In theory, upon your death you can leave your estate to anyone. However, with this power comes responsibility. The law may intervene if you fail to adequately provide for a person to whom you owe a moral and financial duty. This intervention can come in the form of a challenge to your Will under Part IV of the Administration and Probate Act 1958 (Vic) (often called a "Part IV" or "family provision" claim).
Spouses and children are at one end of the spectrum of potential challengers to a Will. It is uncontroversial that they should not be put out on the street after your death. When we talk about protecting an estate from challenge, it is not these people that we are talking about. At the other end of the challenge spectrum are estranged adult children, more distant relatives and that very nice neighbour who sometimes helps with your lawn. These are the people that you may legitimately wish to protect your estate from a legal challenge.
Who can actually challenge a Will?
The good news is that recent changes to the law have effectively halted the more obscure and opportunistic challenges. The nice neighbour is definitely out of the picture, as are most of the extended relatives.
Section 90 of the Act now contains a prescriptive list of who is eligible to challenge a Will. This list includes spouses, domestic partners, children, step-children, and other persons who are actually dependant on the deceased.
By far the most common challenger is a disappointed child or step-child.
Strategies to protect an estate
Here are some common strategies to protect your estate from challenges and ensure that it reaches the hands of those who need it most:
Your 'estate' only comprises those assets which are actually yours. Accordingly, assets which are held in a trust generally do not form part of your estate and are therefore not available to any estate challenges.
Control of the Trust and Trustee are therefore very important and the Trust Deed must be reviewed to understand who will receive practical control of the trust upon death.
Superannuation benefits are not treated as part of your estate, as they are, effectively, a type of trust (unless the superannuation fund pays benefits directly to your estate). Rather, the money in your superannuation fund is paid directly from the fund to a nominated beneficiary by making a Death Benefit Nomination.
When making a Death Benefit Nomination in your superannuation fund, it is important to note the distinction between Binding Death Benefit Nominations and Non-Binding Death Benefit Nominations. Under a Binding Death Benefit Nomination the trustee of the superannuation fund is bound to follow the nomination. Conversely, the trustee of a superannuation fund with a Non-Binding Death Benefit Nomination retains discretion as to when the death benefits should be paid. For obvious reasons, it would be prudent to ensure your Death Benefit Nomination is a binding one so as to ensure your wishes are carried out.
In the case of Self-Managed Superannuation Funds (SMSF), there is no standard form to complete. Accordingly, you would need to draft a Binding Death Benefit Nomination to suit your particular needs.
Assets which are owned jointly will, generally speaking, automatically pass to the other joint owner on death and will not form part of your estate. For example, bank accounts jointly held in the names of both spouses will automatically pass to the remaining account holder upon the death of the other account holder.
For property in particular, there are different types of joint ownership and so this may not always be the case.
Properly drawn Will
It is often inevitable that at least part of your wealth will be in your own name and therefore constitute your estate. Even though the potential for challenge exists for these assets, a properly drawn Will still goes a long way to defending a potential claim.
Often such a Will would be supported by a formal statement or statutory declaration setting out the reasons for omitting a person. Section 91A of the Administration and Probate Act 1958 specifically directs the Court to consider such reasons when determining a claim.
Omitting someone from a Will or reducing their provision is a serious decision. It should not be made on impulse because of a temporary falling out. Six months of bad blood should not override a positive, 50 year relationship.
Carefully considering certain obligations to someone, especially to dependants, will ensure that there are few grounds to challenge your estate.
How can Sharrock Pitman Legal help?
Our team have extensive experience in estate planning. If you need help or have any questions, please do not hesitate to get in touch with our accredited specialist Wills and Estates team on 1300 205 506.
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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For further information contact
Mitchell is the Managing Principal of our law practice.
He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate. For further information, contact Mitchell on his direct line (03) 8561 3318.