Fighting over a will can destroy families and whittle away the inheritance in legal fees. Photo / 123rf
To help avoid the all-too-common, bitter family feuds over wills, Jane Phare looks at how to make estate planning as watertight as possible, and what the options are if someone is unfairly cut out.
There’s nothing quite like squabbling over the spoils to tear families apart. It has all the elements of a perfect storm – sibling rivalry, jealousy, bitterness, injured pride – and money.
Add in step-parents and step-children, or a family member unexpectedly cut from the will, and the resulting seething cauldron of resentment can destroy everything in its wake.
Lawyers who work in the areas of inheritance, succession planning and dispute litigation have seen it all. They’ve witnessed angry adult children, cut out of a parent’s will, take on the executors of the estate – often their siblings – in the High Court. They’ll vindictively chew through the estate’s monetary value forcing the executors to spend, in some cases, hundreds of thousands of dollars to defend proceedings that can drag on for years.
In the end it’s not really about the money, lawyers say. It’s more about getting even, retribution for the hurt the will caused. And sometimes the “hurt” dates back decades.
Patrick Gamble, CEO of Perpetual Guardian Group, warns the consequences of will-making going wrong can destroy families and cause significant damage, in personal and financial terms.
“You can waste an enormous amount of money on lawyers and trying to litigate and relitigate. The thing is it just rips families apart.”
As a result, he says, Kiwis who are relying on an inheritance from the older generation to either buy a house or pay off a mortgage can “tumble out of the middle class”. And that fall is often hard to recover from, he says.
Estate planning and relationship property planning needs to be done well, Gamble says, and that means getting good advice.
Getting it wrong means family wealth and inheritance can be squandered on legal fees and other costs when people fight over a will.
Clear communication early on is the key, he advises, particularly if a will-maker is going to do something unexpected.
“If you explain to them [the family] what you are doing and why, when that time has come it isn’t unexpected and it isn’t a shock. They are likely to still not be happy with it but are far more likely to accept it.”
Gamble points out that families are often held together by the older generation and once they die, dynamics can change.
Solicitor Juliet Moses, with TGT Legal, agrees, saying parents like to think their children will get on well after they’re gone but that’s often not the case.
“When the parents die all bets are off quite often.”
Resentments come bubbling to the surface, she says, including accusations of favouritism, or that one sibling got more financial help than another, or that one did more to help the parents in their old age.
“It’s not normally really about the money. Family dynamics underlie it.”
Moses, who specialises in succession planning and the drafting of wills, says when things go wrong there is potential for major rifts that the family never recovers from.
“People stop talking to each other and they often don’t start again. It’s incredibly sad.”
Blended families increasingly add complications with step-children going to war against a surviving step-parent, or vice versa. The adult children think they have a gold digger on their hands; the step-parent who may have cared for the spouse for years thinks the children have inherited too much.
Gamble says a will-maker needs to remember their will is often the last form of communication their family gets once they are gone.
“It can affect how their family remembers them.”
Any remaining goodwill is squandered as family members squabble over who gets what, he says.
Wellington solicitor Shaun Cousins says there is no legal requirement for a person to treat all of their children equally. For instance a child who has received considerable help from parents during their life may not receive as much as other siblings.
“You simply have to ensure that you have discharged your moral duty to your children.”
Cousins, who heads Rainey Collins’ dispute resolution and litigation team, has worked in the area for 13 years and in that time has seen family relationships destroyed by disputes over wills.
“It is quite common sadly. To be honest most of the people who argue about estates, the damage has already been done potentially years in advance.”
Some will prioritise money over family harmony, he says. Others will choose not to challenge just to keep the peace.
“Sometimes that non-financial benefit outweighs any financial gain.”
Both Cousins and Moses favour transparency, advising parents making a will to tell children of their wishes.
Moses: “But in some cases they don’t want to. They say, ‘it’s not my problem when I’m dead’.”
