Jeremy Sutton: Why succession law needs a serious revamp

Yesterday the Law Commission published a 247-page Issues Paper as part of its Review of Succession Law. The paper highlights which areas of the law of succession need reform and invites public consultation on the report.

Succession law is the system of rules that determines what happens to your property after you die. Your property will pass on to others through your will (if you have one) or the rules of intestacy (if you do not have a will). Most people assume this process is relatively straightforward but there are several different ways it can become complicated.

Frequently the wishes of the deceased are challenged by family members.

Why does succession law need an update?

The current succession law in New Zealand is fragmented across many different pieces of legislation. Most of these laws were created more than 50 years ago when society in New Zealand was different. The law needs to be updated to reflect our current values.

Succession law is complicated

Many New Zealanders are not clear about what happens to their property if they die. Less than half of New Zealanders have a will. Creating a will gives you the freedom to choose what happens to your property after you die and provides certainty for your family. This freedom to determine your affairs is called testamentary freedom. However, testamentary freedom is not unlimited.

Succession law and the Property (Relationships) Act 1976

There are rules about what happens to property when the deceased was married, in a civil union or a de facto relationship for more than three years. These rules need to change. It is not always true that a person’s property will automatically pass to their partner.

The Property (Relationships) Act 1976 defines how a couple’s property will be divided when they separate. It also contains rules for when a partner dies. The rules are based on the idea that a surviving partner should not be worse off on their partner’s death than they would have been had they separated from their partner.

To make sure that the surviving partner is not worse off, they can choose whether to receive gifts provided for them in the deceased’s will or receive a share of relationship property equal to what they would have received if the couple had separated. The surviving partner must choose one of these options, they cannot choose both.

Proposal

The Law Commission has proposed an option that would allow the surviving partner to receive all the gifts provided in the will and receive a “top-up” if it was not equal to their entitlements under the PRA.

The need for education

The Law Commission has recognised that people do not understanding succession laws. Many people are not aware of the importance of having a will or how their property may be distributed if they do not have one. Often people are unaware of how the PRA may be relevant after they die.

In response to this, the Commission calls for greater education through:

• Public education campaigns by the Government
• Education in secondary school programmes
• Providing information at different points of interaction with government departments (e.g. when applying for a marriage or civil union license)
• Introducing requirements on registered professionals or organisations such as real estate agents and banks to provide some form of prescribed information to clients when buying or selling property, applying for credit or opening joint bank accounts
• Making information readily available online.

Comment

It is promising that the Law Commission has identified some critical areas for change and proposed some solutions for moving forward. Education is crucial to ensure people are aware of the consequences of their decisions when making a will, and the impact of not having a will. This education needs to start from a young age.

Lawyers and other professionals have an important role in providing easy, digestible information to the public so everyone is aware of the law’s impact on their loved ones after they die.

How to have your say

The Law Commission is calling for public consultation on the report. They want to know:

• What you think about the issues and proposals set out in this paper
• Whether you agree or disagree with the way the issues have been articulated?
• Whether there are additional issues you think should be considered?
• What you think about the proposals for reform?

Submissions on the Issues Paper should be received by 10 June 2021. You can email your submission to [email protected], post it to Review of Succession Law, Law Commission, PO Box 2590, Wellington 6140 or visit the consultation website.

– Jeremy Sutton is a senior family lawyer, specialising in divorce cases where there are significant assets, including family trusts and complex business structures.

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