Where there's a will, there's a way to challenge it

So you think you can do what you want with your money when you die? Think again.
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So you think you can do what you want with your money when you die? Think again.

So you think you can do what you want with your money when you die? Think again. Nikki Macdonald investigates the myriad ways people are challenging wills.

"Heaven preserve them from litigation and from being forced into the Supreme Court! It was conceivable that there the resources of the garrison might be exhausted in the defence of the citadel, and that when the legal harpy, the voracious lawyer, could thrust his long bill into the family jar, the bread of the children might be as completely wasted in the one case as in the other." – the Honourable Dr Pollen, in 1892, on proposed law changes he feared would result in more wills being contested.

At the funeral, they were close. The minister remarked there was so much love in that household.

"Money just destroyed it," says Deborah Chambers.

It was four years ago, but you can still hear the hurt. The sense of betrayal.

She and Sir Robert, a Supreme Court judge, had written mutual wills treating each of the four adult children in their blended family exactly the same. The surviving partner could use the funds for their lifetime, and the kids would at some point get a quarter each, capped at $2.5m.

It was scrupulously fair and Chambers – a leading divorce lawyer – never imagined it would be contested. Then she got the demand, from Sir Robert's eldest son David. He wanted his $2.5m now.

The High Court largely rejected his claim, but found Chambers must "exercise her discretionary power from time to time". The fight no doubt cost a packet in legal fees, but the personal cost was much greater.

"The wider family got destroyed and it will never be repaired," Chambers says. "It was so gut-wrenching, going through that, within a few months of Rob's death. It just felt like a real kick in the stomach. I could barely talk about it without crying. I was so devastated by it – and this was at a stage where I was already on my knees, coping with losing Rob so suddenly. I just thought – this is so unnecessary. You shouldn't be able to do this."

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Deborah Chambers was devastated when her stepson challenged the will of her partner Sir Robert, a Supreme Court judge, while she was still coping with his sudden death. PHOTO: SUPPLIED

When her case hit the headlines, Chambers was deluged with sympathy letters from people in a similar position. At least she was still working – others had no income while the estate was tied up in court, so had to borrow from friends. 

David didn't need the money. The California-resident software engineer earned US$120,000 a year. And that's where New Zealand is an outlier – in most countries, to challenge a will you have to show financial need. Here, the Family Protection Act says will-makers have a moral duty to provide not just for need, but also to recognise a person's membership of the family. Even if the child is estranged or neglectful.

Chambers argues we have the worst of all worlds, with woolly rules and uncertain court precedent. A clear law declaring that what the will says goes would be difficult to challenge. Rigid rules allocating a set sum to each family member would be difficult to challenge. Instead, New Zealand has a vague combination of the two, leaving the door open to costly court cases, she says. 

"Judges constantly say, 'We don't have the power to rewrite wills'. But that's exactly what they do, over and over again."

The 1955 Family Protection Act (FPA) followed the Testators Family Maintenance Act, which was introduced in 1900 to protect widows and young children from being left penniless. But over time, it has become a vehicle for disgruntled adult children to dispute their parents' last wishes.

This is not a new issue. In a 1997 review, the Law Commission concluded the courts had extended the FPA's reach "far beyond its original purpose". Judges were "uncertain precisely why they are altering the will-maker's arrangements" and the law was unpredictable, unprincipled and chaotic.

The commission recommended removing the right of independent, adult children to contest wills, unless destitute. The recommendation was ignored.

Twenty years on, the problem continues. Throw in a growing tide of blended families, and the situation is murkier still. Good data is hard to come by. From 2011 to 2015, 200-300 applications were filed each year in the Family Court and High Court disputing an estate.

Otago University succession law expert Professor Nicola Peart says testamentary freedom – the right to do whatever you want with your money when you die – is a myth in New Zealand.

"You are not absolutely free. If you think you are and do something that is going to disadvantage your children, the likelihood is that the children will say – 'Oh no, you don't'."

She asks her law students if they mind their parents leaving everything to charity. Probably not, most say. And then she asks if they mind if they leave everything to their stepbrothers and sisters. "Oh yes, then they mind."

But the cases going to court are just a tiny window on the issue. The unpredictability of court action leaves will beneficiaries vulnerable to demands. Many disputes are settled before they get there, even if the claim is weak, Peart says. 

"It's sometimes cheaper, easier and less stressful just to settle to get rid of the claim."

