Category Archives: Family and Matrimonial

Wills, Probate and Trusts: Testamentary Capacity, Want of Knowledge and Approval; and Revocable Living Trusts

Articles, Banking and Finance, Family and Matrimonial, Latest News

Litigation involving wills and deceased estates has been rising in recent years, reflecting both a greater sense of entitlement and a greater willingness to take legal action against others.

The wills, probate and trusts lawyers at Bahamas law firm ParrisWhittaker are increasingly instructed to act for clients involved in contested wills, probate and trusts. These areas are becoming increasingly dynamic, with the developing case law giving welcome clarity as to how the law is interpreted by the courts.

Wills and probate

In The Bahamas, wills, probate and trusts law operate largely as in the UK, with its legal system being based on English common law. Case law emanating from the UK courts has persuasive effect in The Bahamas and is normally followed (in the absence of domestic judicial authority or legislation).

On the death of an individual, the estate must be distributed in accordance with the law, whether that is under the last valid will of the deceased or, in the absence of a will, under the statutory rules of intestacy set out in The Inheritance Act 2002. The issue of whether the deceased’s last will was, in fact, valid is the crux of many cases brought before the courts in recent times.

Developments in testamentary capacity

Testamentary capacity is a hugely subjective issue which is somewhat of a testing area for private clients and the courts alike.  Practitioners are professionally obligated to remain vigilant as to issues pertaining to mental capacity from the moment they first see the client.

Any concerns as to lack of capacity arising, for instance, out of illness, effects of drugs, bereavement and so on should put the practitioner on alert.  They must take appropriate action, whether this is talking sensitively with the client or obtaining a doctor’s report. It is by taking necessary precautions that the risk of later disputes after the death of the testator can be minimized. This is vital given that a growing number of people are taking action to claim an inheritance (or an increased sum) from deceased estates on the grounds that the testator lacked the required testamentary capacity to make a valid will.

So far as the case law is concerned, the test for whether a testator has capacity to make a will is set out in Banks v Goodfellow (1870) LR 5QB 549. The testator must be able to understand the nature of the act of making a will, and its effects; to understand the extent of the property of which he or she is disposing; and to comprehend and appreciate the claims to which he or she ought to give effect. The testator must not be subject to any disorder of mind as shall “poison [her] affections, pervert [her] sense of right, or prevent the exercise of [her] natural faculties”.

Recent important rulings demonstrate the issues practitioners need to be watchful for, particularly given that the courts are willing to declare a will invalid on the basis of ‘want of knowledge and approval’ – even where there is insufficient proof of lack of testamentary capacity.

Hawes v Burgess1

In Hawes v Burgess, the testator did not know of or approve the contents of the will, even though it was drafted by an experienced solicitor. Although she executed the will, she did not have opportunity to check and approve its contents first.   Critically, the will was based on inaccurate information supplied by one of her daughters – a residuary beneficiary of the estate. However, the testator’s son had been excluded from the will.

The client’s lawyer was an experienced wills solicitor, and his “near contemporaneous attendance notes” (as described by the judge) were clear about his views on the capacity of the testator to make the will. The solicitor found her to be compos mentis and able to give instructions for a will at the relevant time. However, expert medical evidence was later taken from a doctor who never actually saw the testator. This expert said there was strong evidence that the she suffered from cerebrovascular disease which, in the light of evidence given by other witnesses and accepted by the trial judge, amounted to dementia of modest severity. The Court of Appeal said, however, that this fell short of what was required to show dementia and lack of mental capacity.

Critically, the daughter had played a major role during the will-making process, being the ‘controlling force’ who had even been present at the time the will was executed. Although the UK’s Court of Appeal ruled that although lack of testamentary capacity had not been conclusively proved – there was want of knowledge and approval and the will was therefore invalid.

So whose evidence did the court prefer? That of the solicitor who had actually met his client, and not that of the medical expert who had not met her. As Mummery LJ stated:

“My concern is that the courts should not too readily upset, on the grounds of lack of mental capacity, a will that has been drafted by an experienced independent lawyer.  If, as here, the experienced lawyer has been instructed and has formed the opinion from a meeting or meetings that the testatrix understands what she is doing, the will so drafted and executed should only be set aside on the clearest evidence of lack of mental capacity.  The court should be cautious about acting on the basis of evidence of lack of capacity given by a medical expert after the event, particularly when that expert has neither met nor medically examined the testatrix, and particularly in the circumstances where that expert accepts that the testatrix understood that she was making a will and also understood the extend of her property”.

This represents highly useful guidance for practitioners – both wills and probate lawyers and litigators.

Topciapski 

The subsequent case of Topciapski v Topciapski2 takes a similar theme. The claimant, one of the testator’s sons who was excluded from the will in question, argued that the testator neither knew nor approved the contents of the will, and that the other son exerted undue influence on the testator.   He relied on expert medical evidence that referred to a further medical report questioning the testator’ capacity on the basis of marked ‘generalised atrophic and ischaemic changes’ which impacted adversely on the testator’s capacity to know and approve of the contents of the will, and there seemed to be no rational reason for the claimant son to have been disinherited. In this case, the Will was declared invalid on the ground of want of knowledge and approval.

Turner v Phythian

In a further case3, the court found that the testator’s will was invalid both for lack of testamentary capacity and for want of knowledge and approval. The testator was a lady whose mental state was fragile throughout her adult life and, at the time the will was made, she was strongly bereaved and taking antidepressants.

The first defendant was the sole executor and also involved in the will drafting; the other beneficiary was his wife. The court found there was no evidence from anyone other than the first defendant that the testator had ever read the will or, indeed, had the will read out to her; nor had there been any discussion or explanation as to its content in the presence of the witnesses prior to the execution of the will. She had had no independent legal advice.

The will was declared invalid on grounds that the testator did not have mental capacity to make the will, and she did not know or approve its contents.

Sharp v Hutchins

In this 2015 case, testamentary capacity was not in dispute: the claimant (the sole executor and beneficiary) asked the court to pronounce a will as valid, but the defendants challenged the will on the grounds of want of knowledge and approval on the part of the testator. The judge ruled in favour of the claimant and found on the facts that “any degree of suspicion was relatively low because it was not a case where the 2013 Will was procured by the person benefitting under it”.

The High Court ruled that the testator understood what was in the will when he signed it and what its effect would be, and accordingly pronounced for that will.

What do practitioners need to know?

There are a number of salutary lessons for private client lawyers:

  1. The courts may resist declaring a will invalid for lack of testamentary capacity, but still find it is invalid for want of knowledge and approval (as the above cases show).
  1. There is a presumption that the testator knew of and approved the contents of a will if the will is formally executed in accordance with the required legal formalities. This presumption may be rebutted where there are factual circumstances that “excite the suspicion of the Court”.  Where there are such circumstances, the court will scrutinize them and consider the evidence before deciding if a will fails for want of knowledge and approval.
  1. In such cases, the burden of proof is on the individual relying on the disputed will itself to prove to the court that the will reflects the testator’s wishes.
  1. Where testamentary capacity and execution of the will are undisputed, where a claimant cannot sufficiently satisfy the court that the circumstances around the will are “suspicious”, a ‘want of knowledge and approval’ will not succeed. The testator’s knowledge and approval are “presumptuously established”.

