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Wills

What’s fair?

The harsh reality of math of asset and estate planning is that sometimes 3 into 1 just will not fit.  Consider Talbot v Talbot.  The residual estate comprised:

  1. 1 farm interest worth approximately $4m
  2. $2m cash, and
  3. 3 beneficiaries.

One son had worked on the farm from the age of 17.  The two daughters enjoyed a child hood on the farm but eventually left to pursue other opportunities.

One daughter was happy with the status quo.  One was not and challenged her surviving parent’s will under the Family Protection Act 1955, on the basis that:

  • adequate provision was not been made for either her proper maintenance, or her proper support, in light of her financial position and what are her economic needs
  • her parents have failed to adequately recognise her position in the family as one of their three children.
  • a redistribution is required to remedy the breach
  • “In all the circumstances where there are three siblings, Jillian contends that current societal attitudes demand a significantly more substantial distribution to her as a daughter from estates such as these than the 15-17% share currently provided by her parents’ wills.” [26]

The law

Section 4  of the Family Protection Act provides:

4 Claims against estate of deceased person for maintenance

(1) If any person (referred to in this Act as the deceased) dies, whether testate or intestate, and in terms of his or her will or as a result of his or her intestacy adequate provision is not available from his or her estate for the proper maintenance and support of the persons by whom or on whose behalf application may be made under this Act, the court may, at its discretion on application so made, order that any provision the court thinks fit be made out of the deceased’s estate for all or any of those persons.

The summary Katz J provided in Ormsby v Van Selm is referred to as a useful summary of the relevant principles.  Her Honour noting as follows:

(a) “Proper maintenance and support” requires a broad approach that includes the need to recognise the child as a valued member of the family and other social and ethical factors. “Support” is a wider term than “maintenance” and is used in its wider dictionary sense of “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.

(b) “Proper” denotes something different from “adequate” and the amount of an award is accordingly not to be measured solely by the need of maintenance which would be so if the court were concerned merely with adequacy

(c) Assessing what provision will constitute proper support is a matter of judgment in all the circumstances of the particular case. Where there is no economic need it may be met by a legacy of a moderate amount. On the other hand where the estate comprises the accumulation of the family assets and is more than sufficient to meet other needs, provision so small as to leave a justifiable sense of exclusion from participation in the family estate might not amount to proper support for a family member.

(d) In cases of financial need, the amount necessary to remedy the failure to make adequate provision in the will, will be able to be determined with greater precision than in cases where the need is more of a moral kind.

(e) The size of the estate and any other moral claims on the deceased’s bounty are relevant factors.

(f) In assessing whether the deceased has made appropriate provision for the claimant’s proper maintenance and support, and what would be required to remedy a failure, the court should do no more than the minimum to redress a testator’s breach of moral duty. Beyond that point the testator’s wishes should prevail, even if the individual Judge might, sitting in the testator’s armchair, have seen the matter differently. Testators are at liberty to do what they like with their assets and to treat their children differently or to benefit others once they have made such provisions as are necessary to discharge their moral duty to those entitled to bring claims under the Act.

(g) The Court’s power does not extend to rewriting a will because of a perception that it is unfair. Nor is disparity in the treatment of beneficiaries sufficient, in itself, to establish a claim.

(h) Although awards should not be unduly generous, nor should they be unduly niggardly particularly where the estate is large and it is not necessary to endeavour to satisfy

Two step process

Family Protection Act claims require a two step process.

Step 1 is to consider whether the claimant’s parents have fulfilled their obligation to provide proper maintenance and support , given the claimant’s financial position and economic needs.

Step 2 is to ask whether the parents have fulfilled their moral obligation to recognise the claimant as belonging to the family as a significant member and being an important part of their overall lives.  This is measured at the date of death [66].

What did not motivate the court?

  • each daughter’s interest in the estate was valued between 15 and 17%
  • the son’s interest was valued between 65 and 68%
  • an unequal distribution by itself is not sufficient to warrant disturbing the will-maker’s wishes [59]
  • what is “fair” to an objective third party is not the standard: Ormsby v Van Selm  at [39]
  • the claimant’s strong financial position
  • it is “hard to argue here that the almost $1.1 million which [the claimant] will be receiving [under the will] is insufficient to provide her with a comfortable life
  • a practice of even-handedness during the parent’s lives does not necessitate the same treatment in their wills.  However, it is useful for practitioners involved in such matters to carefully consider how file notes and other relevant correspondence is drafted
  • the court was not motived by the shares of the estate that each child got noting at [82]:”… I need to say also that I reject the implicit request made in [the claimant’s] submissions that I should look at the comparative values received overall by each of the siblings here from their parents as a critical factor in the present claim. In my view this must be seen generally as a distraction from what is the proper legal question before me, which is whether [there was a breach of moral duty]…”

 

What motivated the court?

The key points from the decision can be summarised as follows:

  • it is not about fair or math
  • the parent’s testamentary intentions were unwavering for over 20 years (this was a significant consideration and one that practitioners should need when making file notes and similar).  What both parents wanted was that one of their children  take over the family farm to keep it in the family where it had been for 4 generations [16], [62] to [65].  Also see Ashworth v Lambie  where the court was also motivated by the parents’ intentions
  • contemporary social mores are important – as noted at [59] “The question whether a testator is in breach of their moral duty must be determined in light of all the prevailing circumstances and against the social attitudes of the day.”
  • the position of the claimant – this is not a case of a claimant who has no assets and is in ill health
  • the court was motivated by the amount of cash that the claimant would receive rather than by what share of the estate this equated to – noting that “The issue in the case before me is whether the over $1 million inheritance [the Claimant] is to receive from the relatively large estates, bearing in mind her financial position, and the lack of what I see as any real economic need, is sufficient to fulfil her parents’ moral obligation to provide proper maintenance and support for her. The answer, in my view, must be yes.”
  • the parents efforts to ensure assets outside the farm to ensure assets for the daughters later were noted by the court
  • the court was also mindful of the number of family meetings held over the years where the parents discussed their intentions – again a note for practitioners – consider how such meetings should be recorded and referred to and the consequences of these.

Take home message

It is wrong to presume that children are entitled to an equal share of their parents’ estate.  Each case is looked at on its own facts.  To achieve testamentary freedom is a marathon not a sprint and takes careful planning over time – rather than an end-of the line decision.  It may seem harsh to the siblings who get less.  However, the focus is currently at least, more on what that share looks like in the context of the claimant’s life, rather than how big it is relative to  siblings’ shares.

Costs

As the unsuccessful Party Jillian is liable for her own costs as well as those of the estate, her brother (50% up-lift) and sister (indemnity).  See the costs decision in Talbot v Talbot [2017] NZHC 832.

References:

  • Talbot v Talbot [2016] NZHC 2382
  • Talbot v Talbot [2017] NZHC 832
  • Family Protection Act 1955
  • Ashworth v Lambie [2012] NZHC 1110
  • Ormsby v Van Selm [2015] NZHC 2822
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