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

Notional estates

Laws in each state of Australia allow a family member or certain other dependants to challenge a deceased's will.  Such a claim is generally known as ether a family provision application or a testator's family maintenance (TFM) claim.  Whether a TFM claim is successful depends upon a range of matters – regardless of the outcome however, TFMs can be costly and emotionally debilitating for all parties involved.

Historically in all Australian states, a TFM claim could only relate to property that was owned by the deceased on the date of their death, putting certain property – such as trust assets or those owned by a spouse - outside the reach of a TFM claim.

In 2005, NSW introduced 'notional estate' provisions, which essentially enable a court to treat certain property that is not legally part of a deceased estate, as being deemed to be included and thereby open to attack by a TFM.  These provisions apply to NSW domiciled persons and any property located within NSW. 

For property to be part of a notional estate, ‘a relevant property transaction’ must have occurred, which in broad terms requires a positive act or omission that results in property being owned by someone other than the deceased. The offending transaction must have taken place within certain specified times before the date of death of the will maker.

All Australian states have been considering adopting similar notional estate provisions to NSW. The only other state to announce their likely approach has been Victoria.  In October 2013, the Victorian Law Reform Commission (VLRC) released its final report on Victoria's succession laws, and recommended that the NSW notional estate provisions should not be adopted in Victoria.

In September 2019 the equivalent body in Tasmania also rejected implementation of a notional estate regime in that state, unless and until there are uniform national rules introduced

This said, even otherwise where a state’s succession laws do not include notional estate provisions, there may still be means to attack assets not otherwise forming part of a deceased’s estate, including because of poor planning or due to sham, contrived or artificial transactions.

Until next week.

Image credit: thinkpanama cc