As Mummery LJ stated in Hawes v Burgess, the cost of contesting the will was a calamity for the family in every way. Lawyers should always be mindful of their duty to their clients to minimize the risk of potential – and calamitous – legal action further down the line by taking appropriate steps if they have any concerns as to the testator’s testamentary capacity and or knowledge and approval of the will’s contents.

Trusts: Revocable Living Trusts

Setting up a Revocable Living Trust can lessen the risks of potential disputes involving a deceased after an individual dies (although trusts disputes can, of course, arise at some point). While a Revocable Trust can be contested, the procedure for doing so is much more difficult than it is to contest a will.

A Revocable Living Trust offers trustees a number of benefits well worth consideration. A Revocable Living Trust (sometimes called a ‘Living Trust’) is set up by an individual for the purposes of holding their own assets in trust.   These, in turn, are invested and spent for that individual – who is also the beneficiary. In other words, the trustmaker, trustee and beneficiary are generally the same person. It will govern what happens when the trustmaker is alive, if and when he or she becomes mentally incapable, and finally on death.

One of the biggest advantages of a revocable living trust is avoiding probate because it can spare beneficiaries the cost and stress of a potentially lengthy probate process. Avoiding the public probate process also ensures greater privacy in disbursing the assets of an estate to the beneficiaries. In addition, the process of setting up a revocable living trust can be a good incentive for individuals to deal with the important issues relating to their assets, and the potential ways of looking after them effectively.

Clients for which a revocable living trust could be advantageous need to balance the administrative and legal costs of setting one up against the cost benefits of having the trust in place.   Importantly, the clients will still need to have a will in place to cover property and assets outside of the trust.

Parris Whittaker: Biography

Parris Whittaker is an award-winning Bahamas law firm with expertise across the full range of legal practice. The firm combines an international reach with a firm grounding in the Bahamas region, and close working partnerships with important bodies such as the Bahamas Port Authority. It was founded in 2011 by partners Arthur K. Parris, Jr, one of the most senior leading legal authorities in the region, and Jacy Whittaker, a seasoned litigator who is very active in the Bahamian business community. Partner Kenra Parris-Whittaker is an award-winning lawyer who recently secured a significant victory in maritime law at the Appeal Court.

 

1 Hawes v Burgess [2013] EWCA Civ 94

2 Topciapski v Topciapski (2013) Ch 20 March 2013

3 Turner v Phythian [2013] EWHC 499

4 Sharp v Hutchins [2015] EWHC 1240 (Ch)                           

5 King v King [2014] EWHC 2827 Ch 

 

The Golden Age of Joint Lives Maintenance is Dead!

Articles, Family and Matrimonial, Latest News, Litigation Mediation & Arbitration

There is no doubt that Family law responds, more than other areas of law, to changes in society and high earners now earn significant salaries and there is a clear trend for couples to divorce later in life, to reflect a greater life expectancy and a greater expectancy of what quality of life they will enjoy in retirement.

Joint lives periodical payments has been the norm during my working life, with the onus on the payer – invariably the husband – to apply to terminate or reduce such an order if the wife were to remarry, cohabit, or find well-paid employment, to avoid crystal ball gazing. But of course that in itself creates uncertainty in both parties being able to plan their futures and leaves open the potential for a further round of litigation and significant costs, and capitalisation at a later date.

Section 25A (2) provides that it is the courts’ statutory duty when making a periodical payments order to consider:

“Whether it would be appropriate to require those payments to be made or secured only for such term as would, in the opinion of the court, be sufficient to enable the party in whose favour the order is made to adjust without undue hardship for the termination of his or her financial dependence on the other party.”

The rationale which underpins Section 25A was properly set out by the Supreme Court in Miller v Miller/McFarlane v McFarlane [2006] UKHL 24, where their Lordships stated that:

“The goal the court is required to have in mind is that the parties’ mutual financial obligation should end as soon as the court considers just and reasonable.”

“The whole point of a divorce is to enable people whose lives were previously bound up with one another to disentangle those bonds and lead independent lives.”

By 2008 in the case of VB v JP [2008] EWHC 112 Fam, the court held:

“In ordinary circumstances a wife has no right or expectation of continuing economic parity (sharing) unless and to the extent that consideration of her needs or compensation for RGD so requires. A clean break is to be encouraged wherever possible.”

Sometimes as practitioners we forget this very simple point, and having grown up in an era of joint lives maintenance we all too often forget the drive to achieve a clean break in anything other than larger money cases.

In L v L (Financial Remedy: Deferred Clean Break) [2011] EWHC 2207 Fam, it was held that the court has a positive duty to consider a term order, even when neither party is seeking it.

If there is uncertainty about the appropriate length of term, the court held in C v C (Financial Relief: Short Marriage) [1997] 2 FLR 26:

“The proper course is to impose no term, but to leave the payer to seek the variation….. Gazing into the crystal ball does not give rise to a reasonable expectation.”

So what Is Income?

Income is easy for the average man in the street – it is what their pay slip shows.

However, I prefer Peter Duckworth’s definition:

“In relation to the husband’s annual earnings/receipts from the Business, means the aggregate of all (a) income received by him, whether in the nature of salary, bonuses, dividends, compensation, pension scheme contributions, or the like, and (b) benefits in kind, including car allowances, P11D benefits, EBT schemes, share incentive schemes or similar, less any tax and National Insurance contributions (or the equivalent in another jurisdiction) deducted therefrom in the tax year in question.”

If we are not considering the above, then we may well be missing something.

Please remember in terms of EBTs there are deferred Tax and NI issues that need to be addressed if treated as income that can support periodical payments.

As with all periodical payments cases there are two questions –

  1. How much?
  2. How long?

Let me start with duration.   Gone are the days where a wife would simply receive periodical payments for life and we would glibly advise the husband that the wife would remarry and periodical payments would come to an end.

I therefore want to consider the questions of “needs”, “sharing”, length of periodical payments, how we treat bonuses and quantum.

Needs and Sharing

R v R (Financial Remedies: Needs and Practicalities) [2013] 1FLR 120 – Coleridge J

Coleridge J reminds us that cases will be dealt with on the basis of needs and practicalities.

JS v L (Financial Remedies: Pre-acquired assets, needs)[2013] 1FLR 300 – King, J “Needs Trumps Everything”

Paragraph 85 – “there is no doubt that the husband came into the marriage with substantial assets, which assets are capable of being the subject of forceful arguments in favour of their being excluded as non-matrimonial property. In my judgment, however, … those assets are required in order to satisfy both the immediate and long-term needs of the wife and children.”

Duration

MacFarlane v. MacFarlane 20th June [2009]

This was an 18 year marriage to the date of separation, with three children the youngest of whom was 12. Mr MacFarlane was an accountant with Deloittes. Capital had been divided equally between the parties and in 2002 at the time of the original hearing the wife had been awarded periodical payments on a joint lives basis of £250,000 per annum.

After various appeals the original award was reinstated by the House of Lords (as was) in 2006.

In 2007 the wife applied for a further increase in periodical payments. At the time of this hearing the wife had more capital than the Husband (£3.86 million as opposed to the Husband’s £3.65 million), but the Husband had slightly more pension. She had an income of £22,000 net per annum, the Husband had an income of between £720,000 – £770,000 net per annum and hoped to retire at the age of 55. He had by now remarried a partner in Deloittes.

