Estate Litigation lawyer Lucy McPherson discusses some of the issues on how to avoid someone contesting your Will and some common myths and practical advice for those making their wills to avoid claims against their estate.
It is a common assumption made by most people that if they have a legally drafted Will that it cannot be contested by family members. Nothing could be further from the truth. In all states and territories in Australia, there is similar legislation which allows certain family members who are listed as eligible applicants who can bring a claim against the estate if they can establish that they have not been properly provided for in the deceased person’s estate. The ingredients for establishing such a claim vary from case to case but basically you need to establish that you qualify as an eligible applicant under the law, that you have financial needs and that the deceased person should have made further provision for you in their estate. The applicant’s financial and material circumstances, as well as the nature of her/his relationship with the deceased, the financial and material circumstances of any competing claimant/s and the moral obligation the deceased owed to the parties involved in the dispute are relevant for the Court’s determination. The test is what a reasonably minded testator would have done so in all of the circumstances.
Claims often come about because certain relatives or family members are not properly provided for in someone’s Will, or at all. In many cases the “black sheep” of the family who is a social misfit and receives a government pension and has little or no relationship with the family generally is usually the most qualified person to bring a claim under the legislation. As unfair as this may seem, and in many cases where a parent or parents choose to not make provision for such a child, more often than not the person effectively cut out of the Will will have a very strong claim against the estate. Not only does this fly in the face of the express wishes of their deceased parent but it also causes inevitable friction with the siblings who have done the right thing with their lives and have been dutiful children. It is understandable that many people consider not even bothering to do a Will if it is possible that beneficiaries who they do not wish to provide for can bring a claim against their estate after they pass away. There are, however, creative ways which your lawyer can structure your estate so as to mitigate the possibility of a claim being made on your estate. We can help you with strategies to make sure that, as far as you possibly can, you can take steps to minimise the prospect of someone bringing a claim against your estate.
One of the common myths of people making their Wills is that if they leave a small sum of money to an errant child that this will be sufficient to discourage or prevent a claim being made. Once again, nothing could be further from the truth. In fact, it will most likely have the effect of angering the person you wish to disinherit which may encourage that person to bring a claim on your estate. The true test is whether you have made reasonable provision for the child or family member concerned taking into account all circumstances of the family dynamics, the estate assets and the individual circumstances of the person making the claim. There is also a common misapprehension that if you have 3 children that you must leave your estate equally to the 3 children. Once again, this is not so and, although people may well think that this is the most morally correct thing to do in all of the circumstances, it really depends upon the individual circumstances of each of the 3 children as to whether the testator has made a Will which is reasonable in all of the circumstances.
So how can you avoid a claim being made against your estate? Here are a few strategies that may save you a lot of anxiety, time and ultimately money within your estate after you pass away:-
- Structure your assets so they are not part of your estate
There are various things that you can do with the ownership of your assets in order to ensure that they pass on to the family members that you want them to. For example, if you hold a property as joint tenants with someone, after you die your share passes to the surviving joint tenant without reference to your Will. Leaving aside issues of notional estate in the State of New South Wales, this can be a very effective way to ensure that your main asset passes to the family member that you wish to receive the property. A great example is where a couple who are on their second marriage buy a property together as joint tenants. When one of them dies, the half share will pass to the surviving joint tenant without reference to the Will or the estate (except in NSW).
Similarly, joint bank accounts can be a strategy to avoid a claim against the estate. Under the law of joint bank account survivorship, the general rule of thumb is that the benefit or ownership of the joint bank account passes to the surviving joint account owner upon death, without reference to the will or the estate.
You can also ensure that superannuation and life assurance cover is paid to specific beneficiaries by completing “binding nominations” for payment of the proceeds of those policies to the beneficiaries that you wish to receive those payments. Although there are strict requirements as to who can be nominated as a beneficiary, and you need to take care to ensure the binding nominations are completed properly and that the insurance policies allow this, it is a useful strategy for ensuring that payment of the proceeds of the insurance policy goes directly to the nominated beneficiaries. Once again, issues of notional estate in the State of NSW can intervene to cause issues with this strategy.
