Jeremy Sutton: Review of succession law – Rights to a persons property on death

ANALYSIS:

The Law Commission on December 15, 2021, completed its review of succession law after being asked to do so by the Government in July 2019. This followed on from the Law Commission’s report on the Property (Relationships) Act 1976.

The paper is 402 pages with 140 recommendations. Succession law is the law that determines how your property is distributed when you pass away.

Currently the law is outdated. Family relationships in New Zealand society are now more diverse than ever and include many blended families for example. Tikanga Māori is also an important consideration.

Current law

Much of the legislation that makes up the laws of succession were drafted generations ago. Succession law is contained in the Family Protection Act 1955, the Law Reform (Testamentary Promises) Act 1949 and parts of the Wills Act 2007, the Property (Relationships) Act 1976 and the Administration Act 1969.

New law proposed

The Law Commission has recommended that a new piece of legislation be introduced called the Inheritance (Claims Against Estates) Act (“the Act”). The purpose of the Act would be to simplify succession law and better provide for increasingly diverse familial structures and tikanga.

The commission suggests that the new Act endorses out of court dispute resolution and tikanga-based dispute resolution. Claims with multiple parties can be particularly expensive compared to the sum involved.

Impact on relationship property claims

Under the current law, if the deceased was married, in a civil union or a de facto relationship for more than three years, their surviving spouse or partner can apply to the court to request a division of relationship property according to the rules of the Property (Relationships) Act 1976.

The surviving spouse or partner can choose whether to request a division of relationship property or receive property according to the deceased’s will. The idea behind this law is to protect partners or spouses who may have been left out of the deceased’s will but would have been entitled to a share of the relationship property if a relationship had ended because of a separation, rather than death.

The Law Commission has recommended that the surviving partner still have this choice. It has further suggested that if the estate does not have enough property to meet relationship property, family provision and testamentary promise awards, the new legislation would give relationship property awards first priority.

Leaving children or grandchildren out of the will

A contentious area of succession law is the rights of family members to claim against the deceased’s estate when they feel as though they have been unfairly provided for or left out of a will completely. Under the current law, dependents of the deceased can make a claim against the estate.

In deciding whether to award family members further provision from the estate, the Court is asked to balance two competing rights. These rights are the will-maker’s right to choose how their property will be distributed (often referred to as testamentary freedom) and the rights of their family and others to whom they owe obligations.

Many people disagree about whether it is appropriate for the Court to be able to disrupt the will-maker’s testamentary intentions to make an additional provision for adult children. The Law Commission noted that the feedback they received during consultation showed strongly divided views on the matter.

In response to the conflicting opinions, the Law Commission has presented two options to the Government. Either:

1. Make awards available to children and grandchildren of the deceased; or

2. Only make them available for disabled children or any child under 25.

Widening of the Court's powers

The Law Commission believed that there are likely to be more claims made by family members given the ageing population. The Commission expects that more family members will provide informal care for their parents in retirement which could lead to a claim against their estate if the child does not feel they were adequately provided for by their parent’s will.

The Law Commission has suggested that the Court be granted a wider ability to make orders to ensure the estate of the deceased (“deceased’s estate”) is distributed.

Issues if a person dies without a will ('Intestacy')

It is estimated that around half of adults (18 and over) do not have a will.

Clear rules are suggested to distribute in an estate (“distribute an estate”?) where the person dies without a will. That will replace the current rules in what is called our Administration Act. The language and succession law is difficult to follow and it creates barriers for some sections of society.

The language needs to be clear and simple and so the Commission has acknowledged the need for reform in the words used in this area.

Summary

The most contentious area is whether an adult family member of a deceased person that is left out of the will can make a claim.

The Law Commission has presented two options to the Government. Any change to the law in relation to beneficiaries’ rights to claim will be hotly contested.

The recommendations for resolution when a person dies without a will are particularly welcoming. The need for clarity and simplification is pressing.

• Jeremy Sutton is a senior family lawyer, specialising in divorce cases where there are significant assets, including family trusts and complex business structures.

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