The court increased her periodical payments by £100,000 net, i.e. from £250,000 to £350,000 net. However, the Court anticipates a termination upon former Husband’s retirement, anticipated to be 2015 but that terms is extendable, and the Court imposed a sliding scale of 40% up to £750,000, 20% up to £1 million and 10% over £1 million.

In Murphy v Murphy [2014] EWHC 2263 , the wife was 32 and Husband, 35. They met in 2004, cohabited from 2005, and married in 2007. The marriage broke down 6 years later in 2013, at which time they had twins aged 3.

At the FDR the majority of issues were resolved in terms of capital and pensions, but a dispute remained as to whether spousal maintenance should be stepped down in the near future and should be subject to a term order.

The wife at this time was a full-time carer, but had held well-paid employment before that.   She had planned to train as a teacher, but that had not materialised and she felt it was no longer viable, and, as such, she was opposed to any stepping down of maintenance.

The Husband had been working in Hong Kong, but had now returned to London and faced a higher tax bill, and raised issues regarding variation of the level of maintenance he was paying.

The court took the view that to step down maintenance, i.e. to guestimate what the wife could or would be earning in 3 years’ time was “totally speculative”.

Holman, J. reminded us of Section 25A (2) MCA 1973, namely:

“Where the court decides in such a case to make a periodical payments order in favour of a party to the marriage, the court shall in particular consider whether it would be appropriate to require those payments to be made….. only for such term as would, in the opinion of the court, be sufficient to enable the party on whose favour the order was made to adjust without undue hardship to the termination of his or her financial dependence on the other party.”

In the circumstances, despite the relatively short length of the marriage, the Judge declined to make a term order.

SS v NS (Spousal Maintenance) [2014] EWHC 1483 – Mr Justice Mostyn, this was a case where the wife was aged 39 and the Husband, 40.

The parties had lived together since 2002, married in 2007, had 3 children aged 11,9 & 7, all privately educated.   They separated in May 2013.   The Husband was in a new relationship.

The Husband was a banker and the wife was the primary carer for the children.

They had assets of broadly £3.29 million.

The Husband had a number of unvested shares, which on receipt would be taxed as income.   Counsel for the wife included the unvested shares, but this was criticised by the Husband.

Mostyn, J said:

“In my judgement there would have to be special features present before money earned, but which is deferred in collection and conditional on performance, is excluded from the divisible pool.”

Mostyn, J. gave the following guidance:

“a.        Spousal maintenance is properly made where the evidence shows that choices made during the marriage had generated hard future needs on the part of the Claimant. In this case the duration of the marriage and the children were pivotal factors.

  1. An award should only be made by reference to needs, save in exceptional circumstances where it can be said that the sharing or compensation principle applies.
  2. Where the needs in question are not causally connected to the marriage, the award should generally be aimed at alleviating significant hardship.
  3. In every case the court must consider a termination of spousal maintenance for the transition to independence as soon as it is just and reasonable. A term should be considered unless the payee would be unable to adjust without undue hardship to the ending of payments.   A degree of hardship in making the transition to independence is acceptable.
  4. If the choice between an extendable term and a joint lives order is finely balanced, the statutory steer should militate in favour of the former.
  5. The marital standard of living is relevant to the quantum of spousal maintenance, but is not decisive.
  6. The essential task of a Judge is not merely to examine each individual item in the budget, but to stand back and look at the global total and ask if it is a fair and proportionate outcome.
  7. Where the Respondent’s income comprises a base salary and a discretionary bonus the Claimant’s award may be equivalently partitioned, with needs of strict necessity being met from the base salary and additional discretionary items being met from the bonus on a capped percentage basis
  8. There is no criterion of exceptionality on an application to extend a term order. On such an application an examination should be made of whether the implicit premise of the original order of the ability of the payee to achieve independence had been impossible to achieve and if so, why?
  9. On an application to discharge a joint lives order an examination should be made of the original assumption that it was just too difficult to predict eventual independence.
  10. If the choice between extendable and non-extendable term is finely balanced the decision should normally be in favour of the economically weaker party.”

In this case the wife was awarded £30,000 per annum index-linked RPI and received a capped percentage of 20% of the Husband future bonuses.   The bonus share was non-extendable, but the base spousal maintenance had an extendable term which expired when the youngest child reached 18 (in just over 10 years’ time).

Beware Extendable Term Maintenance

Yates v Yates [2012] EWCA Civ. 532

The parties entered into a 3 year term without a Section 28 (1A) bar.

The wife’s subsequent application to extend and capitalise periodical payments resulted in the husband having to pay a lump sum of £398,000 – the equivalent of 12 years further periodical payments.

In Chiva v Chiva [2014] EWCA Civ. 1558, capital had been shared equally.

This was wife’s appeal against a periodical payments order of £700 per month for a 2 year term where the parties were in their mid-30s with a 3 year old daughter.   The husband was an IP lawyer and the wife an Actuary. (Pause There) Prior to the birth of the parties’ child the wife had earned more than he had, but was now only working part-time, earning £32,300 to his £94,000.

The wife was unsuccessful on appeal, the court taking the view that the wife could increase her 7 days to 10 days per month over a period of 2 years, and if necessary she could apply to extend the term because there was no Section 28 (1A) bar.

In Wright v Wright [2015] EWCA Civ. 201, the Husband was an equine surgeon earning £150,000 per annum, and was required by a 2008 order to pay joint lives maintenance of £33,200 to his wife, plus child maintenance and school fees.

District Judge Cushing in her Judgment had said that the wife would be expected within the following 2 years to begin making a working contribution towards her own household expenditure. Indeed the Judge had said:

“There is a general expectation in these courts that once a child is in Year 2 most mothers can consider part-time work consistent with her obligation to the children. By September 2009/10 the wife should be able to work. She will be 46 or 47 years old. I do not anticipate her having a significant earning capacity, nor would it be reasonable to expect her to muck out stables for the minimum wage. However, she should make some financial contribution.”

Upon the husband’s application to vary, Her Honour Judge Lyn Roberts reduced the spousal maintenance gradually over 6 years, at the conclusion of which payments would cease.

She notably commented that wife had made “..no effort to get a job without good reason”, and that a working mother would be “…a good role model for the children”, and “..vast numbers of women with children just get on with it” and this wife should have been doing so as well.

The Court of Appeal refused the wife’s oral application for permission to appeal saying there was no prospect of a successful challenge to the Judgment. It was open to the wife to make a further application if despite her best efforts she failed to produce a significant financial contribution both at the present and for the future, but the onus henceforward would be on her. (Lord Pitchford)

Be aware that this case cannot be cited as an authority.

With reference to quantum

In Vaughan v Vaughan [2007] EWCA Civ. 1085, the Court of Appeal held there was no authority and no foundation, even in principle, for equal sharing of future income.

In Nightingale v Turner [2015], a stay-at-home husband says £50,000 per annum on divorce is unreasonable.

The wife is a “high-flying” accountant and at the start of proceedings was 41, with a salary of £420,000 per annum and was a Partner at PwC.

She was the bread-winner, her husband the homemaker – a traditional role reversal.

The couple were married for 7 years, but had cohabited for 10 years, and had one child.

The Judge felt it was reasonable to expect the husband to go back to work full time and he should be able to earn £36,000 per annum, which was discounted against maintenance.   The husband seeks to argue that he should remain a house-husband.

