Case update -adult children challenging a parent’s estate

It is an unfortunate fact of life that family relationships break down – and as a result, the aggrieved family member may alter their Will to remove the other family member as a beneficiary, or only leave them with a nominal gift – even if it is their child.  Whilst it is every person’s right to prepare a Will which reflects their wishes, the excluded person may have the right to make a family provision claim for an entitlement under the Will.

In a recent family provision case (Smith v Smith [2016] NSWSC 1077), the Supreme Court of New South Wales held that 2 of the deceased’s adult children were entitled to grants of $90,000 and $100,000 (when their initial grants under the Will were $30,000 each).

The circumstances of this particular case were as follows:

  • the deceased had 3 adult children – two sons and a daughter;
  • the first son had been estranged from his father for approximately 7 years, although over that time, the son had sent approximately 10-15 text messages to his father, but with no response;
  • the daughter had been estranged from her father for approximately 19 years, although over that time, she had made some attempts to contact her father, but with no success;
  • the second son had a close relationship with the father, caring for him in the last few weeks of his life before he passed away from bowel cancer;
  • in his Will, the father left a bequest of $30,000 to his first son, a bequest of $30,000 to his daughter, some other bequests to grand-children, with the balance of the Estate to be gifted to his second son.

LPPAfter hearing evidence from all parties regarding the difficulties of their relationship with their father, their current financial circumstances, their future financial needs, and the size of the Estate, the Court noted that the breakdown in the relationship was highly likely due to the deceased’s difficulty personality, noting that the children’s limited attempts to contact their father were unsuccessful.  The Court also noted that there was no demonstration by the children of ill-temper or violence towards their father.

Noting the children’s various financial needs, the Court increased the grants to $90,000 and $100,000 respectively (from the initial grants of $30,000).

Interestingly, the Court’s reported decision made reference to a number of comments made by various Judges over the years as to what is an appropriate provision:

Minds may legitimately differ as to the provision that should be made … [W]hat is required is an instinctive synthesis that takes into account all the relevant factors and gives them due weight: Grey v Harrison [1997] 2 VR 359 per Callaway JA at 366-367

It involves

… an intuitive assessment: Kay v Archbold [2008] NSWSC 254 per White J at 126

As to what is an appropriate provision can only be determined on a case by case basis, taking into account all relevant facts and circumstances.

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Please contact Shire Legal if you have any questions about drafting a Will to exclude certain family members, or questions about making a family provision claim.

An earlier blog by Shire Legal in relation to family provision claims can be seen here.

 

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When a deceased drastically changes their will just prior to their death …

When there are drastic changes in the content of the will of a deceased just prior to their death, a number of potential issues arise which need to be addressed in the administration of the deceased’s estate.  It is not uncommon for so called “deathbed wills” to be challenged by aggrieved family members and potential beneficiaries.

This issue was explored recently in the matter of The Estate of Stanislaw Budniak; NSW Trustee & Guardian v Budniak. In this matter, three testamentary documents were produced to the court being a copy of an original will from 2007, an original of a document drafted in 1994 and an original of a document drafted in 1988. The testamentary documents from 1988 and 1994 left the estate to the deceased’s five children equally. In the 2007 will the deceased left his entire estate to one son and one grandchild and appointed NSW Trustee and Guardian as Executor.

The four excluded children took action against the executor requiring the will to be proved in solemn form, claiming that the deceased lacked testamentary capacity and did not know and approve of the contents of the 2007.  A further application was made by the four excluded children for a family provision order under section 59 of the Succession Act 2006 (NSW).

During the proceedings it was established that the plaintiff had taken instructions from the deceased on 8 May 2007 and the document was executed on 3 October 2007.  When the deceased executed the 2007 will, it was found that the an employee of the plaintiff had made no attempt to satisfy himself of the deceased’s testamentary capacity, or his knowledge and approval of the contents of the 2007 Will in October 2007.  As a result, whilst the court was satisfied that the deceased only suffered mild cognitive impairment at the time of giving instructions, it could not be satisfied on the totality of the evidence, that the deceased had testamentary capacity at the time he gave instructions or executed the 2007 will.  As such, the Court found there could not be a grant of probate in solemn for of the 2007 will and made a grant of probate of the 1994 document.

