Contested Estates. 8/16 Main Road, Huonville 1/18 Elizabeth Street, Hobart ABN Phone Fax

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1 Contested Estates 8/16 Main Road, Huonville 1/18 Elizabeth Street, Hobart ABN Phone Fax

2 Table of Contents CONTESTING A WILL OR INTESTACY... 3 CAN A WILL BE CHALLENGED?... 3 WHAT TECHNICAL ATTACKS CAN BE MADE ON WILLS?... 3 WHAT ARE THE RIGHTS OF DEPENDENTS ON DEATH?... 4 DO THE RIGHTS OF DEPENDENTS APPLY IF THERE IS NO WILL?... 4 WHICH DEPENDENTS CAN CLAIM FOR EXTRA PROVISION?... 4 WHAT CAN A DIVORCED SPOUSE OF MY CHILD CLAIM?... 4 HOW ARE CLAIMS FOR EXTRA PROVISION MADE?... 5 WHAT FACTORS ARE CONSIDERED RELEVANT BY THE COURT?... 5 IS THERE A DEADLINE TO MAKE SUCH AN APPLICATION?... 6 CAN OTHER CLAIMS BE MADE AGAINST ASSETS OF THE DECEASED?... 7 HOW CAN I DEFEND MY ESTATE AGAINST ATTACK?... 7 IS THE LAW THE SAME WORLD OVER?... 7 CONCLUSION... 8 SOME ILLUSTRATIVE CASES... 9 OSWELL V JONES & ORS... 9 NICHOLLS V HALL & ORS CHATARD V BOWEN HAYES V O SHANNESSY ALLAN ROY TAPP V THE PUBLIC TRUSTEE CONTENCIN AND SANDERSON V TASMANIAN PERPETUAL... 12

3 CONTESTING A WILL OR INTESTACY When you die the assets you own at the date of your death will usually be distributed in accordance with the terms of your Will or, if you die without making a Will, under the rules set by the Government to distribute the estate. Your estate is the property and affairs left to be resolved after your death. Testament is another word for Will. A person who makes a Will is called a testator. If you die without a Will, you are said to have died intestate. The rules that apply to pass your estate in the absence if a Will are known as the rules of intestacy. The rules of intestacy divide the estate between the next of kin according to a set formula. Only if there is no next of kin at all, will the estate pass to the State Government. Can a Will be challenged? Wills can be challenged in two basic ways: 1. There is some defect in the Will as a legal document. 2. The Will breaches legislation requiring proper division of the estate amongst dependents. What technical attacks can be made on Wills? To make a valid Will there are certain minimum technical requirements. If these are not done properly the Will does not have legal effect. For instance, the Will needs to be in writing and signed by the person making the Will and two witnesses. If any of these elements is missing, the Will may be unenforceable. A person who witnesses a Will cannot receive a gift under the Will. Any gift to a person who witnesses the Will fails. To make a valid Will, a person needs to be capable of understanding the nature and effect of a Will. The person needs to understand the obligations of estate planning and the nature of the estate they have available. A Will by someone who does not have that understanding is not legally effective. The need for capacity to understand does not require a neat or legible signature. An untidy signature or untidy handwriting is not critical. Any mark properly intended as a signature is valid. The mental capacity to understand is what is vital. The Will must be made freely. If the testator has been subject to undue influence the Will may be invalid. A Will can sometimes be valid as a whole but portions of it may be subject to contest because it is ambiguous or wrongly expressed.