The husband felt there was gender-bias and is challenging the order, seeking a stay in the sale of the family home and an increase of periodical payments by 50%.

In effect the husband simply argues that if the roles had been reversed his periodical payments would have been generously assessed.

A date for appeal is to be fixed.

So where does that leave bonuses?

In P v P [2013] – Eleanor King, 20 December 2013, the court said that when ordering maintenance payments following divorce in a case where Husband’s income comprised salary and substantial bonus, the proper approach was to make an order which met the wife’s basic needs out of salary and then to use a percentage of the bonus to top-up that figure. However, it was necessary to set a cap upon the total amount payable from the bonus to avoid the wife receiving substantially more than was appropriate.

In H v W [2014[ EWHC 4105 (Fam), Mrs Justice Eleanor King, 20 December 2013, placed a cap upon Husband’s bonus so rather than having a percentage of his bonus reducing over a period of time, she placed a cap on the amount of bonus that was capable of being shared. In this case £20,000 per annum.

In SS v NS [2014] EWHC 4183 Fam, Mostyn, J. gave his views on an obiter basis, and said:

“Where the Respondent’s income comprises a base salary and discretionary bonus, the Claimant’s support may be equivalently partitioned with needs/necessity being met from the base salary and additional discretionary items being met from the bonus on a capped percentage basis.”

Following on from the indications by King, J. in H v W (Cap on wife’s share of bonus payments) [2013] EWHC 4105, and Roberts, J. in B v B [2014] EWHC 4545 Fam, although Mostyn, J. stresses not what is necessarily required in all cases, but rather:

“…a matter of balance and degree.”

In conclusion, the title to this article is that the golden age of joint lives maintenance is dead. That is not necessarily so and perhaps in more modest asset cases joint lives maintenance remains the answer because it avoids the issue of “crystal ball gazing”; but in larger money cases I am comfortable with the title of the article.

In many ways it reflects changing attitudes and a pre-White era when a wife would seldom receive more than 25% of capital but have the security of joint lives maintenance.   In an era of 50%-50% why do we have a need for joint lives maintenance in larger money cases.

Perhaps in view of the guidance in SS v NS we now need to consider advising our clients with some caution.

But is that really the case? The Matrimonial Causes Act is 42 years old and I take you back to the start of my article –

Section 25A (2) provides that it is the court’s statutory duty when making a periodical payments or order to consider –

“Whether it would be appropriate to require those payments to be made to secured only for such term as would, in the opinion of the court, be sufficient to enable the party in whose favour the order is made to adjust without undue hardship for the termination of his or her financial dependent on the other party.”

…… So what has changed?

Jurisdiction of Swiss Courts in International Estates

Articles, Family and Matrimonial, Latest News

A. Introduction

  • In today’s globalized world, estates increasingly encompass assets located in different jurisdictions. This gives rise to complex legal questions as e.g. which authorities have jurisdiction over assets and which law is applicable to the respective assets. Due to Switzerland’s position as a leading international financial center Swiss lawyers and courts are often confronted with cases regarding assets belonging to international estates.
  • Hence, the authors will give hereinafter an overview on the jurisdiction of Swiss courts and authorities in international estate matters. They also highlight some important conflicts of jurisdiction with foreign jurisdictions respectively the mutual competences in relation to prime jurisdictions.

B. International Jurisdiction of Swiss Courts and authorities

I. Legal Basis

  • The international jurisdiction of Swiss courts and authorities over estates linked to foreign countries is governed by the Federal Law on International Private Law (FLIPL). This statute basically applies if the Swiss decedent was residing abroad at the time of his/her death or if he/she was a foreign national and lastly resided in Switzerland.
  • However, treaties generally precede the FLIPL. Hence, if a treaty containing jurisdiction rules exists between Switzerland and the foreign state of residence or country of origin of the decedent , these rules apply. Such treaties exist inter alia with the United States of America and Italy.
  • The Convention on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (the “Lugano Convention”) is by way of contrast not applicable since the Convention shall not apply to wills and succession pursuant to the Convention’s art. 1 para. 2 (a).
  • Since Switzerland is not a member of the European Union, the Regulation (EU) No. 650/2012 on jurisdiction, applicable law, recognition and enforcement of decisions and acceptance and enforcement of authentic instruments in matters of succession and on the creation of a European Certificate of Succession is also not applied by Swiss courts and authorities. Nevertheless, this regulation will have a remarkable impact on the handling of international estates in Switzerland following its full entry into force since the application of these rules by EU member states may lead to conflicts of jurisdiction with Switzerland.

II. Principle of Residence

  • Pursuant to the general rule of art. 86 FLIPL, Swiss authorities are competent to handle the whole estate irrespectively of whether the estate assets are located in Switzerland or abroad if the decedent had his/her last residence in Switzerland. This even applies for foreign decedents having resided in Switzerland. However, if a foreign state claims exclusive jurisdiction over realties located in its territory, Swiss courts are not competent for these realties.
  • The decedent’s country of residence is defined as the state where the decedent resided with the intent of continual stay.
  • Hence, if a Swiss or foreign national dies with last residence in Switzerland, Swiss courts and authorities are basically competent for all estate assets even if no estate assets are located in Switzerland. This principle often creates conflicts of jurisdiction with countries assuming jurisdiction over estates of their citizens or for moveable estate assets located in their territory.

III. Jurisdiction of Place of Origin

  • In the event that a Swiss national dies with last residence in a foreign country (and the Swiss authorities are therefore not competent pursuant to art. 86 FLIPL), Swiss courts and authorities may be competent based on the place of origin jurisdiction according to art. 87 FLIPL.
  • 1 of this article provides for jurisdiction of the Swiss courts and authorities of the decedent’s Swiss place of origin insofar as no foreign authorities handle the decedent’s estate assets. So, this is a subsidiary jurisdiction coming into play if foreign countries only assume jurisdiction over assets located in their territory.
  • Further, para. 2 of art. 87 FLIPL stipulates the decedent’s option to choose jurisdiction of his Swiss place of origin by way of dispositions of will. The decedent may opt for this Swiss jurisdiction regarding his assets located in Switzerland or his whole estate. In the latter case an exclusive jurisdiction of a foreign country for realties is however reserved.
  • Consequently, art. 87 FLIPL may lead to conflicts of jurisdiction with countries assuming jurisdiction based on a Swiss national’s last residence in their territory.

IV. Forum Rei Sitae

  • Swiss courts and authorities are generally not competent to handle estate assets of foreign nationals with last residence abroad. Nevertheless, as an exception, they have jurisdiction over assets located in Switzerland if no foreign authority assumes jurisdiction over these assets. This rule shall prevent that these assets remain unsettled in cases where the other involved countries’ jurisdiction is limited to assets located in their territories.
  • The Swiss forum rei sitae is further competent to issue any protective measures with regard to estate assets located in Switzerland of a decedent with last residence abroad.