Wills

Capacity

When there are changes to a deceased’s will just prior to their death, a primary consideration is whether or not the testator had capacity to execute their Will.  Testamentary capacity refers to the ability of the testator to formulate sound legal decisions.  The onus of proof is borne by the applicant, who is said to propound the will.  However, during the process the onus of proof may shift to a party alleging that the will should not be admitted to probate to show why it should not be admitted.

The long established test for will-making capacity which was adopted in Australia and other common law countries was established in the case of Banks v Goodfellow in 1870 and has been reaffirmed many times in the 20th and 21st centuries.

The test in Banks v Goodfellow established that it is essential to the exercise of such a power that a testator shall:

  • understand the nature of the act and its effects;
  • shall understand the extent of the property of which he is disposing;
  • shall be able to comprehend and appreciate the claims to which he ought to give effect; and
  • that no disorder of mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties – that no insane delusions shall influence his will in disposing his property and bring about a disposal of it which, if the mind had been sound, would not have been made.

If any doubt exists surrounding the capacity of a testator, a medical opinion should be sought.

Validly Executed

Another important consideration when a deceased has drastically changed the contents of their will just prior to death is whether or not the will has been validly executed.  Pursuant to Section 6 of the Succession Act 2006 (NSW), a will is not valid unless:

  1. it is in writing and signed by the testator or by some other person in the presence of and at the direction of the testator, and
  2. the signature is made or acknowledged by the testator in the presence of 2 or more witnesses present at the same time, and
  3. at least 2 of those witnesses attest and sign the will in the presence of the testator (but not necessarily in the presence of each other).

Further, the signature of the testator must be made with the intention of executing the will.

Where the formal requirements of a will have not been met, the Supreme Court may dispense with the formal requirements for the execution of a will under Section 8 of the Succession Act 2006 (NSW) which provides that:

  1. This section applies to a document, or part of a document, that:

(a) Purports to state the testamentary intentions of a deceased person, and

(b) Has not been executed in accordance with this Part.

  1. The document, or part of the document, forms:

(a) The deceased person’s will-if the Court is satisfied that the person intended it to form his or her will, or

(b) An alteration to the deceased person’s will-if the Court is satisfied that the person intended it to form an alteration to his or her will, or

(c) A full or partial revocation of the deceased person’s will-if the Court is satisfied that the person intended it to be a full or partial revocation of his or her will.

  1. In making a decision under subsection 2, the Court may, in addition to the document or part, have regard to:

(a) Any evidence relating to the manner in which the document or part was executed, and

(b) Any evidence of the testamentary intentions of the deceased person, including evidence of statements made by the deceased person.

Undue Influence

Where a deceased has made drastic changes to their long held testamentary intentions just prior to death, the issue of undue influence on the part of a person who assisted the deceased in drawing up the will may arise. Where the person who assisted the deceased stands to gain from doing so, then they may be required to prove to the court there was no pressure, threat, force, trickery or fear involved at any time during the will making process.

The long established principle in determining undue influence in relation to the making of a will was established in the UK case of Wingrove v Wingrove, where Judge Hannen stated:

“To be undue influence in the eyes of the law there must be – to sum it up in one word – coercion.”

However, Judge Hannen expanded on the above by stating that:

“It is only when the will of the person who becomes a testator is coerced in to doing that which he or she does not desire to do that it is undue influence.”

Undue influence is difficult to prove given that the best source of evidence on the matter is invariably the deceased, meaning those alleging undue influence will have to rely upon circumstantial evidence.

Family Provision Claims

In the event that the changes in the content of the deceased’s will fail to make adequate provision for eligible persons, an application for a family provision order may be brought by the aggrieved individual.