4 What are the rights of dependents on death? Just as we have an obligation to support our dependent spouse and children in life, these obligations can follow us in death. If your Will has not made reasonable provision for those people who are dependent on you, they may apply to the Court to have your Will amended to make adequate provision for them. The Testator s Family Maintenance Act 1912 is Tasmanian legislation that deals with maintenance of dependents after death if no proper provision has been made. Do the rights of dependents apply if there is no Will? The obligation to provide for the maintenance of dependents applies even if there is no Will. The rules of intestacy apply to divide the estate where there is no Will, a dependent can claim that those rules have left them without adequate provision and may claim for extra provision. Which dependents can claim for extra provision? The Act specifies a list of persons who may make application as a dependent. Someone could be dependent on the deceased but outside the listed class of dependents and therefore unable to claim. The types of dependents who can claim are: the spouse of the deceased whether formally married or by virtue of the Relationships Act the children of the deceased the parents of the deceased if the deceased dies without leaving a surviving spouse or children a divorced spouse of the deceased if at the date of the death they were receiving or entitled to receive maintenance from the deceased. What can a divorced spouse of my child claim? Divorced spouses of your children cannot claim directly against the estate under the Testator s Family Maintenance Act. They are not listed dependents. Unless the divorced spouse of your child has some interest in the property already, some other involvement in your affairs or some benefit under the Will, they won t have the right to claim directly against the estate. The divorced spouse might be able to claim against the spouse as part of a general family law claim if the spouse has received the benefit from the estate already. Inheritances are given special treatment by the Family Court so that they are not unfairly made available to a divorcing spouse. The Court understands the justice of taking note of when the wealth comes from one side of the family. An expected inheritance not yet received by a spouse may be a relevant factor in determining what is a proper Family Court property settlement. A husband who can confidently expect to become a millionaire by inheritance will be treated differently to one who can look forward only to more poverty. The Family Court would not have the power to make an order relating to a benefit that a spouse was not yet entitled.

5 A divorced spouse may not claim against an inheritance received by the other spouse after there has been a proper Family Court property settlement. Your Will could withhold the absolute gift from your child to limit its availability to the spouse. The benefit could be made available to the child under a trust arrangement. This would require careful and special work and special advice. Consider if this is an issue worth the time, trouble and money of the extra complications. How are claims for extra provision made? Claims by dependents to contest Wills are usually resolved by a court case or negotiations prior to a court case. Application under the Act is by way of summons to the Supreme Court of Tasmania. The person making the claim must establish that proper provision has not been made for them. Usually all parties will need to be represented by a lawyer. It is possible that different members of the family could have different interests and often each person will need to be represented by a separate firm of solicitors. What factors are considered relevant by the Court? The court does pay regard to the right of the testator to make his own decisions and the freedom of the testator to dispose of the estate as they think fit. The court will respect that freedom unless there has been a failure to make adequate provision for the maintenance and support of those entitled to that maintenance and support. It is a matter for the court to be satisfied in the circumstances of each case whether there has been inadequate provision and what provision is appropriate. The court is not entitled to re-write the Will of the deceased based on its own ideas of what is fair or just but must look at all the facts to determine if the deceased has failed in his moral duty. The review of the moral duty of the deceased is not an assessment of the character and conduct of each claimant on the Will except to the extent that conduct touches on the relationship to the deceased. The review does not test the merits of each claiming child as a person, but may review each claiming person as the child of the parent. The review is to be based on current community standards not those of the past, even those as recorded in relevant court decisions. A duty does not arise from the mere existence of the relationship. A parent is not necessarily bound to treat all his children equally.

6 Healthy adults able to support themselves without special needs may still claim provision in light of all of the relevant circumstances, including the size of the estate and the strength of the competing claims. Although grandchildren are not entitled to claim, the fact that an applicant has a dependent child is relevant. If the Will has a gift for a grandchild, the indirect benefit to an applicant who is the parent of the grandchild can be also taken into account. The review may have regard to whether some buffer against the vagaries of life should have been provided. This is particularly so where an applicant has responsibility for a young family. The review has similarities to the process of division of property between spouses on separation. It cannot be reduced to certain or exact calculation but involves broad discretion and judgment of many factors on general principles. Some of the factors to be considered are: The age of an applicant child. A child who is mature, able-bodied and capable of supporting himself is less likely to be able to establish a need for maintenance; The needs of the applicant. An applicant who has few financial resources and considerable needs is more likely to be successful than an applicant with considerable resources and few financial needs; Financial dependency of the applicant on the deceased, in the form of loan guarantees, business advice and support; The amount of proper maintenance, decided with regard to the size of the estate and the needs of the applicant. The standard is one of justice and not one of generosity; The size of the estate and competing interests in the estate; Special circumstances - contributions made by the applicant to the deceased s estate by way of labour or capital or if the applicant has deprived himself of any opportunity of alternative employment due to his dedication to the affairs of the deceased. This situation may occur in relation to the family farm or other family business: The mental or physical health of the applicant; Provision made to the applicant by the deceased prior to death; The conduct of the applicant may be such to disentitle him to support; If the deceased has during his life created an expectation of inheritance in the mind of the applicant upon which the applicant has acted but has not been fulfilled. Is there a deadline to make such an application? Generally court proceeding for such claims for extra provision made must be started within three months after the date of grant of probate of the Will of the deceased person, or letters of administration of the estate of the deceased person.

