Sense of entitlement
Should financially independent adult children be entitled to an inheritance when a parent dies? As blended families become more common, Donna Chisholm investigates the increasingly murky state of succession law.
Should financially independent adult children be entitled to an inheritance when a parent dies? As blended families become more common, Donna Chisholm investigates the increasingly murky state of succession law.
Auckland businesswoman Carol Fry was a widow of less than three months when she discovered her stepson was challenging his father’s will. The ensuing legal battle took six years and cost her nearly $400,000, but she says she had no option other than to fight the claims in court. “If he’d got what he wanted, I would have been bankrupt, and I would have been tossed out of my own home.”
She says courts are treating second wives like second-class citizens.
The Fry case is one of many challenges by adult children to a late parent’s will, particularly after the parent has remarried, that have legal experts questioning whether the relevant law – the Family Protection Act
(FPA), based on principles enshrined in 1900 – is still fit for purpose. The law says parents must provide for the “proper maintenance and support” of their offspring, even when they are adults, a clause that courts have since interpreted as “moral duty”.
Senior lawyers say the roughly 300 applications a year to the Family Court and High Court disputing estates are just a small proportion of the number of cases challenged, because most beneficiaries are advised to settle rather than incur the expense of a court battle.
But as people live longer and also become increasingly likely to divorce, remarry and start second or third families, the rights of a surviving spouse often conflict with the interests of their dead partner’s children. It’s particularly true when that spouse is similar in age to the stepchildren, who can see an inheritance vanishing into a distant future or being spent in the meantime.
Although Carol Fry won the case in the Family Court, it was overturned on appeal to the High Court, which ordered her to pay stepson Jason Fry $175,000 to meet his father Laurie’s moral duty to him. Laurie had left all his estate to Carol, on the understanding that his three children, and her own beneficiaries, would inherit on her death. The court ruled that because the relationship between Carol and Jason had irreparably broken down, it had little confidence she would provide for him.
MORAL-DUTY CLAIM
Carol Fry had bought and paid for her own home in Parnell in 1986, with no contribution from Laurie, before they married in 1989. It became the couple’s home, and part of Laurie’s estate. The couple set up their business, Unique Fabrics, in 1986, with start-up capital also provided by Carol.
Jason worked for the company in the early 1990s and, after a period overseas, became national sales manager in 2006. He said his father told him he would inherit half the company on his father’s death, but Carol Fry said the plan was always for Jason to buy out Laurie’s share. Jason did not pursue this claim of testamentary promise in the High Court, but went ahead with the moral-duty claim.
Carol Fry, 64, says she was blindsided by the legal challenge, because she thought she and Jason had a good relationship. “This is happening at the time you are grieving. Is that really okay? It steals your grief. You have to get out and fight, and the
system makes you feel totally powerless – you can’t stop it happening.”
She says she was stunned that her stepson thought he was more entitled to the business than she was. “I was there every single day, and in the early days, we slogged – 18 hours a day, seven days a week.”
She says she has no beef with children getting a share of their parents’ estate, even if they’re in no financial need, but is upset at what seems to be a growing sense of entitlement. “It’s just ‘I want’. I wasn’t brought up to expect an inheritance. When my father died, everything went to his second wife and it didn’t even occur to me to challenge it.”
By the time Jason’s sisters – who did not challenge the will – inherit on her death, she says their payout should be many times the amount he received. Carol, who has no children, is leaving her estate to friends and family members, and some loyal employees.
She’d like to see more certainty in the law about what, if anything, independent children are entitled to. “There needs to be a way to stop it going round and round in the system, because in some cases, it will leave the spouse unable to live at the standard they are used to living in, and I think they should be able to do that.”
Jason Fry told the Listener he felt he had no option but to pursue a legal claim after he’d worked for Unique Fabrics for 15 years, but found his father had left him nothing in his will. “I always knew it was a no-win situation, but I did it on principle. I had no other choice.”
He says his father had promised he would inherit shares in the business. Under his stepmother’s will, he might have inherited “in 20 or 30 years”, but there was no guarantee she would not change it before she died.
He believes financially independent adults should be entitled to a share of their parents’ estate, but he wouldn’t recommend anyone pursue litigation lightly, saying it’s a gruelling and expensive process. He says his relationship with his stepmother broke down from the moment he raised the issue.
OPEN TO ABUSE
University of Otago law professor Nicola Peart, an expert in family property and succession law, says there is a need for change. “Property rights on death are a mess. What we have now is highly unsatisfactory. It is open to abuse by people who probably don’t deserve to get anything and equally open to abuse by people who probably do deserve to get something.”
She and a number of other high-profile family-law specialists believe financially independent adult children who aren’t in the will or feel they’ve got too little shouldn’t be entitled to claim on their parents’ estate unless they can show genuine need. They support recommendations on the same lines that the Law Commission made in 1997, but which were subsequently shelved.
The commission slated the Family Protection Act as urgently in need of review, saying the concept of moral duty was obscure and the varying interpretations of judges unpredictable.
A Stuff poll published in June that asked if parents should have to provide for independent adult children in their will attracted more than 10,000 responses. Nearly 80% said “no” – they should be able to divide their estate however they want.
Cue a hollow laugh from Peart. “They think that, until they’re the person at the receiving end. Ask if they’re happy for their parents to leave all the money to the dogs’
“Property rights on death are a mess. What we have now is highly unsatisfactory. It is open to abuse by people who probably don’t deserve to get anything …”
home and they’ll probably say yes. But ask if they’re happy for them to leave it all to your stepsisters, and they’ll probably say no.”
Peart suspects the Law Commission recommendations were ignored because they simply went too far. “Effectively, they went from one extreme to the other – you get not a dime unless you are in serious financial need, and I suspect it’s hard to turn the clock back quite to that extent.”
What the commission was trying to do, she says, was to put a person’s obligations in death in line with their obligations in life: as long as we’re alive, we can give our money or assets to whoever we want and leave adult children with nothing.
Often, says Peart, a challenge under the FPA’s moral-duty provisions isn’t about the money, but about parental recognition. “Am I so worthless they’ve left me with nothing?” But she says a court’s financial award could surely not restore that feeling of worth or recognition.
Society has also changed. Parents now