Tuesday, April 12, 2022

Challenging a deceased estate - do not assume that love spreads** equally

One mantra in estate planning is the concept that beneficiaries should be treated fairly - however this does not automatically mean equally.

The decision in Firth v Reeves [2019] VSC 357 provides a stark example in this regard.

Briefly the factual matrix involved the following:
  1. A mother with 2 daughters gifted one third of her estate to one daughter and two thirds to the other;
  2. The daughter who received one third challenged the estate seeking a one half share;
  3. At the date of the mother's death the estate was worth around $5M, by the date of the hearing the estate was valued at over $8M (meaning that the one third share was in dollar terms worth more by the hearing than a one half share at the date of death).
In rejecting the daughter's challenge and leaving her entitlement at one third the court confirmed:
  1. Taking into consideration all relevant factors and surrounding circumstances, including the size and nature of the estate and the contingencies an estate of that size may warrant being provided for, there was nothing to suggest that the deceased failed to make adequate provision for the challenging daughter's proper maintenance and support.
  2. While the challenging daughter may have had an understandable sense of grievance or hurt as a result of her mother’s unequal disposition of the estate, she did not establish any need or other consideration that would warrant further provision, even where (as here) the estate was relatively large.
  3. On the contrary, it appeared that the existing one third provision would be more than sufficient to meet all needs that the challenging daughter identified.
  4. A challenge against an estate based solely on breach of moral duty, without demonstrating need, will fail.
  5. Furthermore, a willmaker is not obliged to treat their children equally, nor is the provision given to one child a measure of how another child who seeks provision should be treated.
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** for the trainspotters, the title today is riffed from the Stone Roses song 'Love Spreads'.

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