In the ACT and NSW, you are free to make a Will and leave your estate to whomever you choose. However, this freedom is curtailed by the existence of Family Provision legislation which imposes an obligation on the willmaker to make adequate provision for particular members of their family or certain other people. If you ignore those obligations, then those who are often referred to as ‘eligible applicants’, can make a claim against the estate.
This kind of claim can arise if someone has been left out of the will entirely and should have been included, or if some provision has been made for them in the will but an eligible person considers it inadequate to meet their needs. It can also arise if you haven’t made a will.
Who can make a claim?
The law recognises that there are certain people to whom the community expects a willmaker to provide for. As you might expect, this includes spouses and children, but can extend to people outside the willmaker’s family unit in some circumstances.There are slight differences in each State and Territory as to who else can make a claim. This article is specifically in relation to both NSW and ACT as these are the areas where we do most of our work.
Here is a summary of who can make a claim:
- the spouse of a deceased person
- the children of the deceased
- a de facto partner of two years or more
- stepchildren (with some conditions attached including for example in the ACT, a stepchild of a deceased person is not entitled to make a claim unless the stepchild was maintained by the deceased immediately before their death)
- a grandchild of the deceased (with special conditions that are met. The grandchild cannot make a claim unless the parent of that grandchild died before the deceased person died)
- a parent of the deceased
- a former spouse (potentially)
- a person who does not have a particular relationship with the deceased person, but was at any time, whole or partly dependent on the deceased person (relevant in NSW only)
What is “adequate provision”?
Just because someone is eligible does not mean they will be successful in making a claim or have a right to further provision. It must first be established that adequate provision was not made for the applicant in the will. If it is determined that adequate provision was made, then that is the end of the matter and the claim will be dismissed.
If the Court determines that adequate provision was not made in the will, then the Court goes on to determine what would be adequate.
It is not a case of what is fair. For example, there is no obligation on a willmaker to provide for all children equally. The question is, what is adequate. The determination of what is adequate is by reference to a number of factors that are set out in the legislation in each state or territory.
Looking at the ACT, for example, the things that the Court will take into account include:
- the character and conduct of the person making the application
- the nature and duration of the relationship between the person making the application and the deceased person
- financial and nonfinancial contributions made by the applicant to the deceased person
- the financial position of the person making the application and their needs – this is a critical part of assessing adequacy of provision
- the size of the estate and the competing claims
A need for provision must be evident
For example, there might be an applicant who is a child and they have been a faithful child and had a good relationship with their mum or dad. If they have been left out of the will or have received significantly less than others, but are independently wealthy, they may have difficulty showing that they have a need for further provision, particularly if the claims of other beneficiaries are strong. On the other hand, if there is an eligible applicant who has been left out of the will and they do not have means of support, have health needs, do not own a house and perhaps have lots of debt, they are going to be much more likely to succeed in a claim.
In recent times, particularly in NSW, the Court has been pretty hard on adult children making family provision claims when they are reasonably well off. The Court is clear that just because you are a child, it does not mean you have an automatic entitlement. You have to be able to demonstrate that there is a need. This reiterates what we have said earlier in that the family provision is not a test of whether it is fair that some children received and some did not. It is centred around whether adequate provision has been made in the particular circumstances of the case.
Let us take the example of a wife of the deceased person. They were married for 30 years and the main asset in the estate was a farm worth about $4 million. All that is left for the widow under the will is the right to live in the homestead on the farm for the rest of her life with the balance of the estate, including the farm, being left to the adult sons of the deceased, who run the farm.
This is a case where provision under the will is clearly inadequate. In determining what is adequate, the Court will take into account the need for the surviving spouse to have somewhere to live (including when she no longer wishes to live on the farm); the need to have something to live on; and the need to have an amount to meet contingencies. In a case such as this it is likely that the Court would order that the surviving spouse receive an amount of money sufficient for her to purchase her own home; an amount to cover any shortfall between her income and expenses and an amount to cover contingencies and anticipated future expenses.
What can you do to manage the risk of a family provision claim?
There are certain steps that can be taken to minimise the risk of a family provision claim. The best strategy will depend on where you live, where you own assets, and your family and financial profile. In the ACT, you might consider joint ownership of property with your intended beneficiary as joint tenants, as opposed to tenants in common. If you own property with your partner as a joint tenant, then on your death your share of the property automatically goes to them, regardless of what is in the will. Another way you could seek to reduce the risks of a family provision claim is to take steps to minimise what is in your estate or consider giving assets to your planned beneficiary during your lifetime.
However, care must be taken if you live in NSW or if a property is located in NSW because of particular provisions in the NSW legislation which enable the Court to ‘claw back’ assets which are owned as joint tenants or which have been transferred prior to death in certain circumstances and where there are otherwise insufficient assets in the estate to meet a claim for further provision.
The other thing to consider is if you know that someone is likely to make a claim against your estate, then think about leaving something for them in your will which is sufficient to ward off a claim. You should be aware that the costs of family provision proceedings can be significant and will eat into the estate’s value. So, making provision in your will may mean a significantly lesser burden on your estate than the costs of dealing with a disputed claim. What is sufficient will depend on the circumstances.
How long does someone have to make a claim?
In NSW, a claim needs to be made within 12 months of the date of death. In the ACT, it’s six months from the date that probate (or letters of administration) is granted. You do not have to go to Court in order for a claim to be resolved so there are often negotiations that start early on before Court proceedings are launched. But if a claim is to be made then it must be made within these timeframes.
How is a family provision claim applied for?
In our experience what often occurs is that the executor of the will or the executor’s lawyer receives a letter from a disgruntled relative saying they have been left out of the will and advise of their intent to make a claim. What then occurs is an exchange of information because it needs to be clear what is in the estate.
If an agreement can be reached before family provision proceedings are commenced in the Court, then the agreement will usually be documented in a deed of family arrangement. Such an agreement has the effect of changing the provisions of the will to accommodate the further provision for one of the parties.
If somebody starts family provision proceedings either in NSW or the ACT the process is very similar. The person making the claim files their claim and they file an affidavit in support of that claim. They would normally have some information about what is in the estate but they do not necessarily need to have all of the detail. What is important here is to set out details of:
- their relationship with the deceased.
- what contributions they might have made during the lifetime of the deceased
- what their financial position is now and what their needs are
The defendant in the proceedings is the executor of the will because their role is to uphold the will. The executor will share information about what is in the estate and disclose anybody else who is a beneficiary and whose interests are going to be impacted by any claim for further provision. After those initial documents are filed, the Courts – both in NSW and the ACT – require parties to go to mediation. You will not get a hearing date in Court unless you have gone to mediation. A lot of the cases can be resolved through the mediation process.
The key point to remember when it comes to family provision claims and estate planning is that you need to consider and cannot ignore the possibility that a family provision claim may arise. As an estate planning lawyer, we work with you to make sure that the people who you intend to benefit from your estate, have the best chance of getting what you intend for them.
The DDCS wills and estate planning team are highly experienced and specialise in helping people navigate issues like these. To discuss your circumstances, phone our team on (02) 62127600 or fill in the contact us form and our team will be in touch.