‘It interferes with your grieving’
Despite a father’s carefully drafted will, his adult son was able to trump his last wishes.
When even the finest legal brains in the country can’t craft a will that ensures their wishes are carried out on death, who can? That was one of the biggest lessons of a case that had family law experts in a lather last year, when David Chambers, son of Supreme Court judge Sir Robert Chambers, who died in 2013, took his stepmother, relationship property and trust expert Lady Deborah Chambers, QC, to court over his father’s will.
The Chambers’ “mirror” wills made their wishes very clear. His two sons and her two daughters from their previous marriage were each to receive a quarter of the couple’s estate to a maximum of $2.5 million. The surviving spouse had the discretion to pay the money at any time after the first anniversary of the other’s death – for example, if the children needed help.
Three of the children accepted the terms of the wills, but David, a Silicon Valley-based software engineer in his early thirties, did not. He did not want to wait, potentially for decades, until his stepmother’s death to receive his share. He wanted it now – despite the fact he was earning US$120,000 a year and was in no financial need.
Although the High Court rejected much of his claim, it ruled that Deborah Chambers was a “constructive trustee” for her stepson and had an obligation to act in his best interests, regardless of whether he was in financial need.
Having to pay David was an exercise in dead-rat swallowing for his stepmother, and she rails against the wrong-headedness of a law that allows the rights of a financially independent adult child to trump those of a widow or widower – and the express wishes of the deceased.
“When you’re alive, you can give your money whenever you like, to whichever children or charity you like, and no one can stop you. The moment you’re dead, they [the court] can take control over it. There’s something wrong with that concept. What we did was the best that could possibly be achieved under the current law, given that the current law simply fails to tackle the issues of blended families. We did what we thought was incredibly fair for all four of our children and for each other.
“You get angry,” she says of the litigation, which went on for three years. “It really interferes with your grieving. There you are, on your knees, having just lost the great love of your life and then boof, three months later, you get a lawyer’s letter. It was awful. Awful.”
Awful – and unexpected. As masters of the law, the couple thought they’d allowed for every eventuality. The surviving spouse agreed to give the other’s children priority in any payout – meaning their biological children would lose out before the stepchildren. “In effect, it would be only if I was homeless and in the gutter that the children would get nothing. There was never any question that I would not comply with the agreement.”
They also covered off what would
happen if either of them remarried, with a contractual obligation to preserve the children’s entitlements in any new partnership. The survivor could not gift property to a trust or their children without paying the same amount to the survivor’s children.
They intended the provision allowing an earlier payout would take effect only if any of the children’s circumstances changed and they needed help. “If
David had needed money or been in financial strife for whatever reason, that is exactly what I would have done. As it was, he had a very large sum of money in a bank account, a large share portfolio and was in a well-paid job with no dependants.”
ASSETS FROZEN
After publicity about the court case, she says she was inundated with letters and cards from strangers “who told terrible tales of the destruction of families that was never healed” following FPA litigation.
“There were countless examples of widowed men and women having their assets frozen, meaning they couldn’t access any capital at all. People were borrowing money from friends to survive. There were also tales of appalling litigation costs, which forced people to settle claims, particularly where there were modest estates.”
So, how might a legal challenge from one of the children have been prevented? One way would have been to put their estates into two separate family trusts, with the children of each partner being the ultimate beneficiaries of their own parent’s estate held in the trust.
Another way would have been to write in a clause specifically preventing an earlier payout, but, she says, “that seems wrong” because if the children got into trouble, they’d want to help out.
Trusts can be “busted” in relationship property claims if they’ve been established to defeat the Property (Relationships) Act, but can’t be touched by FPA claims.
However, Deborah Chambers says she and her husband were philosophically opposed to trusts being used to avoid FPA obligations, and the children would have been beneficiaries of any trust, giving them significant rights under existing law. She says given that the children were treated equally and very generously, it never occurred to them that there would be a moral-duty claim.
It’s only natural that beneficiaries would prefer to have the money right away, she says – “who wouldn’t, whether you’re 18 or 65” – but they had to respect the will-maker’s wishes.
“David chose money over family; he chose money over love.” tend to help their children more during their lifetime, helping to repay student loans, for example, or to raise a mortgage on a first home. “At the other end of the spectrum, the longer we are living, the more money we need in our retirement,” Peart says.
“Here is an Act introduced in 1900 with a view to preventing families from becoming dependent on the state for charitable handouts, and now we are using it for something very different. Should we not be going back to society and asking if this is the way we ought to be doing this?”
Because of the way courts are interpreting moral duty – basically, limiting adult children’s claims to about 10% of an estate if there’s been no “disentitling behaviour” – lawyers are strongly advising people making wills not to treat children unequally, and not to cut them out, even if they want to.
NO MAGIC SOLUTION
Auckland lawyer Juliet Moses, who specialises in trust and estate law, says she always encourages clients to treat their children equally, but sometimes they don’t want to take that advice. “They have their reasons. One child may have been more successful, one is down on their luck or has a problem perhaps with drug addiction, or they’re worried about the child’s spouse or partner.”
Sometimes, she says, a parent will simply not like a child, or feel they haven’t been to see them as much, or helped them as they’ve aged, and is shocked to discover they don’t have the testamentary freedom to cut the child out without the risk of legal action. “We would always suggest leaving something rather than nothing to remove the incentive of a challenge.
“Most people in a normal nuclear family would leave everything to the spouse, and to the kids after that. But a blended family is much trickier and in almost every situation that has become contentious after someone’s died; it’s the man who has died and his second wife or partner is up against the kids
“Here is an Act introduced in 1900 with a view to preventing families from becoming dependent on the state for charitable handouts.”