How to protect your estate from family provision claims

Brooke Murphy
Butlers Business Lawyers
 
In the past decade, disputes about wills and estates increased by 80%. The majority of these dispute arise from wills involving blended or estranged families. Despite the terms of a will, individuals can make family provision claims if they believe that they have been unfairly left out of a will or unfairly provided for in a will. A family provision claim can be made by an individual who is an eligible person under state legislation. For example, in NSW, under s57 of the Succession Act 2006 (NSW) an ‘eligible person’ is:
· A wife or husband of the deceased;
· A de facto partner of the deceased;
· A former wife or husband of the deceased;
· A child of the deceased (including adopted and step-children);
· A dependant (wholly or partly) of the deceased;
· A grandchild of the deceased;
· A person who was a member of the deceased’s household at any time; and
· A person with whom the deceased was living in a close personal relationship as at the date of death.
 
Step-children can also make family provision claims if criteria are met. For example, in NSW, a step child can qualify as an ‘eligible person’ if they can prove that they were a member of the household of the deceased, were wholly or partly dependent on them, and that there are other factors which warrant the making of the application.
 
If an individual makes a family provision claim, the court will consider a range of factors under legislation to determine whether the eligible person was adequately provided for under the will. For example, in NSW, these factors include: the relationship between the parties, provision made to the applicant, conduct of the applicant, and the financial resources of the applicant.
 
Estate planning risks for blended families
Often a husband and a wife will create wills which give their interest in the family home (and other assets) to the other spouse.
When the surviving spouse dies, the combined assets will be split between all children of both partners. However, in blended families, there is a risk that the surviving spouse can change their will so that it will only benefit their own children.
 
How can family provision disputes be avoided?
Structure your will to protect your children.
Structuring your estate effectively can ensure protection for your beneficiaries. A few common alternatives include:
· Mutual wills: Spouses can enter an agreement which prevents them from changing their wills after one of them dies. These arrangements are inflexible to changes in circumstances, but can also be difficult to enforce.
· Testamentary trusts: A testamentary trust only comes into being on the death of the testator. Creating a trust over the asset pool can allow for the provision of the other spouse with income for the rest of their life, while ensuring that the assets will be distributed to the children of the deceased spouse.
· Transfer assets to family members before death: Transferring assets to family members will remove these assets from your estate. However, you should be mindful of stamp duty, Centrelink and capital gains tax implications.
Ensure that you are adequately providing for your spouse and former spouse
It is important that you structure your estate to protect your children, and in a manner which adequately provides for your current spouse. If your former spouse has already received a property settlement, it is unlikely that they will be able to make a successful family provision claim.
Minimise surprises and risks
The testator should discuss the expected division of their estate with family members to avoid later surprises. It is important to note that someone cannot completely ‘contract out’ of making a family provision claim in the future. Even if such an agreement is made for valuable consideration, the court can still order further provision. When deciding on provisions for adult children, the testator should consider factors such as their health or disability, ability to earn an income, and the possible need to provide financial security for the future.
Choose the right executor
The executor is responsible for carrying out the terms of a will and taking care of a person’s estate after they pass away. This includes attending to funeral arrangements, applying for probate distributing assets to beneficiaries, and defending legal claims against the estate.
Administering an estate can be a difficult, time-consuming and emotionally draining task. You must choose an executor who has the time, expertise and character to administer your estate.
 
If you need assistance with drafting a will or a family provision claim or have other related queries, contact Butlers at enquiries@butlers.net.au or call (02) 4929 7002.