I read with interest a recent article in the Australian Newspaper in relation to a Victorian Supreme Court decision where a stepdaughter was awarded a large payment by the Court for a claim made against her stepfather’s estate.
The claim was made against the estate of the late Harold Ward. Mr Ward died in 2007 and left his shares in the family company Ward McKenzie to his three natural children. These shares were valued at approximately $30 million.
The natural children argued that their father never wanted anyone other than a blood relative to own shares in the company. He had indicated the success of the company was put down to wholesome family values.
The claimant was the daughter from the deceased’s second wife. She lived with him for four years between the ages of 14 and 18 when she became independent.
The deceased, Mr Ward did not make provision for his stepchild for the reasons outlined above, and also that the stepchild was to receive provision from her own mother’s Will.
The natural children argued it would be difficult to provide for the stepchild as the only asset in the estate were shares and there was no cash. The shares will be difficult to sell because it was the deceased’s wish that they remain in the Ward Family.
Justice Hargrave of the Victorian Supreme Court ordered that the Ward children pay an amount of $750,000.00 to the stepsister to be held in trust, plus $50,000.00 a year living expenses until her mother dies. The lump sum was to be held in trust by a trustee if who could make sound financial decisions.
This case highlights the importance of identifying any potential claims when drafting and preparing your estate plan. In this case the Judge did not interfere with the deceased’s wishes of having ownership of the company outside the family. Instead the lump sum payment was made.
Assessing these types of claims a Court will take into consideration the circumstances of the party making a claim, and at this instance, the Judge thought it appropriate to make the award, despite the wishes of the deceased.
Please do not hesitate to contact me if you have any questions about this very important topic.
A recent decision in the Supreme Court of South Australia handed down on the 20th July 2011, ”In the Estate of Brummitt (deceased)”, highlighted to me the importance of properly drafting your Will if you wish to include reasons as to why you have left a person out of your Will.
In the case of the Estate of Brummit, an Application was made in the Supreme Court of South Australia to remove words from a Will of the deceased. In the Will:
a) The deceased directed that his former wife shall not take any benefit from his estate;
b) He declared that he has “no further obligation to her in any circumstances”;
c) He declared that he had not provided for his former wife’s child as he believed that his former wife “had extra marital affairs” and the child was not his child;
d) Both child and his former wife refused to conduct a paternity DNA test.
For obvious reasons, the former wife did not want these particular words to be included in the Will that was to receive the final approval from the Court as the deceased’s last Will.
The judge refused to remove the reference to “extra marital affairs” and admitted the Will in its signed form. A summary of the legal principals relating to this issue are as follows:
- In the first instance the Courts will issue Probate in the words of the Will itself;
- A person making a Will has the right to provide reasons as to why (or why not) the will maker is disposing (or not disposing) of their property;
- The will maker cannot use the will as a vehicle for defamation, scandal or offence, where those words have no effect upon the Will, or the disposition of property;
- Generally, the two criteria that need to be met before the Court can exercise its power to omit the words are:
a) The words cannot be interpreted to have the effect of disposing of assets within the estate; and
b) The words must be capable of being characterised as scandalous, offensive, defamatory or blasphemous; - It is a discretionary power of the Court to determine whether to omit words, on a case by case basis.
- The power of the Court must be exercised with great care and so generally, in so far as words provide or support a reason for the will maker’s decision, they ought not to be omitted from the Will. It follows that where the words assist a Court interpreting the Will, the Court may decline to omit them.
In this case, the application failed because removing the words “extra marital affairs” would have rendered the rest of that particular clause incomprehensible. The Court held “in the circumstances of this case this level of interference with a testator’s testamentary affairs would be disproportionate the offensive or scandalous character, if any, of the words used”.
How does this affect your Will?
This case highlights the importance of getting properly qualified advice if you wish to leave people out of your Will. It is very important to express the reasons why people are left out of your Will. My recommendation is to leave a detailed statutory declaration as a separate document to your Will. The benefits of this are:
a) It is a separate document to your Will, meaning that your Will may not meet the same challenges that were faced in this particular case; and
b) It is a sworn document that can be relied upon as evidence (if prepared properly) in the event that there is a dispute over an estate, and the will maker’s reasons.
If you have any queries in relation to this particular matter please do not hesitate to contact me.
I read the article in the Courier Mail on 19 March 2011, about the dispute erupting over the late Ken Talbot’s estate, with great interest. Mr Talbot died in June 2010, has an estate estimated to be greater than $1 billion.
Mr Talbot was survived by 4 children – 2 from his first marriage, and 2 younger children from his second marriage. The 2 older children were left 24% each and the 2 younger children 17% each. The grandfather of the 2 younger children has now lodged a claim against the Estate of Mr Talbot seeking further provision for the 2 younger children, amongst other things.
This will prove to be a very interesting case if it goes all the way to a hearing, especially given the amounts at stake.
There has recently been some inconsistency in decisions made by the Supreme Court in Queensland about whether adequate provision has in fact been made for beneficiaries. This highlights the need to give very careful consideration as to how your estate is to be distributed upon your death, and to anticipate whether there is any risk of a potential claim being made.
Some of the matters that should be taken into account when considering your will include:
- Who in fact can make a claim against your estate – currently this group includes the deceased spouse (including de facto), children (including step children) and financial dependants;
- Whether some of these people have been left out of the will, or received a lower proportion than others. It is very important that detailed reasons are provided so that a Court can give consideration to the Will maker’s intentions when they made the will. A statutory declaration outlining this information can be a useful tool;
- Exactly what assets form part of the estate. In Queensland, only assets owned in the deceased’s name will form part of the estate, and therefore only these assets will be in dispute. Assets owned in trusts and companies are not estate assets. The situation is different in other states where these assets can form part of the estate, referred to as a “notional estate”;
- Whether some strategies can be implemented now to reduce the risk of a claim being made, such as:
- Transferring assets to beneficiaries pre-death (note however there may be tax and stamp duty considerations here);
- Making a binding death nomination in Superannuation policies and life insurance policies;
- Taking out an insurance policy to provide further funding so that all beneficiaries can benefit;
- Giving detailed reasons as to why some beneficiaries have missed out;
- Structuring assets so that they are owned in entities that do not form part of the estate (such as companies and trusts. Be aware however that often shares in companies are owned in the persons name and these will form part of the estate;
- Entering into binding agreements now for the transfer of business assets and other assets, upon death.
These are just some of the issues that need to be addressed when considering your estate plan. It is important to make sure your interests, and that of your beneficiaries are protected. It will be interesting to see the outcome of the Talbot matter, and how the Courts interpret the Will and the claims that have been made.
