Tags: Law

Grace and Robert

Grace and Robert had been married for 20 years. They had two teenage daughters and lived a lovely lifestyle between their beachfront property in Auckland and their holiday home in Omaha. The house and holiday home were both owned in a family trust. They also had investments outside the trust, including the share of the partnership in Robert’s architectural firm. 

One day Robert came home and quite to Grace’s surprise, told her that he was leaving her. He wanted to “find himself” and he didn’t think he could do that while still married to her. Grace was shocked more than devastated. Her daughters were so annoyed with Robert, they simply stopped talking to him and refused to see him.  
Grace quickly engaged a lawyer, and she and Robert sorted out their relationship property and the trust property in a very civilised manner, despite the hostile situation. Grace kept the Omaha property in their current trust, and a new trust was set up by Robert for the family home which he retained. Robert retired as a trustee of Grace’s trust, but their accountant stayed on as the independent trustee.  Robert also renounced any right he had as a beneficiary, and the power to appoint and remove trustees was transferred to Grace solely. Their other finances were split 50/50, but Grace decided that she wanted to keep that money out of the trust and in her personal name.  She felt that after all these years of Robert controlling the finances, she wanted some autonomy over her money.  
Grace moved to Omaha and spent a very pleasant five years there, until the day when unfortunately she had a brain aneurysm. She was rushed to hospital, but it was too late, and they switched the life support machine off six hours after she was admitted to hospital. Her daughters were devastated.
A few weeks later Grace’s daughters went to see their mother’s lawyer. They were shocked to discover that at the time of separating from Robert and sorting out their relationship property, Grace had never updated her will. Her will had been made ten years previously and left everything to Robert and then to the girls. Robert was the executor and the power to appoint and remove trustees of the trust was left to Robert. The girls were devastated. Their relationship with their father was estranged and they felt he had changed under the influence of his new partner.  hey didn’t think he would stand aside easily.
Grace had made the mistake of not changing her will when she had a change of circumstances. If you get divorced, then that has an impact on your will – it is read as if your ex-spouse died before you. However, if you simply separate then that has no impact on your will.  There are many couples (like Robert and Grace) who separate and then never get around to divorcing. This can have an impact when they die if they don’t address the changes they want to make via their will.  
It is important to review your will at least every five years or if there is a change in circumstances. A change in circumstances includes:

  • Having children – guardianship provisions should be included in your will and provision made for your children.
  • Getting married – marriage revokes any previous will, so if you get married and don’t update your will, you are intestate unless you make a new will.
  • Entering into a long-term relationship of three years or more – the Property (Relationships) Act gives your partner the right to choose to take 50% of all relationship property (ie assets that have been acquired during the relationship including all income, Kiwisaver and the family home whenever it was acquired) if you die, regardless of what your will says.
  • Separating from your partner or spouse – this has no impact on your will, as in Grace’s case.
  • If a partner, child or someone named in your will dies.

If you inherit assets, you need to consider how they relate to relationship property, whether you want to keep them separate and how this needs to be dealt with in your will.
Wills are one of the most important legal documents. Every adult should consider getting a will, and it is important to take good legal advice on how it should be drafted so that you don’t leave a mess behind when you die.

Tammy McLeod, Managing Director, Davenports Law

Issue 126 December-January 2021