Section 57 of the Succession Act 2006 (NSW) defines who is an eligible person to make an application for a family provision order. An eligible person can be:

  1. a person who was the wife or husband of the deceased person at the time of the deceased person’s death,
  2. a person with whom the deceased person was living in a de facto relationship at the time of the deceased person’s death,
  3. a child of the deceased person,
  4. a former wife or husband of the deceased person,
  5. a person:
  • who was, at any particular time, wholly or partly dependent on the deceased person, and
  • who is a grandchild of the deceased person or was, at that particular time or at any other time, a member of the household of which the deceased person was a member, and
  1. a person with whom the deceased person was living in a close personal relationship at the time of the deceased person’s death.

The courts apply a two stage process as set out in Singer v Berghouse, in determining applications for family provision orders by eligible applicants.

  1. Has the applicant been left without adequate provision for his or her proper maintenance, education and advancement in life?
  2. What provision ought to be made out of the estate of the deceased in favour of the applicant?

If the applicant can establish the answer to the first question is ‘Yes,’ the Court will then address the second question in relation to the individual circumstances present in each matter.

Conclusion

Where a deceased has made drastic changes to the content of their will just prior to death which are inconsistent with their long held testamentary intentions, It is important that executors, beneficiaries and potential beneficiaries are aware of the issues set out above in order to minimise the likelihood of costly and time consuming legal action which can significantly dilute the value of the deceased estate.

Contact Andrew Morris at Shire Legal on 9526 3444 or amorris@shirelegal.com.au if you have any questions about a deceased estate.

My relative has died without leaving a Will. What do I need to do?

It is a commonly held belief that if you die without a Will, your assets automatically transfer to the State.  However, this is incorrect.  It is only if you die without a Will and without any eligible relatives that your assets will transfer to the State.

Who are eligible relatives?

Eligible relatives are those who are entitled to distribution of the deceased person’s estate.  Just who is entitled depends on the deceased person’s family situation at the time of death.

(a) spouse, but no children – the spouse is entitled to the entire estate (section 111);

(b) spouse and children who are children of the deceased person and the spouse – the spouse is entitled to the entire estate (section 112);

(c) spouse and children who are not those of the spouse – the spouse is entitled to the deceased person’s personal effects, the “statutory legacy” (currently $350,000), and 1/2 of the remainder of the estate (section 113).  The children receive the balance of the estate (section 127);

Different rules apply where there are multiple spouses (see sections 122126).

(d) no spouse but children – the children are entitled to the whole of the estate (section 127) – if any child has died before the deceased person, leaving their own children, then those children are entitled to their parent’s share (section 127);

(e) no spouse and no children – the parents of the deceased person are entitled to the whole of the estate (section 128). If there is one surviving parent , the entitlement vests in the parent, and if both, it is shared equally;

(f) no spouse, no children and no parents – the brothers and sisters of the deceased person are entitled to the whole of the estate (section 129). If any brothers and sisters have died before the deceased person, leaving their own children, then allowance must be made in the division of the estate for the presumptive share of any such brother or sister;

(g) no spouse, no children, no parents, no brothers or sisters – the grandparents of the deceased person are entitled to the whole of the estate (section 130). If there is only one surviving grandparent, the entitlement vests in the grandparent, or if two or more survive the deceased person it vests in them equally; and

(h) no spouse, no children, no parents, no brothers or sisters, no grandparents – the brothers and sisters of each of the deceased person’s parents (the deceased persons aunts and uncles) are entitled to the whole of the estate (section 131). If there is only one surviving aunt or uncle of the deceased person’s the entitlement vests in the aunt or uncle. or if two or more survive the deceased person it vests in them equally.  If an aunt or uncle have died before the deceased person, leaving their own children who survived the deceased person, the child is entitled to the deceased parents presumptive share and if there are two or more children, they share equally.

If there are no eligible persons that fall within the above classes of relatives, then the estate will go to the State (section 136), unless someone who believes that they have an entitlement to the estate makes a claim.

By way of example, in 2015, a deceased man died without any living relatives, except for his ex-wife’s daughter (being the deceased’s ex-step-daughter).  The Court looked at the claimant’s financial circumstances (single mum, with 3 children, dependent on Centrelink payments) and decided to make provision for the ex-step-daughter’s future maintenance, education and advancement out of the estate by vesting the entire estate to her.

Wills

What is the process if there is no Will?

