Reform of New Zealand’s Succession Law – what has the Law Commission recommended and why should you be interested?
In a recent report to Parliament, the Law Commission concluded that the law which addresses who inherits a person’s property when they die is “old, out of date and inaccessible”.
In 2019, the Law Commission was instructed to begin a comprehensive review of New Zealand succession law.
While the law generally permits people to gift property on their death through their will as they wish, there are a number of pieces of legislation that allow certain people to challenge the will and claim further provision from the estate. If people die without a will, the law directs who should receive property from the estate and in what shares.
The Law Commission has now concluded their review of the legislation and, following a public consultation process, released a report at the end of 2021 to Parliament with their recommendations for reform.
This article outlines why reform to New Zealand succession law is necessary, summarises the Law Commission’s key recommendations and explains why we all need to be interested in the developments in this area.
Why is reform needed?
Succession law affects all New Zealanders, whether we like it or not.
Despite this, most of the key pieces of legislation dealing with succession law were drafted in the mid-20th and, until now, have never been comprehensively reviewed.
Since the mid-20th century, a lot has changed in New Zealand. Society has become more diverse, both ethnically and socially.
Contemporary understandings of Te Tiriti o Waitangi are not reflected in our current succession law.
Family structures have become more complex and traditional gender roles have changed, with civil unions, de facto relationships, blended families and single parent families now prevalent.
People are living longer, increasing the likelihood of more complex family structures and potentially resulting in more people having claims to a person’s estate.
People’s views on rights to a person’s assets on death and the obligations a deceased person may have to provide for certain people have also changed.
What recommendations have been made?
In their report titled “Review of Succession Law: Right’s to a person’s property on death”, the Law Commission has made 140 recommendations. These include:
- Streamlining the existing legislation into one new Inheritance (Claims against Estates) Act (the New Act) to be the principal source of law regarding entitlements to and claims against estates;
- Continuing surviving partners’ rights to a division of relationship property when their partner dies;
- Revising rules for how estates should be distributed when a person dies without a will (intestacy rules);
- Clarifying the legal test for when certain family members can bring a claim for further property from the estate despite what the will or intestacy rules say;
- Providing that Tikanga Māori should determine succession to taonga;
- Enabling a court to recover property when it has passed from the deceased to a third party in a way that leaves the estate without sufficient property to meet awards against it; and
- Supporting efficient and effective dispute resolution both in and out of court.
The goal behind the Law Commission’s recommendations is to ensure that when someone dies, grieving families are able to refer to clear, accessible law that facilities the resolution of any disputes and balances the mana of the deceased, property rights and obligations to family and whanau.
However, some of the Law Commission’s recommendations have proved controversial.
Restricted ability for children to make claims
The Law Commission have recommended two options for reform in respect of the rights of children to make a claim against their parent’s estate.
Currently, under the Family Protection Act 1955, various family members, including spouses, civil union partners, de facto partners, children, financially dependent step-children, grandchildren and parents are able to bring claims against the estate of a deceased family member in certain circumstances. This applies whether the claimant has been completely excluded or left inadequate provision they believe needs to be challenged.
Under one of the Law Commission’s recommended options, only the deceased’s children under the age of 25 or those who are disabled would be able to make a claim. This is a significant change and would mean children excluded from their parent’s will or those who receive significantly less than their siblings under the will would not be able to contest the decision.
The other option would allow children, grandchildren and all stepchildren, regardless of their age, to make a claim.
Financially independent adult step-children may be able to make claims
The Law Commission have recommended all step-children (regardless of whether they have been or were entitled to be maintained by the deceased) be able to make a claim under the New Act if they do not believe they have been adequately provided for.
While this is viewed by many as a positive and necessary change given the increase in blended families, there is also concern that allowing financial independent adult step-children to claim could give rise to significantly more litigation between biological children and step-children, all seeking to assert their rights to inheritance.
Trusts more open to attack
Under the current law, if the deceased owns property outside of the estate, for example in a family trust, then there are limited means by which that property can be attacked in order to receive inheritance.
The Law Commission wants the courts to have greater access to trusts, so if there is evidence of a clear intent to use a trust in order to stop someone from inheriting, then there could be grounds for a claim under the New Act.
As the law currently stands, children who are excluded from inheriting under both their parent’s will and family trust will usually find it easier to make a claim against the parent’s will than they will to attack the family trust. However, this may change if Family Protection Act 1955 like claims under the New Act are restricted to children under 25 and disabled children and claims against trusts are opened up.
Why should you be interested?
In a rural context, succession and succession planning can be particularly complex.
With rising capital values of farm properties in recent years and the increasing costs of day-to-day farm management making it difficult to build off-farm assets, balancing handing over the farm to the next generation with the risk of potential claims against an estate (in particular, from off-farm children) can be challenging.
Regardless of how the Government decides to reform the law, significant change is likely and will affect us all.
The Government will now consider the Law Commission’s recommendations and decide whether to reform the law.
Want to know more?
If you have any questions about the Law Commission’s recommendations or succession law, please contact our team.
PDF version: here.
This article was included in Edition 6 of our rural newsletter – Rural. which you can read here.