C. Conflicts of jurisdiction / Mutual Competences in relation to prime jurisdictions

I. Germany

  • The Federal Republic of Germany assumes jurisdiction for the whole estate of German nationals, regardless whether they lastly resided in Germany or abroad. So, if a German decedent dies with residence in Switzerland, Germany as well as Switzerland are competent. Since only realties are excluded from Switzerland’s jurisdiction, there are conflicting competences for all other assets wherever located. This is in particular problematic since German authorities apply German inheritance laws whereas the Swiss authorities basically implement Swiss laws and decisions of German courts are not recognized and enforced by Swiss authorities under these circumstances.
  • However, upon the EU Regulation No. 650/2012 entirely entering into force (the Regulation is applicable to estates of decedents dying on or after 17 August 2015), Germany’s jurisdiction over estates is defined pursuant to the criterion of the last habitual residence of the decedent. Since it is not clarified whether the term “habitual residence” is identical to the “residence” according to Swiss laws, there might still result conflicting competences. Furthermore, the Regulation stipulates subsidiary competences based on the location of estate assets and the decedent’s nationality which can lead to conflicts of jurisdiction with Swiss courts and authorities.

II. United Kingdom

  • All estate assets being located in the United Kingdom (UK) are part of an UK estate, regardless whether the decedent’s last residence was in UK or abroad. If the decedent had last residence in Switzerland, but moveable assets in UK, a conflict of jurisdiction between UK and Switzerland results since Switzerland assumes jurisdiction for moveable assets wherever they are located. Consequently, under these circumstances UK as well as Switzerland have jurisdiction for moveable assets in UK. Again, UK decisions with regard to these assets are basically not recognized and enforced in Switzerland unless the decedent was a British citizen (and not a Swiss dual citizen) and has chosen UK laws to be applied to his/her estate.

III. United States

  • As mentioned above, there is a treaty in place between Switzerland and the United States of America regulating the mutual competences of Switzerland and USA. Swiss courts generally interpret this treaty as follows: Inheritance disputes regarding moveable assets are to be handled by the courts of the decedent’s last residence whereas disputes with respect to realties are submitted to the jurisdiction of the realties’ location. Furthermore, the competent court shall apply the laws of its jurisdiction (lex fori).
  • Hence, if, for example, the decedent had his/her last residence in the US, any of his/her Swiss realties are basically to be handled by Swiss courts and authorities applying Swiss inheritance laws. In contrast, moveable assets located in Switzerland have to be settled by US courts resp. executors.

D. Conclusion

  • The administration and handling of estates involving assets in several jurisdictions often require advice by local counsels. This is specifically true if the estate resp. the decedent has any relevant connection to Switzerland which may trigger jurisdiction of Swiss courts and authorities. Ideally, the decedent tackles such potential jurisdiction issues in the course of his/her estate planning since respective dispositions by will can prevent some of the conflicts of jurisdiction complicating the administration of the future estate.

 

Do trusts have a future in the context of the 4th AML Directive?

Articles, Banking and Finance, Family and Matrimonial, Fraud & White Collar Crime, Latest News,

It is an undisputed fact that money laundering is a major hindrance to a stable EU market. Money laundering distorts economies by allowing the corrupt to legitimise the illegal. It has unfortunately become increasingly common to witness the world’s most corrupt to launder their funds derived from illicit sources into financial centres.

The Fourth EU Anti Money Laundering Directive (the “Directive”), which has just made its way through the EU’s legislation, is designed to update and improve the EU’s Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) laws. The changes are in line with the recommendations issued in 2012 by the Financial Action Task Force (FATF) which is the international global AML and CTF standard-setting body.

What becomes immediately clear from an overview of the Directive is that it obliges, for the first time, EU member states to maintain central registers listing information on the ultimate beneficial owner of corporate and other legal entities, as well as trusts in certain cases. Interestingly enough, it appears that these central registers were only included by MEPs during the negotiations and were not envisaged in the European Commission’s initial proposal.

Clearly, the aim is to enhance transparency and target those criminals in Europe who have for many years used the anonymity of offshore companies and accounts to hide their financial dealings. In the words of Krisjanis Karins (EPP, LV) (Economic and Monetary Affairs Committee rapporteur) “Creating registers of beneficial ownership will help to lift the veil of secrecy of offshore accounts and greatly aid the fight against money laundering and blatant tax evasion”.

Essentially, a central register of an EU country would contain a list of the ultimate owners of companies which register would be accessible to the competent authorities and their financial intelligence units (without any restriction) as well as to “obliged entities” (such as banks conducting their “customer due diligence” duties). Additionally, any person or organisation who can demonstrate a “legitimate interest” (such as investigative journalists and other concerned citizens) with respect to money laundering, terrorist financing and the associated predicate offenses – such as corruption, tax crimes and fraud – are granted access to beneficial ownership information, such as the beneficial owner’s name, month and year of birth, nationality, residency and details on ownership. Timely access to beneficial ownership information should be ensured in ways which avoid any risk of tipping-off the company concerned.

In terms of the Directive, any exemption to the access provided by member states would be possible only on a case by case basis in exceptional circumstances. Access to the information on beneficial ownership shall be in accordance with data protection rules and may be subject to online registration and to the payment of a fee. It is very dangerous that the Directive failed to define “legitimate interest” as this may give rise to confusion and uncertainty as well as potential room for abuse.

The persons who are able to demonstrate a legitimate interest should have access to information on the nature and extent of the beneficial interest held consisting of its approximate weight. Member States may, under national law, allow for access that is wider than the access mandated under this Directive. The UK, for example, has opted for a publicly accessible register of corporate beneficial ownership.

As far as trusts are concerned, the FATF recommendations have likewise obliged countries to take measures to prevent the misuse of legal arrangements for money laundering or terrorist financing. The FATF recommendations have specified that countries should ensure that there is adequate, accurate and timely information on express trusts, including information on the settlor, trustee and beneficiaries that can be obtained or accessed in a timely fashion by competent authorities. This was faithfully transposed in Articles 30 of the directive which provides that Member States shall require that trustees of any express trust governed under their law obtain and hold adequate, accurate and current information on beneficial ownership regarding the trust. This information shall include the identity of the settlor, the trustee(s), the protector (if any), the beneficiaries or class of beneficiaries, and of any other natural person exercising effective control over the trust.

The Directive further provides that Member States shall ensure that trustees disclose their status and provide in a timely manner the information referred to above to obliged entities (such as banks in the course of undertaking customer due diligence measures), when, as a trustee, the trustee forms a business relationship or carries out an occasional transaction above the threshold set out in points (b), (c) and (d) of Article 111 and accessed in a timely manner by competent authorities and FIUs.

This has inevitably triggered a debate as to how to reconcile this easy access to information with the right to confidentiality especially when once bears in mind that that trusts are widely used to protect the interests of vulnerable family members. As professionals, we all appreciate the importance of having measures in place to prevent the movement of illicit funds, and commit to ensuring that such measures are effective. We are experiencing on a daily basis the loss of human lives caused by terrorist attacks and we all feel this innate drive to do our part to curb the flow of funds to terrorist organisations and help curb these atrocities. Equally, as professionals, we have a commitment to preserve the legitimate confidentiality of our clients’ financial affairs. This will be an ongoing dilemma that most are confronted with. It is interesting to note that a much wider debate is under way in many countries on whether it is time to give power to governments to monitor email traffic to fight serious crime at the clear expense of the right of individuals to privacy. As a profession, we need to recognise that we are confronted by similar dilemmas and need to help develop effective solutions.