Parents who decide to cut a child or children out of their will are advised to think twice because they lay the estate open to a legal challenge. Moses warns that even though will-makers are free to do what they like with their assets, the courts will often find in favour of a child who has been left out.
Rather than cut a child out altogether, lawyers and estate advisers will often recommend leaving a nominal amount in the will, and clearly outlining the reasons why the child has been treated differently. That way the matter is less likely to end up in court.
So what’s the secret to making sure your estate is divided up the way you want? For a start, the experts say, make sure there is a will and that it is up-to-date.
One way to ensure a will-maker’s wishes can’t be challenged is to have most of the estate assets in a trust because only personal property can be considered as part of the estate.
Trusts are sometimes used by parents who, for one reason or another, don’t want part of the estate to go to a particular child or possibly any of their children who are not included as beneficiaries. Unable to claim against the estate under the Family Protection Act 1955, there’s not much the injured parties can do.
Gifting assets to certain family members during a lifetime is another way of making sure that there’s not much left to fight over in the will. Gifts can only be challenged for legal reasons including if there is evidence of lack of capacity, undue influence or given under duress.
Not everyone has a right to challenge a will. Those who do include spouses/de facto partners and children; step-children and grandchildren (if they have been supported by the deceased); and parents and grandparents (if they have been supported by the deceased).
A person who has been promised a legacy in a will in exchange for services during the deceased’s lifetime, but has been left out, can also make a claim. However, lawyers warn proof is needed, the threshold is high and the claim will be expensive.
Siblings can’t challenge each other’s wills; neither can adopted children challenge the wills of their biological/birth parents. Māori children brought up by someone else, often a relative, under the whāngai system are also unable to make a claim on the wills of their birth parents.
Lawyers warn that challenging a will in the High Court is expensive, often costing between $50,000 and $100,000 depending on the complexity of the case. If the claimant is spending that amount, then the executors are likely to be spending a similar amount, taken out of the estate. And due to heavy caseloads in the High Court, claimants may need to wait months to get a hearing date.
Lawyers say unless there is a decent amount in an estate it is often not worth going to court, depending on the number of beneficiaries. Those thinking of challenging a will need to assess the potential legal costs and the amount a court might award if the challenge is successful.
Mediation or coming to a Deed of Family Arrangement, in which everyone agrees to alter the terms of the will, can be better options.
Moses says the out-of-court option is private and settlements are usually confidential, whereas in court the family’s “dirty laundry” is aired in public.
The Law Commission has trusts in its sights, recommending in its 2021 review that the courts be given greater powers to access trusts in cases where they have been used to prevent a person from getting their fair share.
Under a proposed new Inheritance (Claims Against Estate) Act, “claw-back” provisions will be included meaning trusts will no longer be so secure. It was among 140 recommendations made by the commission including one that is likely to cause division – that children over the age of 25 would not be able to contest their parents’ wills.
However, not much is expected to change any time soon, most likely for years. In response to Herald inquiries David Crooke, the Ministry of Justice’s acting general manager, civil and constitutional, said no work was currently under way on the commission’s review of succession laws.
The review would be considered alongside the commission’s relationship property recommendations. Given the scope of the reviews, the complexity of the law, and the level of engagement needed, work to achieve the reforms would take a period of years and would need to be balanced against other Government priorities, he said.
Only one of the commission’s recommendations has progressed. Currently, in cases where a person dies without a will and the estate is worth less than $15,000, probate (a court order recognising a will) is not needed. The commission wants to see that $15,000 threshold, set in 2009, increased. Last month the Petitions Committee recommended an adjustment be made as soon as possible that matches inflation since 2009, and that the threshold be adjusted for inflation in future years. A Government response to that recommendation is due by early August.
Tips for succession planning
Tips for challenging a will
Jane Phare is a senior Auckland-based business, features and investigations journalist, former assistant editor of NZ Herald and former editor of the Weekend Herald and Viva.
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