- Get proper advice in relation to drafting your Will and possible claims
Probably one of the most obvious and often overlooked strategies is to ensure that you make some provision for a family member or beneficiary that you would normally completely cut out of the Will, if you had your choice. As much as this seems to fly in the face of what you want to achieve with your testamentary wishes, sometimes you can avoid a claim by making “adequate provision” to the family member involved. This often happens with “black sheep” children where the parents would normally leave them out of the Will completely. Rather than doing this, it is a much better solution to make some provision for them which is modestly reasonable in all of the circumstances and is pitched at a level that will inevitably make them think very carefully about whether they contest the Will or not. Recently a Supreme Court Judge said “Adequate means no more than sufficient. It does not connote generosity.” The reasoning behind this is that of more recent times the Courts have been much more willing to deny claims brought by adult children and if the executors of your estate are left with an arguable position in relation to possible claims being made by an adult child, it is quite possible that this could prevent and/or restrict any claims being made against the estate.
Utilising this strategy means that you must obtain proper legal advice from lawyers who are experienced in this area of law and can take into account all of the relevant variables in your family situation and the assets of the estate so that provision can be carefully crafted into the Will in order to prevent a claim being made. Unfortunately many people do not wish to spend very much money on getting their Will done and either choose to do it themselves by way of a “do it yourself Will kit” or alternatively use small suburban legal firms who only prepare “simple Wills”. It is impossible for a lawyer to provide you with proper advice in relation to avoiding family provision claims and draft a simple Will for $150.00 or less.
A carefully pitched amount of money or percentage share of the estate left to a “black sheep” adult child will have much more chances of succeeding than leaving them $1.00 or cutting them out of the Will completely. This strategy can only lead to claims being made and often spurs them on to bring a claim where they would not normally bring one.
- Transfer some or all of your assets while you are still alive
Transferring assets prior to your death can avoid a claim being made against your estate with the reasoning being that there are no assets in your estate after you die. Unfortunately the provisions of notional estate in NSW can thwart this strategy if the transaction occurs within specified timeframes with reference to the date of death but this strategy can succeed in the State of Qld.
It is a risky strategy in that if you give away all of your assets before your death, you risk whoever you give them to not supporting you or simply taking off with the assets to deal with as they please. There are also quite dramatic effects that this can have in relation to your taxation and Centrelink benefits which will deem gifts to remain as assets in your name. This could mean that you could effectively get rid of all of your assets and then have Centrelink tell you that you are no longer entitled to a pension! You may also then receive a capital gains tax bill from the Australian Tax Office if you are not properly advised. There is also the possibility (if certain timeframe requirements are met) that if the assets are located within NSW, the aggrieved relative can bring a claim against the estate and have those transactions set aside.
By far and away the most effective strategy to avoid claims being made is to look carefully at the ownership of your assets and how these might be passed to your preferred beneficiaries in a way that the assets do not become part of your estate. This strategy, coupled with ensuring that you obtain proper legal advice in relation to the drafting of your Will and reasonably dealing with any possible claim for provision by your family members will give you the best possible outcome. There is no guarantee that these strategies will completely stop a claim being made by family members. Sometimes family members bring claims against the estate purely to cause as much disruption and stress to their fellow siblings and/or family members and with a view to ensuring that the resultant legal costs soak up as much of the estate assets as is possible. Although a Court would not take kindly to this approach!
However, a carefully crafted strategy to avoid claims with the correct legal advice can save you and your family a lot of anxiety and ultimately, legal costs. A small investment now may avoid a much larger expense, both financially and emotionally, to your estate and your family later on.
You are welcome to contact our office with any enquiries concerning estate litigation claims. Please contact our Wills and Estates Department Manager, Donna Tolley on direct line 07 5506 8241, email [email protected]or free call 1800 621 071 to book your free 30 minutes appointment with one of our dedicated Estate Litigation lawyers.
We have a dedicated Estate Litigation team that practices exclusively in this complicated area. Please click here to access our team brochure with details of our professional staff.