Trusts / Asset Planning
We all lead busy lives. Our circumstances, and those of our family, change. As our lives change our wills and other personal documents also need changing, or at least reviewing.
A recent case (Sutton & Ors v Public Trust  NZHC 1844 [6 August 2015]) highlights what can happen when your will has not been updated to meet a change in circumstances. It also highlights that you need to be sure that what your will says is what you want. Does the person drafting your will know your personal circumstances. Do they know you?
Mr S in his will dated 28 August 2003 gifted, if his wife died before him (as occurred), his estate equally to his three children. The will further provided that if the gift to any of his children did not "take effect" then that gift would pass to their children.
When Mr S died his three children were alive. However, one son, Warren, was an undischarged bankrupt. Under the Insolvency Act 2006 all property of a bankrupt, including an inheritance, vests in the Official Assignee. Warren's children argued that because Warren, as a bankrupt, did not receive the gift, the gift did not "take effect" so they were entitled to their father's share of the estate. The Court rejected this argument as the money could only pass to the Official Assignee if the gift had taken effect. A one third share was gifted to Warren and because he was a bankrupt the gift passed to the Official Assignee to discharge his debts.
The grandchildren's' evidence was that their grandfather had intended Warren's share to go to them. Warren had, on a number of previous occasions, faced potential bankruptcy. He was finally made bankrupt in 2010. Evidence was given that Mr S had in conversation said that his will "covered" the situation. The Court also rejected this argument; it held that the words of the will were not ambiguous and that the gift took effect if Warren was alive.
Mr S had given his instructions to staff from the Public Trust. The Public Trust had no notes or records of Mr S discussing with staff the issues around his son's bankruptcy and/ or giving specific drafting instructions about this.
Mr S's will could have easily been drafted to avoid such an outcome.
When giving instructions about your will it is important to give full and frank information about you and your family. Everyone's circumstances are different. This is why will drafting takes time and consideration. If you have any concerns that you may not be able to explain things properly, make brief notes to be discussed with the person taking your instructions.
Read the draft will carefully. Confirm that the will is in line with your instructions. Ask for an explanation of any clause that you are unsure of.
It is standard practice when taking will instructions for law firms to file any notes/completed questionnaires with the finalised will. This provides evidence as to what the will-maker intends.
Some changes in circumstance have an automatic consequence for your will. Entering into marriage or a civil union automatically revokes your will. Upon the dissolution of a marriage or a civil union, the provisions of a will that provide for a former spouse/partner are read as if the former spouse/partner has died. Note these automatic consequences do not apply to separation or the end of a de facto relationship. A new will is required to remove any provision made for a former spouse/partner.
Your will is a very personal and important document. It should express how you want your assets to be dealt with upon your death. It is important that you:
- check and update your will on a regular basis to ensure that it does meet your current circumstances, and the circumstances of your loved ones who will benefit from your will; and
- understand the provisions of your will and are sure that your will gives effect to what you want to happen with your assets upon your death.
If you have not looked at your will for a while, it is a very good idea to take the opportunity to review it and if you have any concerns to contact your advisor. In these times of electronic calendars you can even provide for a will "bring up" to be loaded for times you think appropriate.
If you would like more information on this article or having any queries please contact the author of this article.