  1. Do a thorough search of the Deceased’s personal papers.  Is there a copy of a Will, even an old Will that may not necessarily be the most current Will?  Can you find any evidence that the Deceased ever instructed a solicitor, even if it was just for the purchase of property – evidence could include letters or invoices from the solicitor firm?  A thorough search will also include placing an advertisement in the Law Society Journal (a monthly periodical magazine distributed to (most) solicitors in New South Wales) asking if anyone knows the whereabouts of the Will.
  2. If no Will is located, then the closest living relative will need to apply to the Supreme Court for “Letters of Administration”, asking the Court to appoint the relative as the Administrator of the Estate, and authorising the relative to distribute the Estate in accordance with the list of “eligible relatives” as provided for in the Succession Act.
  3. The Application for Letters of Administration will need to be accompanied by an Affidavit of the Applicant for Administration (that is, the Administrator) noting the following:
  • the identity of all of the deceased’s eligible relatives, including a copy of all birth, marriage and death certificates;
  • details of the searches undertaken to locate a Will or other document evidencing the Deceased’s intentions regarding their Estate; and
  • a statement of the assets and liabilities of the Deceased.

The moral of the story?  Ensure that you have a valid Will so that your assets can be transferred to those family members and friends that you wish to provide for – not those family members that the State believes has an entitlement to your assets.

Contact Shire Legal if you have any questions about Wills or an entitlement under a deceased’s estate.

Does a disabled adult child have the right to claim against their parent’s estate?

In the recent case of Baird v Harris, the Supreme Court of New South Wales certainly thought so.

This case concerned the estate of a deceased man who had 2 adult children, one of whom suffers from Autistic Spectrum Disorder.  The deceased’s estate consisted of a property near Lake Macquarie, cash, a caravan, a motor vehicle, and a motor cycle, with a total value of $497,200.  In his Will, the deceased left the property and the motor vehicle to his partner, a cash legacy of $50,000 to each of his children, the caravan to his daughter, the motor cycle to his son, and the rest of the estate to his partner.

The Court held that:

  • the son was an “eligible person” as defined in section 57 of the Succession Act;8808432-law
  • looking at the son’s financial and material circumstances, adequate provision for his proper maintenance and advancement in life was not made by his deceased father;
  • consideration then needs to be given to the son’s financial position, the size and nature of the deceased father’s estate, the relationship between the son and his deceased father, as well as the relationship between the son and

“other persons who have legitimate claims upon the deceased’s bounty and the circumstances and needs of those other persons”.

  • the Court must made a determination “according to the feeling and judgment of the fair and reasonable man in the community, the spokesman of which is, and must be, the court itself”.
  • the son was incapable of adequately providing for himself, and it was likely that, because of his medical conditions, he will never be able to do so.
  • therefore, the son should receive additional provision by way of a lump sum which would “enable him to provide for exigencies of life and provide a buffer against future contingencies”.

As a result, the Court ordered that the son was entitled to the benefit of 40% of the net proceeds of sale of the deceased father’s property.

So what does this mean for parents who are preparing their Wills?

If you have children from an earlier relationship, it may not be enough to leave a “token gift” to your children, with the rest and residue of your estate going to your current partner, particularly if your children’s particular circumstances (as well as the size of your estate) would warrant a larger distribution being made to them.

But I don’t want my kids to move overseas if something happens to me …

Time and time again Shire Legal prepares Wills for parents who are living in Australia and whose ex-spouses are resident overseas, with little or no contact with the children. If the Australian parent dies, will the children be required to move overseas to live with their surviving parent?

Not necessarily. Under the Guardianship of Infants Act 1916 (NSW), the surviving parent becomes the guardian, unless there are exceptional circumstances or orders in place (e.g. the deceased parent has sole custody).  However, the child’s Australian relatives can apply to the Family Court for a parenting order under Part VII Division 5 of the Family Law Act 1975 (Cth), to grant them the right to care or visit the child.  Parenting orders may also be appropriate for step-parents, as an alternative to going through a formal adoption process.

