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Estate claims need sound advice up front

31 May 2019

Section 182 of the Family Proceedings Act 1980 gives Courts the power to change nuptial settlements.  Nuptial settlements are settlements or agreements made when the parties think their marriage or civil union will continue forever! Often the spouses are setting up a trust as the nuptial settlement. Once you are divorced you can claim against the assets settled under the nuptial trust.

Until recently s 182 was held as enforceable only by living spouses. In the recent judgment of Thakurdas v Wadsworth Justice Hinton decided that the section could be used to claim on any property settled under nuptial agreements where the premise of the settlement – that the relationship would continue forever - had failed. This ensures that one party does not benefit unfairly at the expense of another.  Justice Hinton decided that if one spouse has died it is right that the personal representatives of that person can still make an application under s 182 on behalf of person who has died.

The case was upheld in the Court of Appeal.

The new interpretation of s 182 does change a few things.  Currently there are three Acts which can be used to make a claim against a will or estate. These are the Family Protection Act 1955, the Law Reform and (Testamentary Promises) Act 1949 and the Property (Relationships) Act 1976. These Acts have specific timeframes within which a claim must be made.  The timeframes for making claims under these Acts are 12 months from date of grant of probate.  If the executors of the estate have not received notification of any claims within the set timeframe then the estate can be distributed to the beneficiaries without liability to the executor.

There is no set timeframe for personal representatives to make an application under s 182 on behalf of a deceased spouse. This widens the possibilities for claiming on an estate.

This recent decision strengthens s 182 which is known as a “trust busting” provision as it can be used to set aside settlements and transfers of property to trusts. This means that any transfers to trusts and settlements of property need to be expressly and carefully drafted to prevent them from being turned over.

If you have recently separated you should seek independent legal advice to classify and divide your assets and debts with your ex-partner.  This agreement can then be documented in writing in a Separation and Relationship Property Agreement. It is important that this document is executed properly and you receive proper legal advice about your entitlements.

If you believe you may have a claim against an estate or you would like legal advice about your entitlements or how this change may affect you please contact us.

 

Gillian Spry is a Consultant in the Family Disputes Team at Norris Ward McKinnon. You can contact Gillian at gillian.spry@nwm.co.nz