November 2020

The enemy within – can your Brady Bunch successfully claim against your estate?

This article was published in the Hire and Rental News magazine November 2020 issue, page 26.

Longer life-spans, increasing divorce rates and multiple relationships, both matrimonial and de facto, has made family dynamics and estate planning increasingly complex and conflict-ridden.

In blended family situations, the deceased’s children, step-children and their partner may have expectations (whether genuine or not makes no difference) as to how much they should benefit from the deceased’s estate. Claims against deceased estates, known as “family provision claims”, can arise in circumstances where the deceased has left their estate to the current partner, whilst leaving their natural children from their prior relationship with no provision from their estate. Conversely, the deceased’s partner may also make a family provision claim in circumstances where the deceased determined to leave a proportion of their estate to their natural children, to the exclusion of their most recent partner.

Blended families, with one or more stepchildren, are becoming increasingly common and have resulted in an increase in the number of stepchildren contesting deceased estates. Problems can also arise where a step child of the deceased person feels that they should have been included in the deceased’s Will or received a greater share of the deceased’s estate. 

But can’t you make any Will you want?

Everyone has a right, called ‘testamentary freedom’, to leave their assets to whom they want to under their Will. However, this testamentary freedom is subject to a recognition in the law that certain persons have a right to challenge a Will on the basis that the Will did not make adequate provision for their proper maintenance, education and advancement in life. These claims are referred to as “family provision claims”.

Who can challenge your estate?

In New South Wales, certain persons known as “eligible persons” have the legal right to challenge a deceased estate. A spouse (including de facto partners) and children of the deceased are automatically “eligible persons” for this purpose.

Being a step child does not of itself make that person eligible to contest a deceased estate. However, stepchildren may be eligible to make a claim in certain circumstances, for example, if they are members of the deceased person’s household at any point in time and can establish that they were dependent on the deceased person at any point in time. Whether a step-child can challenge a deceased estate will depend on whether they can establish themselves as an “eligible person”.

How much can these challenges ask for?

There are a number of factors which the Supreme Court is required to consider under a family provision application and the Succession Act 2006 (NSW) provides the Supreme Court with a wide discretion as to matters that it can take into account in determining whether a claimant should be entitled to a greater proportion of the deceased estate or not.

The Supreme Court will determine whether “adequate provision” for the claimant’s proper maintenance, education or advancement in life has not been made by the Will of the deceased. In doing so the Supreme Court will consider the claimant’s financial position, the size and nature of the deceased’s estate, the relationship between the them and the deceased, any competing claim of the beneficiaries, and the circumstances and needs of both the claimant and each of the other beneficiaries.

So what assets can be claimed?

Should an eligible person successfully challenge a deceased’s Will, then the Supreme Court can make a family provision order not only in respect of assets that form part of the deceased’s estate (that is assets that were held in the deceased’s name at the date of your death) but also in respect of certain assets that do not form part of the deceased’s estate but are treated as ‘notional estate’. The types of assets which can be designated ‘notional estate’ include assets that were gifted during certain time periods prior to the deceased’s death, jointly held assets, superannuation benefits or assets held under trust structures which the deceased or their estate could have benefited from if the deceased chose to provide that benefit.

So what does this mean for you?

Estate planning for blended families will involve careful consideration of how assets are held, each family members’ expectations and needs, and how to meet those expectations and needs or protect your assets against claimants. A carefully considered estate plan will often provide you with the best insurance policy against successful family provision claims.

 

Authors: Chris Tsovolos and Stephanie Flegg