Tuesday, March 3, 2015

How to avoid a $25 million challenge against your estate

Last week’s post looked at the way in which the notional estate rules work in New South Wales.  Some comments were also made about the fact that no other Australian estate has adopted, to this point, similar provisions.

During the week, the Wright estate case has received a significant amount of media attention.  The decision itself is Mead v Lemon [2015] WASC 71, and as usual, a link to the decision is as follows -  http://decisions.justice.wa.gov.au/supreme/supdcsn.nsf/PDFJudgments-WebVw/2015WASC0071/%24FILE/2015WASC0071.pdf

Much of the decision has focused on the fact that the claimant, in receiving an award of $25 million has, by some $22 million, exceeded the previous largest successful application under the family provision rules in Australia.

In the context of the notional estate provisions, perhaps one of the most interesting aspects of the judgment however relates to the comments about the fact that the duty imposed under the law to properly provide for certain people is (in all states other than New South Wales) able to be avoided.

In particular, the court held –
  1. The deceased must have been aware of that duty - he was well advised by a competent solicitor. But it is a duty he could have avoided.

  2. The deceased was aware some six months before his death he was afflicted by terminal cancer. At that stage he was free to distribute his estate in any way he wished.

  3. That would have meant on his death neither the plaintiff nor anyone else could have maintained a claim - there would have been nothing to claim against.

  4. But of course if the deceased had taken that course he would have been liable for millions of dollars in, effectively, gift duty.

  5. The price the deceased paid for passing his assets tax free to his nominated beneficiaries was acceptance of the statutory duty arising to the plaintiff.
The bluntness of the above comments are a common theme throughout the judgment, and one of the quotes that has been circulated to me from multiple sources in this regard is as follows –

‘The plaintiff did say she had a boyfriend whom she hoped to marry within the next two years. She anticipated having four children. Of course it is possible after one child she might reconsider; most sensible people do.’

Until next week.

Image credit: thinkpanama cc