Suzanne Smith, Associate at Dentons Kensington Swan, shares her insights on the Family Protection Act 1955 with a summary of the information advisers should obtain and the factors to consider, when advising will-makers wishing to make differing provisions for key family members.
Overview
The extensive catalogue of Family Protection Act 1955 (the ‘Family Protection Act’) judgments means practitioners must identify and carefully weigh a range of personal and financial details, when advising will-makers.
In the event of a client’s death, it is possible for certain persons, including their widow or widower, de facto partner, children and grandchildren to apply under the Family Protection Act for provision from the deceased’s estate. Where the deceased has not made adequate provision for them, the court may order such provision as it sees fit from the deceased’s estate.
Claims are typically made to the High Court of New Zealand or the Family Court in the first instance, although they can also be made to the Maori Land Court. There is only a small window of opportunity in the estate administration process for a claimant to notify the administrator of their intention to make a claim and file an application.
A successful claim under the Family Protection Act only results in orders against the deceased’s estate. Orders can be made against an estate subject to a will, or a wholly- or partially-intestate estate.
There is no provision under the Family Protection Act to claw back antecedent gifts or other transfers by the will-maker during their lifetime e.g. to trusts. As such, a gift to a trust can defeat a claim under the Family Protection Act. However, recent proposals to reform succession law have raised the possibility that statutory claw back provisions will be introduced.
Due to this constraint, claims under the Family Protection Act are often made in conjunction with other legal avenues, such as the Property (Relationships) Act 1976 (where the claimant was married to or in a de facto relationship with the deceased) and/or the Law Reform (Testamentary Promises) Act 1949 (although that legislation also lacks a claw back provision). Other avenues are also being tested. For example, there is a claim in constructive trust (for alleged breach of fiduciary duties), by the children of a deceased against trustees of an inter vivos trust, which is presently on appeal to the Supreme Court (D and E Limited (as trustees of Z Trust) v A,B and C[2022] 3 NZLR 566).
Who can make a claim
A claim under the Family Protection Act can be made by or on behalf of any of the following classes of persons:
a) a spouse or civil union partner of the deceased;
b) a de facto partner living in a de facto relationship with the deceased at the date of death. However, if the de facto relationship was of short duration (usually less than three years), that partner can only claim if: there is a child of the relationship; or the de facto partner has made a substantial contribution to the relationship, and failure to make an award would result in serious injustice;
c) the deceased’s children;
d) the deceased’s grandchildren living at the deceased’s death;
e) the deceased’s stepchildren who were being maintained wholly or partly or were legally entitled to be wholly or partly maintained by the deceased immediately before the deceased’s death;
f) the deceased’s parents, who were being maintained wholly or partly or were legally entitled to be maintained wholly or partly by the deceased immediately before the deceased’s death and the deceased left no living spouse, civil union partner, de facto partner or child of their marriage, civil union or de facto relationship.
Recent succession law reform proposals have raised the possibility that the list of persons may be more restricted and/or qualified, to reflect current social attitudes. However, the proposals have not yet progressed beyond the consultation stage.
Threshold tests
The test for a successful claim under the Family Protection Act is whether adequate provision has been made for the proper maintenance and support of a person (the ‘claimant’), taking into account the claimant’s means and obligations and all other relevant circumstances.
The test is not whether the testamentary provision made for the claimant is unfair.
The Court of Appeal has confirmed that, where there is a will, the enquiry begins with a presumption of testamentary freedom, except to the extent that there has been a failure to make proper provision for the maintenance and support of those entitled to it.
The court must determine:
a) whether the deceased had a ‘moral duty’ to the claimant, judged by the standard of a wise and just will-maker. Although the phrase ‘moral duty’ is not mentioned in the Family Protection Act, the court considers that it is implicit in the enquiry required;
b) whether the moral duty has been breached, determined as at the date of the will-maker’s death, having regard to all the circumstances and the social attitudes of the day; and
c) having found a breach, whether to exercise its discretion to make an award and, if so, what would be necessary to remedy the breach, i.e. what would be adequate provision for the claimant’s proper maintenance and support. In making this determination, regard may be had to events after the will-maker’s death.
Proper maintenance and support
The claimant has the onus to establish their need for proper maintenance and support, based on financial need or on a broader need for support or both. That does not mean that they must be in ‘necessitous circumstances’.
