Ring fence assets for children

By Amanda Bradley and Suzy Garnett, Solicitor

First published in The Press 4 June 2011

If you’ve been in a relationship (or two) during your life, your Will may not be worth the paper it’s written on.

Take Jack and Jill.

They were married for 30 years and had three children together. During their life, they bought a house, paid off the mortgage, and accumulated a house full of stuff. Jill died, and left everything to Jack in her Will.

After a time, Jack met Betty and romance flourished. Betty didn’t own her own house but moved into Jack’s home. Then, after 10 years with Betty, Jack died.

Jack left Betty the sum of $50,000 under his Will. He left everything else, including the house, to his three children equally under his Will. He knew this is what Jill would have wanted, and he wanted that too. After all, it was the family home that the children had been raised in.

However, Betty was told by friends that she shouldn’t have to move out of the house she had lived in with Jack for the past decade. Betty decided that she needed some legal advice.

Betty does, in fact, have two options available to her under the Property (Relationships) Act. She can elect to take what she is left under the Will – which, in this case, would be the $50,000 gift. Or she can elect to request the division of relationship property in accordance with the Property (Relationships) Act, which starts with a presumption that all relationship property – including the family home – is shared equally.

If she chooses the division of relationship property under the Property (Relationships) Act, this takes precedent over Jack’s Will and any other claim that might be made on Jack’s estate. However, if she chooses the division of relationship property, she is no longer able to take what she is given under the Will and all of her property is also taken into consideration when determining what relationship property there is.

Betty has six months after the grant of probate to make a choice about which option she wants to take. If she chooses to request a division of relationship property, she must notify the estate of her intention to opt for division of relationship property.

Betty must then make a formal written application in line with the requirements of the Property (Relationships) Act. A solicitor must sign the application to confirm that they have advised her about her options. Timing is very important - if she doesn’t give notice within the six month period, she will automatically be considered to have chosen to receive what she is left under the Will.

If Betty chooses a division of relationship property under the Property (Relationships) Act, she will be entitled to half of the family home, and half of the family chattels. Chattels include household items, furniture, jewellery, ornaments including artwork and family vehicles. This could include some of Jill’s possessions. Betty would receive far more than the $50,000 that Jack left her in his Will. If Betty chooses to take the division of relationship property, Jack’s children would stand to lose their family home, including personal items that belonged to their parents, both highly sentimental.

If Jack and Betty had entered into a relationship property agreement when they first entered into the relationship, Jack would have protected the family home and chattels for his children. In the current situation, the children have no say in what will happen to their parent’s assets.

It is very important to leave a Will. However, in cases like this, it is also very important to ensure that you organise your personal affairs with a relationship property agreement so that your wishes are able to be carried out in accordance with your Will. See a lawyer to assess your relationship status and so that you are aware of your options. If you are in a second relationship and want to ensure your children receive the full benefit of your Will, ensure there is a contracting out agreement for you and your partner to ring fence which property remains the separate property of each partner. If you are not in a relationship but may enter into one in future, that is a good time to settle your property into a trust with your children as the beneficiaries.

Amanda Bradley and Suzy Garnett are lawyers with national and trans-Tasman firm Duncan Cotterill. A.bradley@DuncanCotterill.com

Disclaimer: the content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.

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