Trusts & Estates
Generally speaking, you are granted freedom to dispose of your assets as you wish in your Will. However, as a parent, there are certain duties on you to provide for your children. Failure to make proper provision for a child in your Will can result in a claim being brought against your estate by that child under the Family Protection Act 1955 (FPA).
What are my duties?
Underr the FPA you have a ‘moral duty’ to provide proper maintenance and support for your children when you die. Such a duty relates both to the emotional and material needs of each child. The extent of this obligation is largely defined by the relationship you have with each of your children during your lifetime. It is also defined by the age and circumstances of each child.
Under the FPA, the Court can vary a Will if it considers you have breached this ‘moral duty’. However, the Court is not authorised to rewrite your Will merely because your Will may be perceived as being ‘unfair’ to a certain child. It is still possible to discharge your moral duty even if the final division of your estate among your children is unequal.
Your child would need to prove in a broad sense that they have need of maintenance and support. The Court prefers to respect your final wishes and generally adopts a conservative approach. If the Court decides you have not adequately provided for your child, it will only award your child a sum that is no more than the minimum necessary to make ‘adequate’ provision.
How best to prevent an FPA claim
Leave your child something – it doesn’t have to be much, it only has to be ‘adequate’. Part of the ‘moral duty’ is to recognise that your child was a part of your family and played a part in your life. If you do not have a good relationship with your child, that can support a lesser moral duty. A signed and witnessed letter can also be a great tool to support your reasoning when the terms of your Will are questioned after you pass away.
By way of example, let’s say Anne dies leaving a daughter and three sons (all adults). Anne and her daughter did not have a good relationship for various reasons and barely spoke for 20 years. On her death, her Will left her daughter a legacy of $15,000. The residue of her estate was left equally between her sons. The value of her estate after expenses was $315,000 so her daughter received $15,000 and her sons received $100,000 each. Anne left a signed and witnessed letter to be held with her Will and read to her daughter on her death. The letter explained her reasons for the unequal treatment in her Will. If her daughter felt that this was inadequate, she could argue this in Court. However, the letter is admissible evidence of their relationship. In this case, the daughter agreed that she did not have a good relationship with her mother and would not dispute the Will. She agreed that the $15,000 was an ‘adequate’ amount to represent their relationship. In effect, this $15,000 legacy discharged any emotional or material support and maintenance Anne owed her daughter.
Another option is to dispose of your assets during your lifetime. If you want to spend your kids’ inheritance before you die, you can! Of course, the potentially smarter option is put the assets in Trust during your life time for the benefit of those children you wish to receive a greater share of your estate, because once your assets are in Trust, they are no longer your legal property, and therefore do not form part of your estate when you die.
Lastly, you may want to treat all of your children equally in your Will, but prevent a lump sum being released all at once to a particular child. In this case, you could create a ‘Sprinkler Trust’ under your Will. Such a trust is created by Will rather than by trust deed. The precise terms of a Sprinkler Trust will vary based on your situation and wishes, but generally you would leave any distribution at the discretion of your Trustees; they can decide when and how much is released to your child.
There are many ways to protect your wealth, and manage your children’s access to it after you die. This article provides only simplified examples. If this article applies to you, the best way forward is to discuss your Will with us and what is appropriate in your circumstances so that we can best tailor a Will for you that is less open to a claim. To contact a member of our trusts and estates team please call +64 3 379 9940 or email firstname.lastname@example.org.
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