And there's no way to know how the FPA influences will-writing – some lawyers advise parents to leave 10 per cent to each child, to reduce the chance of a claim.

"The way we have developed this is through the courts, from what was once a maintenance provision. What we've not done is to go back to society and say 'Do you think this is the right way to go?'."

Peart favours clear rules awarding children a set slice of the cake, with the will-maker free to dole out the remainder as they choose.

Apparently happy families sometimes turn out to be anything but when greed and grief combine. PHOTO: ROSS GIBLIN/FAIRFAX NZ

Senior solicitor Henry Stokes, of Public Trust, says will disputes are happening a lot, because families have become more complex, and more scattered, so it's easier for parents to lose contact with kids and for relationships to become strained. Mum might favour the daughter down the road, who stops in regularly for tea and does the grocery shopping.

He sees both sides of the dilemma. He listens to parents explain why they want to leave children out of their will, or split the spoils unevenly. There might have been verbal or physical abuse; maybe the parents can't stand the son- or daughter-in-law and never see the grandchildren; or the child is a druggie or a waster and they don't want the money squandered. Or maybe they built up their lives from nothing and want their children to do the same.

And then he sees the fallout when the will is delivered and family discover they've been left nothing. The shock, the recriminations, the denial.

"It's amazing how, once Mum or Dad is dead, everyone else seems to know exactly what Mum or Dad would have wanted and exactly what they would have been thinking."

The smaller estates often settle, the larger ones fight it out in court. The bigger the battle, the worse the fallout. It's not uncommon for siblings to break off all contact after a massive scrap over how a parent's estate was left.

Stokes recommends talking to family about your will while you're still alive, to remove the toxic combination of shock and grief.

"It's not just about your division of assets. It's also about how is your will going to affect those ongoing relationships. It really is that lasting legacy."

There's a bigger, philosophical question at stake here – do parents have a moral duty to provide for their independent, adult children? Chambers doesn't think so – she agrees with the Law Commission that adult children shouldn't be able to challenge wills, except in extreme cases, such as where there's a history of abuse.

"A judge shouldn't be able to step in and say 'I know better than you – about your family, and I will tell you what your moral obligation is'. Because families are really complicated things."

And the idea a judge can award money to recognise someone's position in the family, as if that will somehow make amends for being short-changed, is "irrational dribble", she says.

"How does that make you feel 'OK, I'm acknowledged as part of the family', given the parent didn't want you to have it. It's just not logical".

GreyPower​ Wellington president Bruce McLachlan also questions whether parents have a moral duty to their adult children. "My kids say to me, 'Dad, go and spend all your money, we don't need it'."

"If there is a moral duty, it has to go both ways."

IT'S NOT FOR COURTS TO REWRITE WILLS, BUT ...

The rules: Under the Family Protection Act, partners, children, grandchildren and dependent stepchildren and parents can challenge a will on the basis the will-maker has failed to provide them "proper maintenance and support". This has become known as a will-maker's "moral duty" to provide for family.

Case study: The need to be needy (Williams v Aucutt)

Lilian Henderson died in 1996, aged 88, leaving behind two daughters, Christine Williams and Susan Aucutt.

Williams rented in Australia with her husband and two sons, aged 9 and 7. She sometimes worked part-time and her husband earned A$32,000 a year.

Aucutt's three sons were all adults when Henderson died. Her assets were worth close to $1m, slightly more than her mother's entire estate.

Henderson left Aucutt shares, a painting and an antique tea set, worth about $50,000. To Williams she gifted the remainder, explaining that her will favoured Williams "not because of any lack of affection for my daughter Susan but because I consider that my daughter Christine's financial position is much worse".

Aucutt challenged the will, claiming one-third of the estate, in recognition of her position in the family. In the High Court, she was awarded 25 per cent. But in the Court of Appeal four long years later, judges reduced that to $100,000 – about 10 per cent .

Justice Richardson said Aucutt's case was special because she was "not in any financial need nor ever likely to be so".

Richardson found "support" meant not just money but also "sustaining, providing comfort". "A child's path through life is supported not simply by financial provision to meet economic needs and contingencies but also by recognition of belonging to the family and of having been an important part of the overall life of the deceased."

While Justice Blanchard noted "the court is not authorised to re-write a will merely because it may be perceived as being unfair to a family member, and it is not for a beneficiary to have to justify the share which has been given", the court nonetheless doubled Aucutt's original share.