In making their determination of proper maintenance and support, the court will consider:
a) the claimant’s means and obligations;
b) the claimant’s character and conduct;
c) the size of the deceased’s estate;
d) the strength of other moral claims on the deceased’s estate;
e) relations between the deceased and the claimant during their joint lives;
f) other ethical and moral considerations; and
g) changing social attitudes which will influence whether and to what extent there is a moral duty.
The court’s approach in making their determination can be summarised as follows:
a) Determining what is ‘proper maintenance and support’ requires a broad approach.
b) ‘Proper’ maintenance is more than merely-adequate maintenance.
c) ‘Support’ is a wider term than ‘maintenance’. For example, a child’s path through life is supported not only by financial provision to meet economic need and contingencies but also by ‘recognition’ i.e. acknowledgement that he or she belongs to the family and was an important part of the deceased’s overall life. In determining what would be ‘proper support’, the context is relevant.
c) The size of the deceased’s estate and any other (competing) moral claims the deceased may have, are relevant factors.
d) In cases of financial need, the amount needed to remedy the failure to make adequate provision can be determined more precisely than where the need is of a moral nature.
e) Where the claimant is not in financial need, a modest award may be sufficient.
f) Where the deceased’s estate represents the entirety of the family’s assets and is more than sufficient to meet other potential claimants’ needs, an award which is ‘so small as to leave a justifiable sense of exclusion from participation’ in the estate might not be ‘proper support’ (Williams v Aucutt [2000] 2 NZLR 479 at [52]).
g) The court should do no more than the minimum to remedy the deceased’s failure to meet their moral duty. Beyond that, their testamentary wishes should prevail.
h) The court’s power does not extend to re-writing a will because it is perceived as unfair. There is no presumption of equal sharing and differing treatment of beneficiaries under the will is not enough, in isolation, to establish a successful claim.
i) An award should be neither unduly generous nor unduly miserly, particularly where the estate is large and it is not necessary to meet the competing claims of a number of deserving recipients from an inadequate estate.
This general approach also applies on an intestacy.
Where the court has found that a moral duty to the claimant has been breached and has decided to exercise its discretion to make an award, the amount required to remedy the default has to be determined. There is no statutory or common law test for determining the amount of the award. The court has previously favoured awarding a percentage of the overall value of the estate and more recently, has tended to favour an absolute monetary amount.
Claim by the deceased’s spouse or de facto partner
When advising a client regarding the risk of a claim by a spouse or de facto partner, advisers should be aware that a spouse or de facto partner has the paramount right to claim against the deceased’s estate (or defence against another’s claim) under the Family Protection Act. However, leaving all of the deceased’s estate to their spouse or partner does not remove the deceased’s moral duty to others, such as their children or stepchildren, even if there is evidence that the deceased’s spouse or partner intends ultimately to provide for them.
The Court of Appeal has said that it can see no reason why an ‘entitlement’ for a deceased’s spouse or partner to benefit from a fully-discretionary trust should not be taken into account in assessing whether the deceased has made adequate provision. Where a person relies on discharging their moral duty to their spouse or partner from a discretionary trust, the Court of Appeal has indicated that, upon a claim being made under the Family Protection Act, the court may assess the way in which the trust will operate.
Claim by a child of the deceased
When advising on potential claims by a will-maker’s child, advisers should consider whether the proposed provision under the will satisfies the following two thresholds:
a) whether the deceased has satisfied their moral duty to provide proper maintenance and support to their claimant-child, in light of the claimant’s financial situation and economic needs; and
b) whether, as at the date of death, the deceased has satisfied their moral obligation to acknowledge that the claimant belongs to the family and was an important part of the deceased’s overall life.
Although the relationship of parent and child inherently carries with it a moral obligation, the extent of the obligation will be determined by considering the actual relationship which existed between the deceased and their child during their joint lives. For example, the extent of the moral obligation owed by the deceased may be reduced by a dysfunctional relationship or estrangement caused by the claimant-child or misconduct by the claimant-child towards the deceased parent. Further, an estrangement brought on by a deceased parent’s own actions will not reduce an award against their estate and, as an extension of that, where there is proven evidence of abuse by the deceased parent towards the claimant-child, that may strengthen the claimant-child’s moral claim against the deceased parent.
