.
If a constructive trust is declared, the Court may grant the applicant an ownership interest by declaring that the trust holds the property on trust for the applicant in such shares as it determines. When assessing what share of the property your partner may be entitled to, the nature and value of the contributions will need to be considered.

What can you do to prevent the likelihood of any of these grounds of attack being successful?

The best protection that you can have against attack is to enter into a property agreement within the first 3 years of your relationship, declaring that your interest in the trust and its assets are your separate property.

Other measures include:

Consulting with your lawyer about the desired purposes of the trust, trustees, beneficiaries and terms of the trust prior to formation;
Ensuring that your home is transferred to a trust prior to commencing a relationship (if at all possible);
Understanding and carrying out your trustee duties with diligence – e.g. ensure that meetings are had and minutes taken, use the trust bank account for the payment of outgoings, have financial accounts prepared;
Consider whether you and your partner should be paying occupational rent to the trust when occupying trust property;
Do not allow your partner to make any major contributions to the property e.g. provide finance or labour for extensive renovations, unless there is legal documentation in place to record the arrangement;
Consider renting out the property to someone else rather than living in it together.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Please contact Hannah Carey at Parry Field Lawyers (348-8480) hannahcarey@parryfield.com

What happens if a family member does not provide for you in their will?

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Property (Relationships) Act 1976

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Transfers of relationship property to a trust

Transferring property in order to defeat your partner’s claim

Your trust is declared a “sham”

Illusory trust

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What can you do to prevent the likelihood of any of these grounds of attack being successful?

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