Family Provision Claims
The most common type of challenge against a Will is known as a ‘family provision’ claim. These claims are also called a ‘testator’s family maintenance claim’ or a ‘Part IV claim’. This is where a person believes that they should have been provided for in a Will, and they make a claim for further provision from the estate.
Strategies to minmise the risk of successful claim
There are a number of strategies that can be used to help prevent or reduce a successful family provision claim against your Will. These include:
- reducing the amount of assets that form part of your estate on your death,
- providing a written statement explaining why you have made less or no provision for the particular person, and
- providing the potential claimant with a gift in your Will.
Reducing the assets that form part of your estate on your death
A family provision claim (in Victoria) can only be made against assets in your estate on your death. If you take steps to reduce the amount of assets that will form part of your estate, then the risk of a successful family provision claim may be reduced or eliminated. Some possible strategies include:
- Moving assets from your sole name into joint names with your intended beneficiary: Assets held jointly with another person will bypass your estate on your death and will automatically become the sole property of the surviving owner.
- Transferring assets to your intended beneficiary or beneficiaries outright prior to your death: As these assets will not be owned by you on your death, they will not form part of your estate.
- Making a binding death benefit nomination (BDBN) for assets held in your superannuation fund: On your death, the assets in the superannuation fund will be paid directly to your intended beneficiaries in accordance with the BDBN. Provided the BDBN is valid and not made to your estate, the distribution cannot be challenged. If your superannuation fund is an SMSF, it is also important to put in place a binding plan to effectively pass control of the SMSF.
- Moving assets into a family trust: On your death, the assets in the trust will not form part of your estate. The assets will instead be distributed at the discretion of the trustee and in accordance with the rules of the trust. If you set up a family trust, it is also important to put in place a binding plan to effectively pass control of the trust.
Restructuring your asset portfolio
It is essential that you receive appropriate legal and financial advice before taking any steps to restructure or transfer your assets. This is because an asset restructure or transfer may trigger any or all of the following:
- A stamp duty liability (if the restructure/transfer involves real estate),
- A capital gains tax liability, or the loss of a capital gains tax exemption for an asset,
- An assessment by Centrelink to reduce your pension, if you are a pensioner or intend to become a pensioner in the near future, and/or
- The loss of control of your asset or assets (if transferred to another person).
Transfers of assets to other persons before you die can be challenged if it is found that the transfer was procured by undue influence or unconscionable conduct. An experienced solicitor can advise you on how to limit or prevent such achallenge.
Taking steps to divest your estate of assets may have no effect if your assets are in a jurisdiction (such as New South Wales) which allows assets to be ‘clawed back ’into your estate after your death.
Providing a statement for your reasons
If a family provision claim is made, the Court must take into account any reasons given by the Will Maker to explain why they have made less or no provision for the claimant. It is therefore good practice to draft and sign a separate statement, preferably in the form of a statutory declaration or affidavit, which explains your reasons for making less provision for a potential claimant. Such a statement will not necessarily prevent a successful claim; however, it will be taken into account by the Court and may result in the claim being reduced or denied. To have the best legal effect, the statement should address the relevant criteria under the legislation.
Making a gift in your Will to reduce the likelihood of a family provision claim
It is a common misconception that if you leave a gift in your Will to a potential claimant that they will be prevented from making a family provision claim. This is not correct. A Court may increase a gift in a Will to a claimant if the gift is deemed to be inadequate for their proper maintenance and support.
Nevertheless, making a gift to a potential claimant in your Will may reduce the likelihood of a successful challenge if the gift is sufficient.
Other challenges against your Will
Other common challenges against a Will include claims that the Will Maker:
- lacked the mental capacity to make and understand their Will, or
- lacked knowledge and approval of the contents of their Will, or
- was unduly influenced by a beneficiary to make their Will.
An experienced solicitor will take steps to limit such a challenge when the Will Maker provides their instructions and signs their Will. Such steps may include:
- Arranging a doctor’s assessment and report to confirm the Will Maker’s mental capacity (particularly if the Will Maker is elderly),
- Ensuring that beneficiaries are not present when the Will Maker provides instructions to the solicitor and signs their Will, and
- Arranging a professional interpreter to be present when instructions are provided, if the Will Maker is not proficient in English.
How Sharrock Pitman Legal can assist?
A competent solicitor should be able to make suggestions based on your individual circumstances as to how you can minimise the likelihood of a challenge. Contact our Accredited Specialist Wills & Estates team on 1300 205 506 or fill in the contact form below.
The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.
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Binay Prasad is a Senior Associate of Sharrock Pitman Legal and an Accredited Specialist in Wills and Estates law.
Binay has over 10 years of experience in the field of wills and estates and has a particular interest in complex estates involving business, family trusts, and SMSFs. Binay also has experience in family law, which complements his wills and estates practice. For further information, contact Binay on his direct line (03) 8561 3329.