Thankfully, the mandatory register of trusts applies only to taxable trusts and it will not be public. In terms of the Directive, Member States shall require that the information mentioned above is held in a central register only when the trust generates tax consequences. The central register shall ensure timely and unrestricted access by competent authorities and FIUs, without alerting the parties to the trust concerned. Moreover, information on trusts will only be available to competent authorities. Ultimately this information could nonetheless be collected by tax authorities as a result of automatic exchange of tax information agreements and therefore one does not envisage that the impact on the institute of trusts will be too major in this sense. The abovementioned strict limitations placed on access to trust registers were naturally welcomed by trust practitioners especially when one considers that trusts in common law countries are regularly used to protect vulnerable beneficiaries, some of whom could be at significant risk if their identities were published. Therefore said limitations allowed families to maintain their fundamental right to respect for a private family life. Whilst the focus is on the Directive and therefore the direct impact on EU countries, the pressure to allow public access to beneficial ownership information is spreading around the world in the wake of the revised FATF Recommendations. To mention a few, it appears that the government of the British Virgin Islands is planning to introduce some new measures whilst the government of the Cayman Islands said it will work on the Directive. It is clear to everyone that we’re living in an era where there’s nowhere to run to or hide!
[i]

1 Article 11 provides that “Member States shall ensure that obliged entities apply customer due diligence
measures in the following cases:
(b) when carrying out an occasional transaction:
(i) amounting to Eur15,000 or more, whether that transaction is carried out in a single operation or in several
operations which appear to be linked; or
(ii) which constitutes a transfer of funds, as defined in point (9) of Article 3 of Regulation (EU) 2015/847 of the
European Parliament and of the Council exceeding Eur1000;
(C) in the case of persons trading in goods, when carrying out occasional transactions in cash amounting to
Eur10,000 or more, whether the transaction is carried out in a single operation or in several operations which
appear to be linked;
(d) for providers of gambling services, upon collection of winnings, the wagering of a stake or both, when
carrying out transactions amounting to Eur2000 or more, whether the transaction is carried out in a single
operation or in several operations which appear to be linked.[i]

 

Hong Kong’s Top Court Follows Radmacher And Charman

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The Withers family law team in Hong Kong continues to be at the forefront of developing family law in Hong Kong. Very few cases go to Hong Kong’s most senior court, the Court of Final Appeal (CFA), but in the past few months our team has been involved in two prominent cases before the CFA – one involving a pre-nuptial agreement and the other addressing the issue of trusts as a resource of the husband.

SPH v SA [2014] HKEC 957, in which Sharon Ser and Sindy Wong represented the wife, primarily dealt with forum. However, as the parties (who were both German nationals living in Hong Kong) had signed a pre-nuptial agreement (PNA) and, subsequently, when the marriage deteriorated, a separation agreement in Germany, the treatment of the PNA was also addressed. The wife contested the validity of the agreements, alleging that they were made under undue influence. At first instance, the Hong Kong Court was persuaded that the matter should be heard in Germany, as the majority of the assets were located there and the agreements were formalised there. The Court of Appeal (CA) and the CFA disagreed with the trial judge, finding that the wife’s connection to Hong Kong was overwhelming and she could issue there as of right. The CFA also found that the existence of a PNA was a factor in the exercise of discretion, that the old rule that agreements providing for future separation were contrary to public policy was obsolete and, further, that there should be no distinction between pre-nuptial agreements and separation agreements.

Following the principle of the English Supreme Court in Radmacher v Granatino [2010] UKSC 42, the CFA held that parties could not oust the jurisdiction of the court, but the court must give due weight to an agreement which had been entered into freely, unless in the circumstances it would not be fair to hold the parties to the agreement. An agreement could carry full weight only if each party had entered into it out of his or her own free will, without undue influence or pressure, having all the information material to his or her decision and intending that it should be effective to govern the financial consequences of the marriage coming to an end.

As forum cases are common in Hong Kong and are often hotly contested, the clarification in respect of the treatment of nuptial agreements on the impact of choice of jurisdiction has been a welcome development. The treatment of marital agreements will also be welcome by many wealthy families who wish to protect assets, particularly as the Hong Kong Court has followed English case law on the approach to asset division.

The treatment of marital agreements will also be more important in the light of the second CFA case Withers was involved in this year. In the case of Kan Lai Kwan v Poon Lok To Otto (KLK v PLTO) [2014] HKEC 1174, Marcus Dearle and Patrick Hamlin represented the trustee. In this case, the CFA found that neither the trial judge nor the CA had applied the correct test when considering the extent to which trust assets could be regarded as a resource of one of the parties. It applied the ‘likelihood test’ from Charman v Charman [2006] 1 WLR 1053 (CA, Eng) and Charman v Charman (No 4) [2007] 1 FLR 1246 (CA, Eng) (in which Withers’ London team acted for the husband) which required the court to assess whether, ‘if the husband were to request it to advance the whole (or part) of the capital in the trust to him, the trustee would be likely to do so’. In the circumstances of this case, where the husband was the settlor, the protector and a potential beneficiary under the trust, the CFA found that the trustees would exercise their discretion to benefit the husband. The CFA found that it was clear from the evidence that historically the husband had been able to access funds from the trust as and when he wished, and that the terms of the trust and the letters of wishes indicated that the husband always intended to occupy a dominant position in relation to the trust.

The trial judge and the CA had found that the trustees would not countenance a division of the trust funds which would result in the reduction of the parties’ daughter’s ‘one third interest’. The CFA disagreed and found that in accordance with section 7(1)(a) Matrimonial Proceedings Ordinance (the Hong Kong equivalent to section 25(2)(a) Matrimonial Causes Act 1973), the whole of the trust was a financial resource to which the husband had, or was likely to have, in the foreseeable future.

The CFA further decided that this was a long marriage and that there was no justification for a departure from equality, including the 84.63% of the shares in the husband’s highly successful construction and engineering business which were held in this discretionary family trust. In addition to real property owned by the parties, the wife received an award in the region of HK$840 million (almost GB£65 million). The court further commented that, should the husband decide that the daughter’s third interest should remain intact, he was free to secure this out of his half share.

Parental Guidance

Articles, Family and Matrimonial, Latest News

When buying property for children, clients must weigh up the IHT benefits of giving funds away and reducing the size of their estate against their desire to protect assets from claims, says Caroline Cook 

Using the ‘bank of Mum and Dad’ may be the only way to get on to the property ladder for many but there are consequences. As well as considering inheritance and tax issues, clients must also ensure that the investment will be protected from claims, for example in the event of a relationship breakdown or problems with creditors.

Parents investing in property for a child under 18 have to use a trust structure (at least until the child turns 18) as under-18s can’t own property, which is fairly straightforward. However, it’s more complicated when the child is an adult.

An adult child can own property outright or benefit a trust, so parents need to think about which is appropriate. The purchase could be funded through a cash gift or loan and, if a loan, the parents must decide on what terms and whether a charge over the property should be taken. If the property will be jointly owned, should it be held as joint tenants or tenants in common? It’s a minefield.

I always ask clients what they want to achieve and what their concerns are. They often just want to keep things simple, in which case making an outright gift of cash is probably the most straightforward way of assisting the child with a property purchase. Provided the parent survives seven years from the date of the gift, the funds are outside the parent’s estate for inheritance tax (IHT) purposes.

The child owns the property outright so benefits from principal private residence (PPR) relief, provided the property has been used as their main residence. This ensures that there is no capital gains tax (CGT) payable on sale. Should the child go through a divorce or the breakdown of a cohabiting relationship, however, the property may be at risk of being sold to fund any settlement. Equally, if the child is made bankrupt, the property would be at risk of being claimed by creditors.

