What happed to the inheritance?

21 Oct 2009 @ 7:08 AM

What happed to the inheritance?

An interesting case has recently been handed down from the Courts. This case now provides Parents with the rights to strip their Children of inheritances. The judgment goes against what was previously believed to be good law.

To date, we have all thought that Parents owe a duty to their Offspring to provide for them in some way upon their deaths. Well that reasoning may go by the board if the most recent case is anything to go by.

The case

The case goes something like this. Dad, Mum and two Daughters lived cheerfully together but when Mum died and left her Fortune to Dad, the two Daughters fought over the Estate. The result was the Daughters ended up with $56,000 whilst Dad received $20,000.

Dad decided that he would place his affairs with the Public Trust and so he completed a Will in which he left nothing to his Daughters. He also left instructions with the Public Trust that they were not to tell his Daughters about his passing away, his funeral or his Will.

Dad’s statement to the Public Trust went along the lines that his Daughters gave him zero, not even respect and that is what he intended to give them on his death - Zero.

When Dad died the Public Trust actioned his orders. Herein lies the problem. No demise notice was available. The Public Trust did on the other hand advertise for creditors of the Fortune to come forward but none ever did which is standard policy when dealing with a individual Estate.

The Public Trust did not report to the Daughters and the Estate, valued at circa $250,000, was passed to his de facto partner, in accordance with in his Will.

The oldest Daughter learned of her Father’s demise, about two years after the event, which is long time to try and follow up after a loss of life, on the other hand didn’t deter her. Instead, she sued the Public Trust, citing they had a legal duty to advise her of her Father’s passing away. If she won the claim, she would likely receive approximately $62,000.

The Judgment

The Court however didn’t quite see the Daughter’s side of the story. Instead they issued a judgment stating that Executors (the Public Trust in this particular case) did not have a general duty to report to potential claimants about a passing away or even a general duty to advertise for claimants. Rather, Executors have a duty to tell a person only when they know that person wishes to make a claim. So, Executors have to have actual knowledge of a potential claim rather than pre-supposing someone might make a claim.

The Court completed up by saying that the Public Trust did not have actual knowledge that the Daughter would make a claim and therefore, was not liable.

Lessons for us all to learn

So what does all this mean for Parents and Offspring?
Well to start with, we want all families to play as one and stay together. The emotional cost of falling out with each other is huge.

Secondly, we would like to see all material goods held in a Trust not in a person’s individual name and capacity. Why? Because Trust possessions can be passed from Trust to Trust meaning they can be passed from a Parent’s Trust to a Trust established for their Offspring upon that Parent’s death. This protects belongings from Creditors and the Legitimate Assignee and of course, negates gift duty.

Thirdly, everyone should have an up to date Communication of Wishes. This document will tell your present Trustees what you want done with the material goods of the Trust when you are dead.

Lastly, everyone should have a current Will which deals with the belongings that you do actually hold in your private name at the time of your demise, such as tools, jewellery, etc.

Of course, asking your Parents what they plan to do with your inheritance is often a thorny subject to broach. A way of opening up this type of discussion with your Parents is to tell your Parents what you expect to do with your individual belongings for your own children.

One of the lessons to be taken from this situation is if you want to watch over the inheritances you are going to be given from your Parents and if you want to defend the inheritances you expect to leave to your own offspring, ensure you take action.

Janet Xuccoa BCom LLB, is a Family Trust specialist and accountant and partner at Gilligan Rowe & Associates Ltd (GRA). GRA is an accounting firm specialising in property and family trusts

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