It's your money, you can do with it as you please – right? Wrong. While no-one can prevent you spending or giving away your wealth when you're alive, the state comes swooping in when you die.

The Family Protection Act (FPA) was designed to prevent women and children being left destitute when a husband disinherited them. Most Western nations have similar provisions, with one critical difference – to claim a greater share of the will, family members have to show financial need.

As Williams v Aucutt shows, New Zealand courts say parents have a moral duty to leave money to adult children not just because they need it, but to recognise a child's place in the family. 

"We are much more liberal in New Zealand than in any other jurisdiction," says Otago University law expert Professor Nicola Peart.

The rule of thumb is that all children get at least 10 per cent of the estate, irrespective of need or their closeness to the parent.

Henry Stokes, of Public Trust, says it's still possible to split an estate unequally, in recognition of greater need, or greater support. But the more uneven the split, the greater the likelihood it will be contested. 

Blended families are also complicating matters, Stokes says. As in Deborah Chambers' case, there can be tension between the children of the will-maker and the new partner, who might get control over the assets during their lifetime, depleting the funds eventually handed to the children.

"What people don't necessarily realise is that, when they're alive, they are the glue that keeps everything together. Sometimes people keep their genuine opinions to themselves – they don't want to upset their mother or their father. And then lo and behold, when Mum or Dad aren't on the scene, you can discover that in actual fact they've never been able to stand their father's new partner, but they just played happy families to keep the peace. We do see quite a bit of that."

GIVING IT ALL AWAY

CASE STUDY: A father's moral duty (Auckland City Mission v Brown)

Eric Miller worked hard to build an estate worth $4.6 million.

In his will, he bequeathed to his daughter Inge shares and investments, furniture and jewellery and forgave half a $20,000 loan (total worth $110,000). Miller had a low opinion of Inge's husband Shane and was concerned that anything he gave to Inge would be wasted.

He also gave $400,000 to a friend; $500,000 to the Cancer Society; $250,000 to a long-term employee and placed a $1m commercial property in trust for his three grandchildren.

The remainder was to be split – two-thirds to the Auckland City Mission and a third to the Salvation Army.

Inge claimed – and the charities accepted – that her father had failed in his moral duty. However, the charities argued $650,000 would right the wrong, whereas Inge wanted half the estate.

The High Court found Inge was a dutiful daughter – despite her parents' acrimonious split and her father's "often shabby" treatment – and awarded her an extra $1.6m from the charities' share.

The Court of Appeal, however, found that "far in excess" of what was needed to remedy Eric's moral failing and cut it to $850,000, or about 20 per cent of his estate. They also made clear charities should not be criticised for defending bequests.

John Tizard in front of Wellington SPCA's animal hospital, which was named in honour of his wife Margaret Doucas after she bequeathed the charity millions in her will. Doucas had no children, so was in a position to be generous, Tizard said. PHOTO KEVIN STENT/FAIRFAX NZ

Less than 8 per cent of Kiwis make charitable bequests, but it's not small-fry for the charities involved, amounting to more than $100 million a year. 

However, charity bequests can go sour, if family members decide they've been hard done by. Lower Hutt's Vogel House is now set to be sold to benefit the Crown, after the grandsons of its former owners contested its gift to two charities.

The $5 million stately home was gifted to the Crown by Jocelyn Vogel in 1965. The villa became home to prime ministers and ministers, before the Crown decided in 2016 that it no longer needed it, and offered it to the beneficiaries of Jocelyn Vogel's estate, the SPCA and Vogel Charitable Trust.

However, her grandsons Tim and Geoff Vogel challenged the gift and requested a review by an independent lawyer, arguing their grandparents meant them to have it if the Crown no longer needed it.

In an unexpected twist, the independent lawyer advised neither the Vogels nor the two charities should be given the property.

SPCA Wellington boss Steve Glassey says the Vogel House case is one of many in which charities – and therefore communities – lose out. He estimates three-quarters of SPCA bequests are contested by family, resulting in annual losses of $500,000-$1,000,000.

In one case last year, a will leaving money to the charity was witnessed by family members, who then contested it three months later. In other cases, family members specifically excluded from the will have successfully contested.

"People should be warned that despite family members saying they won't contest, soon after the casket is lowered they are clawing at the money. Sadly, your word is no longer law."