As general rule when making parenting orders, the Court will consider what is in the best interests of the child, by:

  • ensuring the child has the benefit of both of their parents having a meaningful involvement in their lives, to the maximum extent consistent with the best interests of the child;
  • protecting children from physical or psychological harm from being subjected to, or exposed to, abuse, neglect or family violence;
  • ensuring that children receive adequate and proper parenting to help them achieve their full potential; and
  • ensuring that parents fulfil their duties, and meet their responsibilities, concerning the care, welfare and development of their children.

The principles followed by the Court are:

  • children have the right to know and be cared for by both their parents, regardless of whether their parents are married, separated, have never married or have never lived together;
  • children have a right to spend time on a regular basis with, and communicate on a regular basis with, both their parents and other people significant to their care, welfare and development (such as grandparents and other relatives);
  • parents jointly share duties and responsibilities concerning the care, welfare and development of their children;
  • parents should agree about the future parenting of their children; and
  • children have a right to enjoy their culture (including the right to enjoy that culture with other people who share that culture).

The Court will of course take into account anyone nominated in the deceased parent’s Will as the child’s guardian.

If you challenge an Estate, can the costs be paid for by the Estate?

The general rule with any litigation (that is, court proceedings) is that the unsuccessful party must pay their own legal costs as well as all (or some) of the legal costs of the successful party.

The idea behind this general rule is that it will discourage people from bringing frivolous (“vexatious”) claims against others – with the rule in place, the risk obviously is that there will be an adverse (negative) costs order against the person who brings the proceedings if they are unable to prove their claim.

However this general rule does not always apply.  For example, if someone believes that they have sufficient reason to challenge a deceased’s estate, then the costs of challenging the Estate may be paid for by the Estate.

Examples of circumstances in which a challenge may be made against the Estate include:

  • someone has grounds to believe that the testator did not have the relevant testamentary capacity at the time of signing their last Will;
  • the Will was not executed properly;
  • the deceased was unduly influenced when preparing the Will.

Alternatively, someone may wish to challenge an Estate if they believe that they have not received adequate provision under the Will pursuant to the family provision rules in the Succession Act 2006 (NSW).Will

So before you consider challenging an Estate, or if you are acting as the executor and received a challenge to the Estate, seek legal advice before proceeding any further so that you can determine whether or not your legal costs will be paid for by the Estate.

When is stamp duty payable? How much do I need to pay?

OSRTransfer of land

Stamp duty is generally payable on transfers of ownership of land or business within New South Wales (unless you are entitled to a stamp duty exemption or concession).  Stamp duty is paid to the New South Wales Office of State Revenue.

A stamp duty calculator is available on the Office of State Revenue’s website.

First Home Owners

First Home Owners who purchase or build a new home (with a total value less than $650,000) may be eligible for a $15,000 grant (aka “FHOG”) (the grant will reduce to $10,000 in January 2016).

There are also exemptions/concessions on stamp duty for first home owners under the First Home New Home Scheme:

  • for new homes valued up to $550,000 – exemption
  • for new homes valued between $550,000 and $650,000 – concession
  • for blocks of land valued up to $350,000 – exemption
  • for blocks of land valued between $350,000 and $450,000 – concession

Transfer to your Self-Managed Superannuation Fund (SMSF)

There is a reduced duty of $50 payable on transfers of title from your name to your SMSF (section 62A Duties Act 1997 (NSW)) (subject to certain rules set out in the section).

Transfer pursuant to a family law property settlement

If the ownership of a property is transferred as a result of a family law property settlement (e.g. from both spouse names to just one name), then the transfer is exempt from stamp duty.

Transfer of a deceased estate property

A transfer of a deceased’s property to the legal representative (executor) or a beneficiary, pursuant to the Will, is exempt from stamp duty.

Establishment of a trust

The establishment of a trust, such as a family discretionary trust, is subject to $500 stamp duty.

When is stamp duty payable?

Stamp duty is payable within 3 months after the duty to pay liability arises, otherwise interest will be charged.

However, if the property is being purchased “off the plan”, then stamp duty is payable:

(a) at settlement/completion; or

(b) after 12 months from the date of exchange,

whichever occurs first.