Challenges to wills
Do you know who has a claim to your estate?
BY TERRY PURCELL

Challenges to Wills can be very expensive and extremely destructive for families and they are on the increase. When making a simple Will, whether one based on a Post Office precedent or a low cost one from a solicitor, it is very easy to overlook the legal rights of potential claimants. It is a key part of RetireLaw’s approach to Estate Planning to advise clients on the risk of claims against their estate and to suggest strategies or approaches that seek to minimise such risk. The following is part of a recent talk I gave on the subject.

Part 1 – The why, the who, the when and the what

To understand why someone’s Will can be challenged it is helpful to understand some history. The Victorian era was said by one English High Court Justice to be a period of “unbridled testamentary licence” – in other words, a person could make a Will which had no regard to any personal or moral obligations. Needless to say this gave rise to significant unfairness in some situations to widows and children. Curiously enough the winds of change were first felt in New Zealand when, following the introduction of the world’s first social security system, a crisis was caused by male heads of households leaving their families out of their Wills on the premise that the state would look after them via the new social security system. The NZ Parliament responded by passing the Testator’s Family Maintenance Act in 1900. This approach was followed in New South Wales in 1916 with the Testator’s Family Maintenance and Guardianship of Infants Act, with most other states following soon after.

The NSW Act had been under consideration for some time but what propelled its passing was said to have been the death of an infamous newspaper proprietor whose Will left his substantial fortune to his mistress, leaving his wife with nothing. However, as most of the politicians of the day had been defamed in the deceased proprietor’s papers, they immediately passed the Act and backdated it to enable it to commence operation before his death so that his wife could then challenge his Will and claim a rightful share of his estate. An interesting footnote to this important social and legal reform was that it took the UK almost 40 years to pass similar legislation after many failed attempts. The 1916 NSW legislation and its1982 successor, the Family Provisions Act, authorised the Supreme Court to correct unfair treatment of dependants who are not properly provided for in a Will. So who can challenge a Will? The Family Provisions Act nominates two groups who can apply to the court for a share of an estate. It should be noted that claims can be lodged against someone’s estate whether there is a Will or not.

The first group of those eligible to claim are:
• The husband/wife of the person at the time of their death
• Someone living in a domestic relationship at time of death
• A child of the deceased person

The second group of those eligible to claim are:
The second group of those people eligible to claim contains some surprises and also gives rise to the potential for claims from non-family members. Those that are covered by this group comprise:
• A former wife or husband of the deceased person
• A person who was, at any particular time, wholly or partly dependant on the deceased person, and who was, at any particular time, a member of a household of which the deceased person was a member
• A grandchild who was, at any particular time, wholly or partly dependant on the deceased

How does the court deal with such applications? If a person comes within any of these classes it is open to the court to order that provision be made for the maintenance, education or advancement in life of the eligible person. In other words, the court must be satisfied that the provision (if any) made for the applicant was “inadequate for (his or her) proper maintenance, education of advancement in life”. So it is important that there be an established need. However, in respect to the second group, namely a former spouse, a dependant person and a grandchild, they face an additional threshold in order to be considered. This group must also establish to the court’s satisfaction that in all the circumstances there are “factors which warrant the making of an application”. If the court is not so satisfied it will not proceed to determine the merits of the application. Such factors include the character and conduct of the applicant, any contribution made by the applicant to the deceased’s property or welfare, or any other matters the court might consider important. When must a claim be made? The Act specifies an 18-month time limit, although this can be extended in some circumstances.

Another interesting timing aspect is the time frame used by the court in deciding entitlement based on need. Contrary to what common sense might dictate, the court does not consider the claim based on the applicant’s circumstances at the time of the deceased’s death, but looks at their circumstances at the time of the court hearing. This means that should misfortune strike an eligible person some time after the deceased’s death, then that is the relevant need. What can the court use to meet successful claims? Obviously all the assets of the estate are available including assets no longer forming part of the deceased estate. There is a unique element of the NSW legislation which is not found in similar legislation in other Australian jurisdictions – namely the concept referred to in the legislation as “notional estate”.

This concept originally applied when “death duties” were in force and referred to property or assets which are not in the name of the deceased at the time of death because the deceased disposed of those assets within certain statutory time frames. For the purposes of the Family Provisions Act, the court can make orders in respect to such assets for the purpose of meeting claims against the estate. Examples are where property is converted into joint tenancy or donated to a third party for the purpose of denying potential beneficiaries. Despite the jurisdictional difficulties it has been suggested that assets transferred into a superannuation fund may also be categorised as “notional estate”. One of the challenges for the courts has been to set some consistent benchmarks when considering such claims against the intentions of the Will maker. However, the extraordinary variety of circumstances that such cases throw up makes it very difficult to predict with any certainty the likely outcome but some trends have emerged from the cases.

Widows, whether from a first or second marriage, are entitled to the family residence and financial support. Long standing de facto partners are generally treated in a similar way to marriage partners. With children it is less clear with the exception of disabled, infant or otherwise clearly dependant children, with the courts working to ensure they are properly provided for. The claims of adult daughters would depend on whether there was special need particularly if the estate is modest and the cases where applications have been successful seem to generally result in a modest allocation. Adult sons would also appear to have modest prospects in the absence of extenuating circumstances. As to the second group of potential claimants namely former spouses/partners, dependants who lived with the Will maker and grandchildren, the need to show “factors warranting” an application makes it difficult for this group but clearly there are individuals who, on the facts and circumstances, can and do succeed. One matter that always needs to be remembered is that, provided a person fits one of the statutory claimant categories, they cannot be prevented from lodging a claim.

However, the Supreme Court is taking steps to discourage “dog in the manger” claimants i.e. “if I can‘t have it then I will litigate to run up costs to erode the estate”. And I suspect that in the not too distant future rules will be introduced to reduce speculative claims funded by law firms, not unlike the recent measures introduced to reduce the number of personal injury claims. How do we minimise the chances of a claim being made? We believe that the answer is get proper advice from an experienced estate planning lawyer when you are having Wills drawn up. In our experience too many Wills are drawn up without proper consideration of the client’s circumstances. These include full disclosure of assets whether directly owned or otherwise controlled, and personal situations – clear details of the family, current and past marriages or relationships, children etc.

This is where you deal with issues that unless addressed and taken into account are likely to give rise to challenges to Wills. Without this type of systematic approach to getting full instructions from clients, it is too easy for situations which could lead to claims by potential beneficiaries to be overlooked. A disputed Will is not only expensive but it prevents early distribution of your estate and will almost certainly leave scars on the family which may never heal. For these reasons, serious consideration needs to be given before a decision is made to leave an obvious dependant out of your Will. I realise that most of you here will think that the type of claims referred to could not possibly happen in your family and you may be right. However, with the high divorce rate, who can predict whether a child’s marriage which might be stable when the Will is drawn up, could disintegrate, and your child may find themselves in dire straits. For this reason, it would be a wise parent who periodically reviewed their Will in the light of their children’s changing circumstances so that need becomes the deciding factor