Grey cloud

Therefore, I advise clients to consider using a trust, funded with cash from the parents while the trustees (who could be the parents) buy the property. As beneficiary, the child can live in the property, which is protected from claims. Provided the parent survives the gift into trust by seven years, the funds are outside the parent’s estate for IHT purposes and PPR will be available to relieve CGT when the trustees sell the property.

Every silver lining has a cloud, though, and with trusts it is the accompanying tax complications. If the cash gift into trust exceeds the nil rate band (currently £325,000), there will be a tax charge on creation of the trust. Trusts are also subject to an ongoing charging regime that includes ten-yearly charges. With a trust comes the security of knowing that the funds are protected; the costs of running one, however, can make it unattractive.

For that reason, some clients opt to use a loan arrangement, particularly if asset protection is more important to them than IHT planning. The terms of the loan can be tailored to the circumstances. It may be on full commercial terms with a rate of interest linked to RPI and secured against the property.

Alternatively, the loan could be very simple.For example, interest-free and repayable on its sale. The arrangement does not provide any immediate IHT benefit as the loan remains an asset in the parent’s estate.

The loan can be written off at a later date, though, when the parent is satisfied that the child is in a secure relationship or that there is no risk from creditors,and the seven years for IHT purposes will then start to run. So there is still scope for IHT planning with this route.

Originally published in Private Client Adviser

Limitations On Disclosure In Divorce Cases

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Q: My wife filed for divorce. The paperwork provided by the court included a checklist of documents to produce. Many of the documents are personal and confidential. Others relate to my business. I don’t think my partners will want this information produced. Do I need to produce these documents?

A: Certain disclosures are required in every case, unless waived by agreement. Family Division Rule 1.25-A, which can be found at www.courts.state.nh.us/rules/family, provides a list of the information that must be produced in different types of family law cases. The information is extensive, although it is possible to agree upon limitations or terms to protect of confidentiality.

In a divorce, absent agreement to the contrary, some of the documents that must be produced include: a current financial affidavit (disclosing all income, assets and expenses), three years of personal and business tax returns, four most recent pay stubs and year-end pay stub (or equivalents), various financial statements (monthly, quarterly and year-to-date income statement and balance sheet), documentation concerning medical insurance and other employee benefits, all applications for credit or statements of assets and liabilities within the last year, one year of statements for bank and other accounts, six months of credit card statements, documentation of life insurance and any prenuptial or postnuptial agreements. These documents must be produced within 45 days from the date of service of the petition or 10 days prior to a temporary hearing (not the ‘First Appearance’ conference).

As you point out, many of these documents are personal and confidential. While business partners are often quite unhappy to learn that such information must be disclosed, it is required. A court will compel production and may impose penalties if information is withheld. The benefit to such disclosure, however, is that the exchange of this information at the outset of the case allows for early case assessment and productive discussions about settlement.

While the disclosure of sensitive information often worries parties, some protection of the information is available. For example, pursuant to RSA 458:15-b, the disclosure of a financial affidavit to a person not authorized to obtain it is a misdemeanor criminal offense. Rule 1.25-A also allows parties to redact all but the last four digits of account numbers and social security numbers that appear on documents. If more comprehensive protection is desired, the parties may also agree or the court may order that certain information be treated as confidential and not disclosed outside of the litigation.

Published in the Manchester Union Leader, October 3 2014.

It’s a lottery: does your former partner get to share in a post-separation windfall?

Articles, Family and Matrimonial, Latest News

It is one of the many questions that might keep a newly separated spouse awake during the night: if I win the lottery before I effect a property settlement, do I have to share the winnings with my former partner?

In this Alert, Special Counsel Rachael Murray and Law Graduate Elle McDermott discuss a recent case which considered whether a husband was entitled to share in his estranged wife’s post separation windfall.

Since at least 2000, when the Full Court decision of Farmer v Bramley (2000) FLC 93-060 was handed down, family lawyers have advised clients that post separation windfalls, such as lottery wins, will generally be taken into account by the Court when determining property settlement matters and, on occasions, included in the pool of property available for distribution between the parties.

In that case, no assets existed at the time of separation and several years later, the husband won $5 million in a lottery. The wife was awarded 15 percent of the winnings. The factors motivating the Court’s decision included that the wife had made more substantial contributions throughout the marriage by supporting the husband including whilst he was unemployed, while he was studying, as he struggled with heroin addiction and in caring for their child.

A recent Full Court appeal decision has, however provided some further guidance on the proper treatment of post separation windfalls. It demonstrates that parties are not always awarded a share of their former partners’ post separation winnings, and that each case turns on its own facts.

In the decision of Eufrosin & Eufrosin [2014] FamCAFC 191, the Full Court of the Family Court was asked to revisit the issue of a post separation lottery win. The wife purchased a winning ticket worth $6 million just six months after the parties separated. The parties were not divorced at the time and had been married for approximately 20 years. The parties had two children together who were adults at the time of separation. The husband was ultimately denied any share of the wife’s lottery winnings which were excluded from the pool of property available for distribution between the parties.

In denying the husband a share of the winnings, the Full Court focused on the fact the parties had, at the time of the win, commenced the process of leading separate lives, including living separate financial lives. There was no longer a “common use” of property as both parties were applying funds for their respective individual purposes.

The husband unsuccessfully argued that he should be entitled to a share since the funds used to purchase the ticket were “joint funds” from a business that was primarily run by him during the course of the relationship. The wife denied this and asserted she used funds received from her sister to purchase the ticket.

The Full Court held that the source of the funds used to purchase the ticket should not determine how the lottery win should be treated and the court instead considered the nature of the parties’ relationship at the time the lottery ticket was purchased. The “joint endeavour”, which was the parties’ marriage, had dissolved and the purchase of the ticket was not in furtherance of a joint matrimonial purpose. The court compared post separation windfalls with lottery wins that occurred during a relationship and noted that in those circumstances, the winnings would ordinarily form part of the parties’ joint assets and therefore be available for division between them, regardless of whose funds were used to purchase the winning ticket.

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Parents Required To Pay $16,000 Toward Estranged Daughter’s College Education

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“Caitlyn’s parents Maura and Michael were young loves. Their marriage only lasted two and a half years but the two say they amicably parented to give their daughter the best life they could.” ABC News Anchor, Wendy Saltzman, reported on last night’s news.

Caitlyn’s parents became estranged from their daughter when “Instead of following our rules, she decided she is going to leave her mother’s house where she was living and move in with her grandparents.”

When it came time for Caitlyn to apply to colleges, her parents made a joint decision they would not contribute to the cost of Caitlyn’s college education unless she attended a college in the State of New Jersey.

Despite not having meaningfully spoken with her parents in over two years, at age 21, Caitlyn approached her parents to contribute to the cost of Temple University, a Pennsylvania State School.

When her parents jointly refused, Caitlyn filed a Motion to intervene in her parents’ divorce action so that she could sue them for the cost of college.  The Court granted Caitlyn’s Motion and the lawsuit went forward with Caitlyn as an intervening party.

On October 31, 2014, a Camden County, New Jersey Court required Caitlyn’s parents to pay $16,000 toward her college tuition at Temple.  This Order was entered without any hearing.

From a legal perspective, this decision may problematic on several fronts.

