While it is generally the case that you have the right to leave your estate to anyone you choose, failing to make adequate provision under a Will for certain dependants may lead to a claim against your estate by way of a Family Provision claim.
What is a family provision claim?
In Queensland, the Succession Act provides that where a deceased person has failed to make ‘adequate provision’ under their will for the ‘proper maintenance and support’ of the deceased person’s spouse, child or a dependant, it may be possible for a Family Provision application to be brought against the estate, seeking further and better provision to be made in favour of the aggrieved person.
‘Spouse’ includes married, de facto[1] and civil partners. ‘Child’ can include biological (including unborn), adopted and even stepchildren. A person is ‘dependant’ if they are either a surviving minor, a parent of the deceased, or a parent of the deceased’s surviving minor child, and they are also wholly or substantially maintained or supported by the deceased person at the time of death. A dependant must satisfy that there is a continued need for maintenance and support which suggests it is reasonable for provision to be made for the person.
Why is it important to avoid a family provision claim?
The key point to protecting the estate against Family Provision claims is ensuring that all your assets are correctly distributed to the correct beneficiaries in accordance with your wishes. This becomes particularly relevant if you are contemplating disentitling or intentionally leaving a specific person out of your Will, which can have disastrous consequences if not done correctly. Unintended consequences may also arise if the estate is particularly complex and involves corporate or trust entities, company and trust assets, joint property, comprehensive superannuation, or self-managed superannuation funds.
Another reason it is important to protect your will against a Family Provision claim which is often overlooked is that legal costs of a Family Provision claim are generally paid out of the estate. Because the costs of these claims have potential to considerably diminish the remaining value of the estate, the consequence of a claim is that your remaining intended beneficiaries may be deprived of their share of their entitlements under the estate, which may potentially cause undue hardship and emotional strain. For example, in Niebour-Pott v Pott,[2] the legal costs incurred in defending a $3.8 million estate from Family Provision applications over a number of years consumed more than $1.1 million of the estate, markedly reducing the remaining value to be distributed to the intended beneficiaries.
Worse yet, claims against the estate may halt the intended distribution of the estate for a significant period of time and cause significant financial, emotional and relationship strain for the will’s executors who are required to defend and attempt to resolve the claims. Significant time may also be expended in attending negotiation conferences, mediations and protracted court hearings.
What factors are considered when assessing whether further provision should be made from the estate?
In considering whether adequate provision has been made in a will for the proper maintenance and support of an eligible person, courts will fundamentally consider the concept of “need”, “moral duty” and “moral claim”.[3] In determining whether an order should be made, courts consider a wide range of factors which include (but are not limited to) the following:[4]
- Size and value of the estate;
- Relationship between the deceased and the applicant, with a consideration to any disentitling conduct or estrangement;
- Financial needs (current and future), character and conduct of the applicant;
- Whether maintenance or support has previously been provided by the deceased to the applicant;
- Obligations, responsibilities, promises and/or statements to the applicant by the deceased;
- Age and health of the applicant, including whether they have any disabilities or infirmities (physical, intellectual or otherwise) and have difficulty supporting themselves or maintaining employment;
- Contributions made by the applicant to the deceased estate.
What is often surprising about Family Provision claims is that the principles of ‘adequate provision’ and ‘proper maintenance and support’ are entirely relative to the circumstances of the estate, and to the needs and standard of living of the applicant. Sometimes it can even be the case that wealthy applicants succeed with challenges against large estates, simply to enable them to continue living under their accustomed standard of life, or to have a safety net to protect them against change of circumstances or fortune.[5]
Case examples
In the Queensland case of Banks v Seemann,[6] an applicant was left a bequest of $200,000 under the deceased’s estate while the respondent executor was left with the more favourable residue of the estate (estimated at $1.5 million). Even though it was acknowledged that the applicant and his wife in fact owned substantial assets and had a steady income, the Court considered that the applicant had contributed significantly to the deceased’s business and financial well-being and had been suffering ill-health for a number of years. As a result, the applicant successfully proved they were entitled to make a Family Provision claim for further and better provision from the deceased’s estate
Conversely, in the case of Vigolo v Bostin,[7] the applicant unsuccessfully brought a claim seeking provision for one-fifth of the deceased’s estate valued at $1.9 million. The applicant and his wife had assets of more than $2.3 million whereas the applicant’s siblings (also contemplated under the Will) had assets totalling no more than $300,000. The applicant in this case made a Family Provision claim not on financial need but by “moral claim” based on the deceased’s promises to leave the farm to him, in return for his long service and hard work in building up the family assets. However, the applicant’s case was ultimately dismissed on the basis that adequate provision had in fact been made, as the applicant had been gifted significant opportunities by his parents affording a significant financial advantage when compared to the other siblings.
What these cases illustrate is that ‘adequate provision’ and ‘proper maintenance and support’ from an estate cannot simply be determined in a vacuum and regard must be had to the financial situations and relationships with all dependants who may be eligible for family provision. This highlights the importance of carefully and strategically structuring the estate to ensure all potential beneficiaries and dependants are adequately provided for.
What’s the fix - how do you avoid a Family Provision claim?
While it is impossible to completely prevent a Family Provision application being brought against your estate by an eligible applicant, careful planning and strategic legal advice tailored to your specific circumstances from estate planning experts will go a long way to protecting your estate and assets from unintended beneficiaries, especially if you wish to disentitle a specific person from your Will.
To this end, some potential strategies to protect the estate against claims include: [8]
- Avoiding the use of DIY will kits, especially where the estate may involve complex assets or interests – the cost of proper legal advice will pay off in the long run!
- Gifting assets and corporate or trust interests during life;
- Structuring assets in companies and trusts such that they fall outside the estate (though be mindful of control of assets through shareholdings and powers of appointment!);
- Binding death nominations for superannuation being made directly in favour of a dependant, which ensures superannuation never passes through the estate;
- Creating non-binding statements of wishes, which may dissuade potential applicants from making a claim or persuade a court that provision should not be made;
- Transferring assets into joint ownership to ensure that the survivor takes ownership outside the estate.
Some of the above strategies can also ensure that wealth is transferred to the intended beneficiary as tax effectively as possible.
[1] The definition of ‘de facto’ means living together as a couple on a genuine domestic basis for a continuous period of at least 2 years before death - Succession Act 1981 (Qld) s 5AA(2); Acts Interpretation Act 1954 (Qld) s 32DA.
[2] [2020] QSC 007.
[3] Re Allen; Allen v Manchester (1921) 41 NZLR 218 at 220–1; Singer v Berghouse (1994) 181 CLR 201 at 209 (‘Singer’).
[4] Singer at 209-210; Vigolo v Bostin (2005) 221 CLR 191 (‘Vigolo’); Hughes v National Trustees, Executors and Agency Co of Australasia Ltd (1979) 143 CLR 134.
[5] In Vigolo, the HC suggested maintenance may imply continuation of a standard of living or even provision for living above such standard; see also Mead v Lemon [2015] WASC 71.
[6] [2008] QSC 202.
[7] [2005] HCA 11
[8] These examples may differ depending on jurisdiction as differences in succession legislation across States applies in Australia.
