In December 2015 the Sunday Star Times reported on a dispute amongst the members of the Ropati family in respect of their mother’s estate.
The article contains the following statements:
"Figures released by the Ministry of Justice show that the number of disputes over wills rose by nearly a third in just two years … In 2012 there were 252 contested wills, and last year the figure reached 325 … Claims against estates can be brought by widows, widowers, de-facto partners, children, step-children and grandchildren … A claimant has to prove that the deceased failed to discharge a moral duty to provide for him or her … In one extreme case, two sisters battling over their mother’s $80,000 estate took their fight to the Supreme Court … The dispute between Judith Guerin and Marta Hayes lasted more than five years."
Similarly, statistics from the UK show an increase in estate claims over recent years1. What is the reason for this?
- People are living longer and amassing more significant assets. In particular the values of house properties in Auckland mean that estates are often sizeable
- It’s now more common for a person to form a second or third relationship, following the death of a spouse or breakdown of a long-term relationship and this, in turn, frequently leads to relationship property claims
- Disputes are arising between the adult children of a first marriage and the second or subsequent spouse/partner
- Many people hold significant assets in their personal names and also in a family trust or trusts. There is no guarantee that any provision will be made for a family member. Challenging the deceased’s Will can force a distribution from the trustees, and
- Balancing the competing claims of close family members can be a very difficult; the rules are unclear.
Unfortunately many people assume that if they make a claim it will be resolved quickly and cheaply in their favour. In fact, in many cases, the opposite is true: the claim is expensive to pursue, the court system is slow and frequently there are valid competing arguments which mean that the outcome is far from certain.
Litigation usually results in the parties being permanently alienated. Few people realise how stressful and unpleasant litigation can be.
Will-makers frequently underestimate the consequences of decisions they make and also misjudge the potential for serious arguments to arise. Many decisions are poorly considered and often made without the benefit of full advice.
Avoiding estate disasters
- Get competent legal and accounting advice from professionals who practise in this area
- Be clear about the ownership structures. You need to understand why assets should be owned personally, by a trust or through a company and how they can be used to avoid claims
- In the absence of good reasons, it’s unwise to cut out close family members from a Will or provide significant rewards to family members ahead of their siblings
- Family farms and businesses commonly create problems; often it is only realistic for one member of the family to carry on the family farm/business, and
- Having suitable trustees is critical.
Inheritance planning requires careful thought and good advice. Attempts to ‘punish’ or ‘reward’ family members seldom have the desired effect, and create disharmony and a family breakdown. Careful thought and good advice can usually prevent this.
1 In the UK between 2010–2014, an average of 633 will/trust and probate cases were heard each year at the Chancery Court in London compared with an average of 485 per year in the previous five years.