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Beneficiaries, Beneficiary rights, Trustees, Trusts

Disappointed beneficiaries

Blended families pose numerous challenges.   On the death of a parent balancing the needs of that parent’s children and a surviving step-parent can be challenging.  Add a trust and some last-minute asset and estate planning into the mix and the potential for conflict increases.

Consider the position of the children who believe themselves to be beneficiaries of a trust that owns the family home.  Shortly after their father’s death they discover that only weeks before is death the trustees (including their father) distributed the family home to their father who then arranged for the property to be settled under the Joint Family Homes Act on their father and step-mother.  A new will was also drafted in the stepmother’s sole favour.  Within weeks their father as died.

The children anxious to preserve their position lodge a caveat on the title to the property.  The matter comes before the court to determine whether the caveat should lapse.  Issues relating to whether the children’s father had capacity to enter into the transactions carried out so soon before his death will likely be further considered by the court in different proceedings.

Regardless of whether there is something rotten in the state of Denmark, the Court’s sole concern is whether the children had a caveatable interest.  In short they did not.  The reason being, the property was owned by the trustees of a trust of which each child could benefit.  However, the children were discretionary beneficiaries – they had no interest in the property.  Just the right (or hope) to be considered.  While the trust may have been settled with a view to protecting property for the benefit of beneficiaries including the children, in distributing the property to the father, the trustees acted in accordance with the terms of the deed of trust and their obligations as trustees.

A disappointing outcome.  However, it appears correct.  One cannot help but wonder whether the father might have been able to be better advised regarding balancing concern for his wife of limited years and his adult children of a life-time.

References:

  • Melville, Farrington, Fisher, Cornelius v Wen & Ors [2014] NZHC 630

 

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Discussion

One thought on “Disappointed beneficiaries

  1. Hi Vicki

    Thanks for the disappointed beneficiaries blog. Very pertinent and a situation that we come across regularly. Particularly interested in your throw away comment at the end. We use what we call ‘second family insurance’. Even if the client doesn’t or can’t (because of age) use insurance it really gets them thinking. I’ve actually recorded a video clip on our website to cover the sort of point that you make in this blog.

    http://www.castletrust.co.nz/second-families.html

    Thanks for the continuing stream of useful articles.

    Regards

    Glyn

    Posted by Glyn Lewis-Jones | September 3, 2014, 12:13 pm

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