Family Provision Applications and Notional Estates

As mentioned in a number of recent posts, one of the ways in which a disgruntled beneficiary can challenge a person's will is by making an application to the court for further and better provision from the estate.

Historically, in all Australian jurisdictions, courts have only been able to make further provision for a beneficiary out of the assets that directly form part of the deceased’s estate.

In New South Wales however, special rules have been implemented that allow the courts to make orders in relation to assets that do not in fact form part of a deceased’s personal estate.

In many respects, the rules are analogous to the bankruptcy legislation in that will makers who take steps to remove assets from their personal name leave those assets exposed to be 'clawed back' into the estate for the purposes of family provision applications made within 3 years of the date of their death.

While the rules apply to anyone living in New South Wales at the date of death, they also potentially apply where the will maker has any assets connected with New South Wales (including shares in companies whose registered office is located there). While there have to date been very few cases that have applied the notional estate provisions, we are seeing an increasing number of clients implementing specific strategies to reduce the risk of the rules applying to their estate plan.

Challenging a Will under a Family Provision Application

A recent post listed the five main ways in which a will can be challenged – see - Ways to contest a will

One of the aspects listed was the ability to challenge a will due to the will maker’s failure to make adequate provision for certain beneficiaries.

The laws underpinning family provision applications are often referred to as an example of the courts applying 'The Vibe', as popularised in the classic Australian movie 'The Castle' -see - The Castle (1997 Australian film) and It's the constitution. It's Mabo. It's justice. It's law. It's the vibe....

Certainly family provision applications are by their very nature extremely subjective and therefore often turn almost entirely on the court's interpretation of the factual matrix.

This said, there are a number of key components to a family provision application, including:

1. Before a person can make an application for further provision, they must be within a defined category set out under the legislation:
1. Generally, children (including adult children), current spouses or anyone that is financially dependent on the will maker are able to make an application for further provision;
2. There are other potential categories other than those listed above including in certain situations, stepchildren and de facto spouses (even where the will maker is also lawfully married);
2. The test then applied by a court is to determine whether a person within the defined category has received adequate provision from the will maker’s estate for their proper maintenance and support, as determined by the court in its discretion;
3. If a court determines that adequate support was not provided, it then can make such further provision as it again determines in its discretion; and
4. One of the key aspects of family provision applications is that generally it is only the assets that form part of the will maker’s personal wealth that can be reallocated by a court.

Challenging a Will due to Existence of Mutual Wills

A recent post listed the five main ways in which a will can be challenged – see 'Ways to contest a will'

One of the aspects listed was that wills are always subject to any contractual arrangements that a will maker may have entered into before their death.

One particular approach that is used from time to time is the concept of creating 'mutual wills'.

Essentially, a mutual will is a contract whereby two people agree to make their wills in a certain way and to then not change the document without the express consent of the other party to the agreement.

Traditionally, mutual wills are made between spouses, often where one or both of the spouses are in their second or subsequent life relationship. Alternatively, mutual wills can be implemented where there are particular assets in the estate that both spouses want to ensure are dealt with in a particular way, regardless of when they may each die.

The creation of a mutual will, if crafted correctly, can allow a party who would otherwise have received a benefit, but for a person entering into a new will in breach of the mutual will, to sue on the basis of a breach of contract.

While in theory, litigation for the breach of contract should be easier to succeed in, there have been a number of cases that have seen attempted mutual will arrangements fail.

Furthermore, the significant inflexibility created by mutual wills mean that most specialist advisers caution against their use.

Challenging a Will due to a Later Inconsistent Document

A recent post listed the five main ways in which a will can be challenged – see Ways to contest a will

One of the aspects listed was the ability to challenge a will due to a later inconsistent document.

As there is no central registry for wills (unlike, for example, the ASIC which records numerous key aspects in relation to every company registered in Australia), often confusion can arise as to what is in fact a person’s last will.

Generally, any potential confusion is resolved as part of the probate process. In other words, before a court grants probate of a testamentary document, it must be satisfied that the document is the last statement of the will maker’s intentions.

There can be scenarios however where, even after probate has been granted, evidence is discovered that shows either a later will was made, or alternatively, material was brought into existence that overrides certain aspects of what was otherwise the person’s last will.

Particularly as technology improves, the complexity surrounding what is in fact a person’s last testamentary document is likely to increase and reinforce the approach adopted by virtually every specialist lawyer in this area of a person only ever signing one copy of their intended will, and generally ensuring that the physical copy of any previous will is then destroyed.

Challenging a Will due to Undue Influence

A recent post listed the five main ways in which a will can be challenged – see - http://blog.viewlegal.com.au/2016/01/ways-to-contest-will.html.

One of the aspects listed was the ability to challenge a will due to the will maker not making the document of their own free desire.

While there will always be a myriad of influences on someone when they decide to make their will, a will is only invalid if any such influence is determined to be 'undue'.

Undue influence is said to exist when there is something so strong that the will maker is under the belief that while the document is not what they want, they feel compelled to sign it anyway.

Challenging a will due to the lack of testamentary capacity

A recent post listed the five main ways in which a will can be challenged http://blog.viewlegal.com.au/2016/01/ways-to-contest-will.html.

One of the aspects listed was the ability to challenge a will due to the will maker’s lack of testamentary capacity when signing the document.

As set out in previous posts http://blog.viewlegal.com.au/2013/12/testamentary-capacity-and-elawyer.html, there are a number of critical issues that must be addressed to ensure that a will maker does possess sufficient testamentary capacity to avoid a situation where their will is held to be invalid.

One technique that is being used increasingly in situations where there is some potential concern about testamentary capacity is ensuring that detailed medical evidence is created at the time of drafting and ultimately signing a will. This evidence can include:

1. having a will maker’s regular doctor provide an opinion as to their testamentary capacity on the date of signing the will; 
2. having a specialist medical practitioner assess a will maker, solely with reference to the criteria for testamentary capacity; and 
3. retaining the medical evidence together with a detailed file note by the lawyer who prepared the will.