We all know that divorced parents in New Jersey are required to pay for college on behalf of their children under the landmark 1982 case, Newburgh v. Arrigo.  The theory is that college is a necessity and divorced parents should pay as a facet of their obligation to provide support to their children.

Among Newburgh’s twelve enumerated factors that a court must consider prior to apportioning college contribution between parents are the following: (1) whether the parent, if still living with the child, would have contributed toward the costs of the requested higher education; and (11) the child’s relationship to the paying parent, including mutual affection and shared goals as well as responsiveness to parental advice and guidance.

As to the eleventh factor, we have seen New Jersey Courts previously deny college contributions on the basis of an estranged relationship between parent and child.

For example, in Gac v. Gac, the New Jersey Supreme Court held that in certain circumstances an estranged non-custodial parent should not be obligated to pay for college.  The Court must examine the following issues:

(a)        What caused the breakdown in the parent-child relationship;

(b)        Whether it is the child that has alienated the non-custodial parent; and

(c)        Whether the non-custodial parent was consulted on the child’s choice of college.

Similarly, in Dahms v. DeSanto, a 2007 Appellate Division Case, the Court reversed a trial court’s decision to compel an alienated non-custodial mother to contribute to the cost of her child’s college education.  On remand, the trial court was required to specifically consider:

(a)        The mother’s limited financial resources;

(b)        The impact of the estrangement and the decision to exclude the mother from the college selection process;

(c)        The root factors as to the breakdown; and

(d)       The lack of evidence of the parents’ agreement to pay for college.

Most recently, in the case of Black v. Black, which I blogged on several months ago, the Court held that while it would enforce an estranged father’s prior  obligation to contribute toward his son’s college costs, such obligation was expressly contingent upon the son’s reciprocal obligation to actively commence and attend joint counseling for the father.

Thus, while Caitlyn’s lawyer, Andrew Rochester, stated, “The law in New Jersey is so clear. It is cut and dry. The law says parents are supposed to contribute to their children’s post-secondary expenses,” an examination of the case law demonstrates this is not so.

The fact is that accordingly to precedent is that New Jersey Courts must carefully examine the issues surrounding the breakdown of the parent-child relationship prior to apportioning college costs.  Here, there was no hearing, no examination of who was at fault for the breakdown, evidence that the parents were not consulted and their opinions not respected.

Moreover, there was no indication that the Court made the parents’ payments conditional upon Caitlyn’s effort to repair the relationship, perhaps even as a condition of the contribution, as in Black.  Rather, all we have here are wildly differing versions of what happened.

However, what I find most striking is the Court did not extensively consider the first Newburgh factor: (1) whether the parent, if still living with the child, would have contributed toward the costs of the requested higher education.

Oftentimes, an examination of this factor requires the Court to speculate as to what the parents would have done had they stayed together and made a joint parenting decision. A typical situation is that a custodial parent seeks contribution from the non-custodial parent because they are unable to come to an agreement and they invite the Court to resolve the dispute on their behalf.

But in this case it seems that the parents were on the same page; there was no need for the Court to speculate as to what their joint decision would have been.  It was the child, Caitlyn, who disagreed with her parents’ joint decision.  The parents were united.

From a Constitutional perspective, therefore, this situation hearkens back to the age-old questions “why do divorced parents have an obligation to contribute to college, but intact parents do not?” Eric Solotoff blogged about this conundrum on March 13, 2014 when Rachel Canning’s story hit the news (remember – that teen who sought and failed to compel her married parents to contribute to her education?).

It seems that the simple act of the parents’ divorce exposed them to an obligation to contribute to their child’s college education even when they were in complete agreement no to contribute.

The parents have stated that they plan to appeal.  It will be interesting to see what the Appellate Division does with this case, particularly because the facts are so unique.

Meanwhile, Caitlyn’s parents were to pay the cost of her tuition yesterday but have stated they will not pay a dime until their daughter re-reestablishes a relationship with them.

The Role And Duties Of An Executor/Administrator

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The role of an executor/executrix or administrator is a personal one, in that you are appointed either by a will or by the court to administer the estate of a deceased. A person appointed to this role under a will is called an executor or executrix, whereas if a person dies intestate i.e. dies without leaving a will, the Royal Court will appoint an administrator. The role and duties of an Executor and Administrator are identical, save for the fact that an Executor is appointed under a will.

Under Jersey law, an Executor is only required for your will of movable estate (personal estate): cash in your bank accounts, shares (including shares in a share transfer property), units in trusts, cars, jewellery etc) and not for your will of immovable estate (real estate): land, freehold property, leases of over nine years) as when you die, the will of immovable estate is simply registered in the Public Registry for it to take effect.

When a person dies testate i.e. with a will, and has appointed an Executor under his will, a grant of probate will be obtained. When a person dies intestate, a grant of letters of administration will be obtained.

Where an Executor is named in a will, he/she is entitled to prove the will before all others, including the heirs at law of the deceased. Under the Probate (Jersey) Law 1998, an Executor must apply to the Royal Court for probate of the deceased’s will. In order to do so, the Executor will require the following:

1) original will of the deceased;

2) the death certificate; and

3) The value of the estate as stamp duty will need to be paid on the value estate.

Stamp duty is calculated by taking the gross value of the estate less any liabilities which may be due e.g. outstanding care fees, medical bills, tax etc.

In order for the Administrator to order to obtain letters of administration, he will require the following:

1) an affidavit confirming that he is the principal heir of the deceased and as such is the person entitled to administer the estate;

2) the death certificate; and

3) the value of the estate as outlined above.

Under the Law, the Executor swears that he will well and faithfully uphold and carry out the contents of the will, it therefore stands to reason that as acting as an Executor your duties are to the beneficiaries of the estate and the same applies to an Administrator. Once probate/letters of administration has been obtained, it is the duty of an Executor/ Administrator to:

1) gather in the assets of the deceased; and

2) pay all outstanding liabilities that may be due.

Once this is complete, it is the duty of the Executor to divide the assets of the estate in accordance with the terms of the will, or in the case of an Administrator, in accordance with the provisions of the law.

Unlike in the UK, under Jersey law there is no provision for a small estates procedure therefore, for Jersey residents, a grant of probate or letters of administration will be required for any sums held by the deceased, including a Co-Op share account, personal allowance held by a care home or even to pay off debts due by the deceased. The one exception to this is where the assets of the deceased are held joint and for the survivor with another individual. In the case, and under the system of ius accrescendi, the assets will automatically pass to the surviving party however; this is subject to certain provisions of Jersey law e.g. légitime and rapport – please contact us for further advice on these matters.

Under Jersey law, the year and a day rule is important for the Executor, and there are certain aspects of the rule that an Administrator should be mindful of. There are several features to this rule:

1) The period under which challenges can be brought against a will is a year and a day from the issue of the grant;

2) All legacies under the will should not be paid until a year and day after probate has been obtained as a will may be challenged during this time;

3) It is during the year and a day period that an Executor can apply to the court for directions in respect of the will e.g. if there is any ambiguity in the will;

4) Following the expiration of the year and a day, the Executor must distribute the estate in accordance with the will and give a good account of the estate to the beneficiaries.

Should any individual who is not the Executor or Administrator of the estate and who has not obtained probate or letters of administration take possession of, or deal with the estate of the deceased, he or she may be guilty of intermeddling which is an offence under the Law and may be liable to a fine and/or imprisonment.