The charity relies heavily on wills to fund its $4.5 million in annual operating costs, so court battles and compromise cost the organisation dearly, Glassey says. He encourages people to instead consider donating during their lifetime, or contacting the charity for help drafting a will that will protect their wishes.

Jim Datson, of the Fundraising Institute, says a prior relationship with the will-maker helps a charity strengthen its case against a will challenge. That could mean anything from volunteering time or attending events, to donating during their life-time.

Giving it all away to the exclusion of your children is likely to land your estate in court, Datson says. Some lawyers suggest leaving 10 per cent of the estate to each adult child, to reduce the likelihood of the will being challenged.

Datson also advises talking to family about your intentions, and consider having a lawyer present, to record any discussions as evidence in the case of a future challenge to the will.

THE STRAINED AND ESTRANGED

Case study: The estranged daughter

From her $2.4 million estate, Nelson grandmother Caroline* left 17 specific bequests, with the remainder split between a cousin, an unnamed person and a trust for her granddaughter Amy*.

Caroline's daughter Sarah* received just $25,000 and was not told of her mother's death for more than six months. She contested the will, claiming $1.25 million, in recognition of Caroline's moral duty. The opposing lawyer, however, argued she was a 67-year-old woman with no  dependants and four properties and was not in financial need.

Sarah had been estranged from her parents since the age of 21. She was also estranged from her only child – Caroline's granddaughter Amy. 

Sarah alleged her father had been violent and abusive and Caroline failed to intervene. When she married at 21, her parents did not attend the wedding. She had a psychiatric breakdown in 1983 and has not worked since.

However, Amy and the cousin said Caroline and her husband were a loving couple. Amy said the abuse Sarah described at the hands of Caroline was in fact the abuse Sarah had inflicted on Amy. She also accused her parents of repeatedly trying to get Caroline to sign over financial control to them, sparking a complaint to Age Concern.

The judge found evidence to support both narratives. He awarded the daughter $360,000 (15 per cent) on the basis the alleged abuse history increased the moral duty, while acknowledging the claims were impossible to verify.

"Estrangement complicates the assessment of the moral duty owed by a deceased parent to a child. The need to provide proper maintenance and support is not extinguished by estrangement between a deceased and an applicant, despite the fact that the nature of the relationship has bearing on any award."

*Names have been changed

When the state tried to curtail will-making freedom in 1892, with the Testamentary Trusts Restriction Bill, parliament was in uproar.

The bill, said Honorable Dr Pollen, enabled the prodigal of a family "to dance upon his father's grave, to break up the home, to put out the sacred fire on the hearth, and scatter the household gods, to relegate the widow to the tender mercies of the Public Trustee, the daughters of the family, possibly, to the Tailoresses' Union, and the little ones to the Charitable Aid Board or the Industrial School".

The bill was defeated, but the controversy around awards to prodigal, profligate or estranged, family members remains. As this case shows, even if someone has been far from a dutiful child, the courts consider the parent still has a "moral duty" to provide for them.

Judges may reduce the sum normally awarded, in recognition of estrangement, but that's counteracted by any suggestion the parent's conduct could be at fault for the relationship bust-up.

BUT HE PROMISED ...

THE RULES: While only specific family members can challenge a will under the Family Protection Act, anyone can invoke the Testamentary Promises Act. The TPA provides for people who have done work for the will-maker and say they were promised compensation by way of inheritance, but that promise was not fulfilled. 

CASE STUDY: The stepson and the charity (Blumenthal v Stewart)

John Mathieson was in a de facto relationship with Dawn Blumenthal for 22 years. Dawn had three children from a previous marriage; John had none.

The couple had agreed to leave nothing to each other. John transferred his property to trust and bequeathed that and other assets – worth about $923,000 – to the Neurological Foundation.

When Dawn died in 2004, her will left nothing to John – including the house the pair lived in. Her children nonetheless disputed her will, leading John to express "his sadness and dismay".

John had a father-son relationship with Dawn's son Paul. John gave moral support after Paul's marriage break-ups. Paul helped out at John's property, where he was allowed to run his pest control business, rent-free. When John was admitted to hospital, Paul visited daily. And when John died, Paul organised the funeral.

After John's death, Paul challenged his will, on two alternative grounds – the Family Protection Act (FPA), or the Testamentary Promises Act (TPA).

Under the FPA, stepchildren can only claim a moral duty if they're being "maintained" by that person at the time. So Paul argued his rent-free use of John's property constituted dependence. High Court Justice Ellis found, however, that the relationship was "mutually beneficial". 