7 That deadline can be extended by the Court up until the final distribution of the estate of the deceased person has taken place. Distribution of any part of the estate made before the application for an extension is not subject to being disturbed. Can other claims be made against assets of the deceased? Just as people may dispute ownership while someone is alive, disputes over Wills sometimes focus on claims of disputed ownership to assets of the deceased. Partners for instance, may have confused arrangements as to what will happen on death. Part ownership may be recorded by verbal agreement or created by someone other than the owner making contributions to the property. A de-facto wife for instance may have spent $20,000 on renovations to the property and claim accordingly to be a part owner, even though the property was purchased by the husband on his own. How can I defend my estate against attack? Technically, attacks are best avoided by having your Will and estate plan properly prepared by a capable solicitor who is experienced in the area. Do it your self Wills are dangerous. There are a number of ways of defending your estate against claims that inadequate provision has been made for dependents. Carefully record the circumstances that led you to make the provisions in your Will. Many court cases contesting the provision made for dependents are about the facts. By marshalling your records of the facts you will support the provisions in your Will. The testator s family maintenance provisions only apply to the estate of the deceased that pass through the Will. It is possible to set up ownership of your assets so that they pass automatically on death as you wish rather than through the Will. This may mean that assets are unavailable to be claimed on the basis of an alleged dependency. The assets may be set up under co-ownership arrangements or under a deed of trust to exclude them from the deceased person s estate on death. The structuring of such arrangements involves tax, pension and control issues and needs great care. Take care in making records of ownership generally, so that there is no doubt as to who owns what. Take care to manage the expectations people have to benefit from your estate. If people have a wrong impression that they will benefit, they are more likely to dispute the provisions you have made. Is the Law the same world over? The law on the transfer of property on death is state based. Assets in other jurisdictions may have different rules There are minor differences between the states of Australia. The law is similar in most countries based on English law but very different in countries based on Roman law.

8 Conclusion The costs of dealing with claims are often borne by the estate. They can be very expensive. Generally speaking, there will be no orders as to costs of an unsuccessful application. An unsuccessful applicant may need to pay costs where the claim was frivolous or vexatious or made with no reasonable prospects of success or where the applicant has been guilty of some improper conduct in the course of proceedings. To reduce the risk of your Will being contested by a dependent for whom you have not made adequate provision, see your solicitor before you prepare your Will. Make sure that you discuss with your solicitor any situation that you think may expose your estate to a claim.

9 SOME ILLUSTRATIVE CASES Most of these cases involve big estates. Usually the modest estate disputes settle before court. Parties often wish to maintain privacy and to avoid the expense of court action. Oswell v Jones & Ors The deceased died aged 83 and was survived by his de-facto widow of fifteen years and three adult children of his first marriage; a daughter aged 51, and two sons aged 53 and 52. The estate was worth 1.5 million dollars. The Will was made 22 days before death. The Will gave the sons $100,000 each, the daughter the interest on $100,000 for life, a fund of $800,000 for the defacto widow s son and the rest to the de-facto widow. The daughter was severely physically disabled, having been born with cerebral palsy and suffering other significant health problems. She was almost totally physically incapacitated and, wholly dependant on others for care. She was in receipt of a Disability Support Pension and lived in State Government housing. She had enjoyed a very close relationship with her father and wanted more from the estate. The de-facto wife and grandson did not have any financial need. The decision: In a large estate, a gift of the income on $100,000 to a child in the circumstances of the applicant was clearly inadequate provision. The competing claims of the widow and the grandson were of significant importance. Neither were financially needy and the grandson was outside of the class of persons for whom the testator had an obligation to provide. The testator had discharged his moral obligations to his widow (who had no real financial needs) by making the significant gifts to her favoured grandson. Pension entitlements should be taken into account. Sometimes a benefit should be structured so that its availability is restricted. The daughter was awarded the benefit of about $1,000,000 for her life and on her death that benefit would pass as per the Will.