Additional factors which have been taken into account by the courts, in considering a child’s application, include:
a) evidence of the deceased parent’s intentions, including where a parent’s testamentary intentions have remained unchanged for many years, as evidenced by prior wills;
b) a letter signed by the deceased parent contemporaneously with the will which explains the parent’s intentions. A letter can also be considered as evidence that any differential treatment was neither a mistake nor the result of a misunderstanding of the parent’s moral duty;
c) evidence that one child has made a greater (unpaid) contribution than another to the value of the deceased parent’s estate;
d) evidence that the deceased’s estate included the estate of the other parent of the claimant;
e) current societal expectations of testamentary freedom and what is expected of a wise and just will-maker in the circumstances.
Provision in a grandparent’s will for grandchildren (children of the claimant) is not a relevant factor in determining whether there has been adequate provision for the claimant-child nor is it viewed as ‘recognition’ of the claimant-child.
Claims by the deceased’s grandchildren
When considering a claim by a deceased’s grandchild under the Family Protection Act, the court must take into account:
a) all of the circumstances of the case; and
b) any provision made under the deceased’s will, or by the court, for the claimant-grandchild’s parents.
A grandchild is less likely to establish a successful claim against a grandparent’s estate if their parent (the grandparent’s child) is living. The (rebuttable) presumption is that a parent will make adequate provision in their will for their children.
Where a parent (the deceased’s child) has died, there is a greater likelihood that the deceased’s grandchild will make a successful claim. However, the claim must be made in the grandchild’s own right and often, the award received will be less than their deceased parent might have received, had they been alive.
The court treats the strength of claims by grandchildren as a continuum:
…starting with more usual cases where a testator can probably discharge all duties by making provision for their children, who can reasonably be expected in their term to make provision for the testator’s grandchildren. At the other end of that continuum will be much more unusual cases where a grandparent may have taken full responsibility for a grandchild, giving rise to a moral obligation that may come close to that owed to children (Jones v Molesworth HC New Plymouth A71/85, 14 November 1986 at 8 cited with approval in Brown v Brown (as Executors and trustees of the estate of Brown) [2022] NZCA 476 at [64]).
Timing of Family Protection Act claims
The window of opportunity for making a Family Protection Act claim and its inter-relationship with estate distribution was succinctly summarised by Isac J. in the High Court in Hunt v Moriarty [2022] NZHC 2121 at [12]:
The statutory timeframes governing the distribution of estates, and the timeframes for bringing claims against them, are set out in ss 46–51 of the Administration Act 1969, and s 9 of the Family Protection Act 1955. In summary, these provisions provide:
(a) No application under the Family Protection Act “shall be heard” unless it is made within 12 months from the grant of probate (ss 9(1) and (2)(b) of the Family Protection Act).
(b) However, an administrator is entitled to distribute an estate six months after the grant of administration (s 47(4) of the Administration Act).
(c) The ability of an administrator to distribute is, however, suspended for three months if they receive notice in writing from an intending applicant of an intention to bring a claim under the Family Protection Act (s 48(1) of the Administration Act).
(d) However, if the intending applicant fails to file and serve proceedings within the three-month time frame, the administrator may “act as if [they] had not received the notice” (s 48(1) of the Administration Act).
(e) Where a distribution has been made, “and there is nothing in any Act to prevent the distribution being disturbed”, the court may nevertheless direct the return of a distribution to the estate (s 49(1) of the Administration Act). These are commonly known as “following orders”.
(f) However, no application for a following order “shall be heard” unless the application is also made within 12 months from the grant of probate (s 49(3)(a) of the Administration Act).
In short, the timeframe to make a valid claim is narrow:
a) an estate may be lawfully distributed six months after the grant of probate, unless the executor has notice of an intention to claim under the Family Protection Act (or another claim).
b) if the estate has already been lawfully distributed and a claim under the Family Protection Act has been commenced within 12 months from the grant of probate, a ‘following order’ might be used to claw back distributions to satisfy an award.
c) No claim can be made under the Family Protection Act 12 months after probate is granted.
Suzanne is an associate in Dentons Kensington Swan’s private wealth team. Specialising in asset planning and structuring for wealthy individuals and families, she advises private clients, trustees and family offices on all aspects of trusts, trusteeships, wills, estates, relationship property, relationship property disputes and related taxation considerations.