Paul then argued John had promised him an inheritance. Claims under the TPA require both a promise of compensation, and work or services meriting that. While Justice Ellis accepted John had probably talked of inheritance, Paul had not done work "beyond what might might be expected of a good friend or close family". The "essential conundrum" of Paul's case was that the close relationship he relied on to claim moral duty under the Family Protection Act made him ineligible under the Testamentary Promises Act, Ellis noted.

"Although he and John had a close familial relationship, it is not one that is recognised by the FPA. And it is the close familial relationship and its ordinary incidents that conspire to defeat his claim under the TPA."

The Court of Appeal agreed, rejecting Paul's claim. The court process took three years.

While researching this case, Sally Morris, who represented the Neurological Foundation, discovered New Zealand is the only place in the world where you can contest a will based on an alleged promise. 

"I think it's fundamentally flawed."

She has two other cases where extended family members who can't claim under the Family Protection Act are challenging charity bequests under the Testamentary Promises Act. 

All you really need is a credible person saying 'When I dropped off Auntie she said, one day this will all be yours, don't you worry.' Corroborating evidence helps, but isn't mandatory. And the only person who can refute the claim is dead.

"Nowhere else in the world can you bring a claim based on someone promising you something in that way," Morris says.

Because there's no "moral duty" under the Testamentary Promises Act, you have also to show you've performed services for that person, which is where Paul Blumenthal foundered.

Morris says the TPA means, even with the best intention and advice, no will is water-tight.

"You can go to your lawyer and try to protect your testamentary intentions, by drafting your will in as clear a way as possible and providing for people the court might find you owe a moral duty to. But the Testamentary Promises Act almost opens a back door, because anybody can bring a claim, as long as they can say somebody promised me something and I performed services for them."

Facebook photos of Gary Watt cruising and living it up prompted his stepchildren to take him to court to recover their inheritance.

NO WILL? NO WAY!

The rules: If someone dies with no will, the laws of intestacy kick in. If there is a partner and children, the partner receives any personal possessions and $155,000, plus one-third of all remaining property. The children get two-thirds of the remainder.

Case study: Spending the kids' inheritance 

James Roberts-Gooch and his sister Alexandra Gooch were 16 and 14 when their mother, Anne Roberts, died of cancer, in 2012, with no will.

Under intestacy laws, Roberts' partner, Gary Watt, was entitled to $155,000, plus one-third of the remaining estate, while the teenagers were due the remaining two-thirds.

Instead, Watt, who was the estate's administrator, offered them $30,000 each. After seeing on Facebook that Watt had splashed out on a new motorbike, jetski and car and gone cruising with his new girlfriend, James saved money for legal fees and the pair took Watt to the Family Court.

The judge ordered Watt to pay them almost $300,000, but they saw none of it. Watt was declared bankrupt in June 2016. Property records show the Ngaio house Watt shared with Roberts was sold in October. It's not known if Roberts' children ever received their share.

If there's no will, the person's partner could end up having to sell the family home to pay out children or surviving parents. PHOTO: JEFF McEWAN/FAIRFAX NZ

About half of all Kiwis are believed to have no will. Most who have partners believe everything will simply pass to their beloved. They're wrong.

Intestacy laws are a tangle of complex rules, depending on the family make-up. And they can lead to some nasty shocks, says Public Trust solicitor Henry Stokes.

The most common is where a couple have no children – the partner gets all the personal property, $155,000 and two-thirds of the remainder, but the rest goes to their in-laws. That's despite the fact will-makers rarely allocate money to parents, Stokes says. "Usually you go down the chain rather than up."

"The spouse certainly doesn't usually expect to be sharing the estate with surviving parents. If the relationship is not flash, you've got a home in it and the surviving spouse can't afford to buy the parents out, they can find themselves having to sell the home to be able to pay the parents out. So it can be extremely difficult."

The same can happen with stepchildren. If – as in Anne Roberts' case – someone with children from a previous relationship dies without a will, their current partner gets their personal property, $155,000 and one-third of the remainder. However, that person's children get two-thirds of the remaining estate. If that's tied up in a house, the partner may again have to sell up and end in financial strife.

In another nasty fish-hook, if you've been separated from your spouse for 20 years, but never divorced, your former partner can still claim their entitlement.

Just get a will, says Stokes. "That is the best thing you can do to make sure things happen how you want them to happen."

 - Stuff

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