10 Nicholls v Hall & Ors The estate was worth 1.3 million dollars. One son was 47 years of age, the eldest of four children and was conceived during a brief relationship. He did not meet the deceased until the son was 36 years old when they had 2 face to face meetings. He subsequently spoke to his father on the phone 11 times over 8 years and had no other contact. The son had a home worth $350,000 with a mortgage of $280,000 and a moderate income. The complained that the Will was unfair and said that he would contest it because he was his son. The Will gave the estate equally to the other 3 children. The other 3 children were not wealthy, but had some assets and means of support. The decision: The son was awarded one seventh of the estate (half the size of the share of the other children). When determining claims under the Act, concepts of moral duty and moral obligation are relevant, but not determinative. Rather than look at moral duty, the Court should have regard to the size and nature of the estate, and the relationship and need of competing claimants. That a relationship that consists of nothing more than bare paternity does not necessarily preclude a claim. The facts that the son made an effort to find his father and establish some relationship with him, that there was some need, and that the estate was large enough to cope with the competing claims were accepted as relevant factors. Chatard v Bowen The deceased left most of his estate to charity. The estate was worth 7 million dollars. The widower was a model husband and had been married to the deceased for forty years. Under the Will he received one million dollars and a life interest in a two and a half million dollar house. He had superannuation of half a million dollars, some other assets but a low-moderate income and no other home. He was 63 years old and wanted more from the estate. The decision: The model husband got to keep the two and a half million dollar house absolutely.

11 The model husband was entitled to security and flexibility of owning the two and a half million dollar house absolutely. Hayes v O Shannessy The estate was worth 2 million dollars. The children had received half a million dollars in super in addition to their share in the estate. The de-facto partner received $350,000 under the Will, a BMW and bank account by survivorship and a gift of $530,000 shortly before death. The relationship with the deceased had been a short, second relationship and the beneficiaries of the Will were the deceased s children from his first relationship. The de-facto was relatively financially comfortable, had re-located to live with the deceased and was receiving rental income from her previous home. She wanted more from the estate. The decision: No further provision was made for the partner, not a merry widow! The ability to continue the lifestyle that she had lived with the deceased was not considered a relevant factor given the short duration of the relationship. Allan Roy Tapp V The Public Trustee This involved a small estate, a house and car in Claremont The Will gave the husband a right to reside over the half share of the house owned by his wife and then that half share went to her children by another relationship. It was a 24 year relationship, with some unhappiness. The Husband had made a far greater capital contribution to the house and wanted more from the estate. The decision: The husband got three quarters of the wife s interest in the house as well as the right to reside.

12 Contencin and Sanderson V Tasmanian Perpetual The mother of two adult children left them nothing and instead left almost all of the $640,000 estate to a two year old grandchild. The son was the father of the infant grandson who got the estate, had a steady job earning about $100,000 per year, a partner earning about $30,000 per year and assets that were roughly equal to his liabilities, about $350,000. He wanted a share of the estate. The daughter had a son who got nothing under the Will, worked two days a week earning about $15,000 per year, received a small Centrelink allowance and a partner earning about $36,000 per year. The net worth of her and her husband was about $150,000. She wanted a share of the estate. The children had only limited recent contact with the mother. The parents separation had split the mother from the family. The decision: The son was granted $120,000 The daughter was granted $240,000.