Lessons Learnt in Estate and Succession Planning

It is critical that you consider and plan for what happens after you pass away.

A death in the family is a stressful event for the remaining family members, and if the deceased person does not have an effective and resilient estate plan in place, the stresses faced by the family undoubtedly escalate.  Adding to the considerations when implementing an estate plan is the prevalence of “blended” families.

Every family has different ideals and values, and in the farming context there are a number of additional considerations that require substantial thought.

If there is a farm involved:

• What should happen to the farm in the event of the premature death of an owner?
• Has a successor been identified, and if so, what is the plan to enable that person to receive the farming business over time?
• If the successor is a child, are there other children living, and how can you be fair to them?

The law in New Zealand recognises that parents owe a moral duty to all of their children, and on death, a parent must make “adequate provision for the proper maintenance and support” of children and certain other family members.  Proceedings can be brought against an estate under the Family Protection Act 1955 by the following persons if they consider the duty has not been properly discharged:

• the spouse or civil union partner of the deceased
• a de facto partner who was living in a de facto relationship with the deceased at the date of his or her death
• the children of the deceased
• the grandchildren of the deceased living at his death
• the stepchildren of the deceased who were being maintained wholly or partly or were legally entitled to be maintained wholly or partly by the deceased immediately before his death
• the parents of the deceased

The case of Talbot v Talbot [2016] involved a Family Protection Act claim by a daughter of the deceased parents against their estates in circumstances where her older brother had received the benefit of the family farm and the two sisters shared equally in the residue of the estates.  The value of the benefit received by their brother was approximately 70% of the total value of the estates.  He had worked on the farm for 25 years. Each daughter inherited approximately $1,100,000 from the estates.

The daughter was unsuccessful in her claim and the provisions in the parents’ Wills subsisted.  The key reasons given by the court were:

• The parents had always planned that the multi-generational farm would be left to their son.
• They had implemented a succession plan during their lifetime and, at the time of their deaths, their son already owned 50% of the farm and operated in partnership with them.
• There had been a number of family meetings over the years where the parents discussed their intention with their children.
• The daughters received a significant inheritance.
• The daughter who brought the claim was in a financially stable position and had a comfortable lifestyle.
• She had not been excluded from the family.  Appropriate recognition was given to her as a dutiful and loving daughter.

The courts awarded significant costs against the daughter.  She appealed to the Court of Appeal, and was again, unsuccessful.

Key Lessons

• Children are not entitled to an equal share of their parents’ estate.
• Whether the discharge of a moral duty is met will be factually specific.
• The importance of implementing a succession plan as early as possible during your lifetime.
• A Family Protection Claim can only be brought against personal assets in your estate on death.  Proper planning can protect against such claims.
• Communicate your intentions to your family.  This does not mean seeking permission, but ensuring your wishes are clear.
• Seek good legal advice early.
• Where there is significant value in a major asset such as a farm, consider how to be fair (not necessarily equal) to other children.  Planning and implementing the plan could be complicated.
• The professionals involved in the planning and implementation should keep robust notes of instructions so that in the event of a challenge there is evidence of the discussions, considerations and reasons for the decisions made.

For assistance with succession or estate planning, please contact one of our expert team.