Totality of the Estate

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Totality of the Estate – Will Disputes & Family Provision Claims In NSW

This page provides information about how 
Totality of the Estate
What is incorporated in the estateDifferent types of Estate
What is incorporated in the estate
Deceased Estate
  • The deceased’s estate does not only include property which the deceased had at the time of their death.
  • In New South Wales, superannuation is treated as part of the notional estate.
  • A notional estate is property deemed by the Court which should be treated as part of the deceased estate. This type of property does not need to be subject to the will of the deceased and may nevertheless included into the totality of the estate when the matter is being settled.
    • The following sections are relevant in dealing with notional estates in the Succession Act 2006 (NSW) sections 78 & 80.
  • The court must first be satisfied that the estate, if any, is insufficient for the making of the family provision order, or any order as to costs, that the Court is of the opinion should be made, or provision should not be made wholly out of the deceased person’s estate because there are other persons entitled to apply for family provision orders or because there are special circumstances.
Superannuation

Kelly v Deluchi [2012] NSWSC 841

  • One of the most common examples of notional estate is superannuation. The Act expressly provides that it is a relevant property transaction.
  • In Kelly v Deluchi the deceased made a will leaving a pecuniary legacy of $50,000 to his son, Mark, $75,000 to his son Peter and $75,000 to his daughter Michelle. The will gave a further pecuniary to a friend, the proceeds of a life policy to his grandchildren and the residue of his estate to his wife who was not the mother of his children.
  • The estate was insufficient to pay the legacies in full and as a result they abated rateably. Initially an application for provision was made by each of the deceased’s children. One claim was settled and the other two proceeded to a hearing.
  • The deceased was the joint tenant of a property at Belrose with his wife. He was also a member of a self-managed superannuation fund at the date of his death. The trustee of the fund was a corporation that had been joined as a defendant to the proceedings. In February 2012 being a time after the deceased’s death his wife in her capacity as sole director of the trustee of the superannuation fund presided at an Extraordinary General Meeting of the trustee at which it was resolved to allocate the deceased’s death benefit to her.
  • Hallen AS J held that the resolution was a relevant property transaction falling within s75 of the Act. He also held that s83(1)(a) of the Act was satisfied in that the relevant property transaction directly disadvantaged each of the plaintiffs, each of whom were persons entitled to apply for a family provision order.
  • His Honour determined that Peter should receive a legacy of $150,000 and Michelle should receive a legacy of $100,000. Each order was in lieu of the provision made in favour of each plaintiff in the deceased’s will.
  • The decision is illustrative of the manner in which the notional estate provisions operate in respect of superannuation. His Honour designated the property of the superannuation fund as notional estate to the extent that the actual estate was insufficient to meet the order for provision and costs.
  • Another aspect of the matter worthy of mention is that the Judge placed some significance on the fact the deceased intended that each of Peter and Michelle should receive $75,000 and this intention had only been frustrated by reason of the size of the estate.
Joint Tenancy

Cetojevic v Cetojevic [2007] NSWCA 33

  • This was an appeal from a decision of Campbell J. It is significant because it resolved a difference of opinion between judges at first instance as to the Court’s approach in determining whether a failure by a deceased to sever a joint tenancy prior to death was a prescribed transaction under the Family Provision Act. The same provisions apply under the Act.
  • In this case the deceased owned a property with his parents as joint tenants. The parents were the appellants. The deceased married the respondent. The deceased died as a result of accidental drowning, Campbell J decided the case on the ground that the appellants held one third of the proceeds of the property on a constructive trust for the respondent. The respondent had filed a cross claim out of time seeking relief under the Family Provision Act which raised the question as to whether the deceased’s interest as joint interest in the property could be designated as notional estate.
  • The Court of Appeal decided the appeal on the ground that it upheld Campbell J’s conclusion that the appellants held one third of the proceeds of sale of the property for the respondent on a constructive trust. Accordingly, it was strictly unnecessary to decide the notional estate question under the Family Provision Act.
  • Notwithstanding this the Court determined the question because of conflicting decisions at first instance. In Wade v Harding supra Young J had held that the failure by the deceased to sever a joint tenancy was not a prescribed transaction (the equivalent of a relevant property transaction under the Family Provision Act) because on the evidence there was an “even chance” as to which of the joint tenants would die first. In that case the husband survived the wife by only 20 days. His Honour held that what was forgone in not severing the joint tenancy was received by continuing to be a joint tenant. In his view full valuable consideration was received.
  • In Cameron v Hills (unreported 26 October 1989) Needham J disagreed with the view expressed by Young J on the ground that because the Court had to view the matter immediately before the death of the deceased he could not see how a joint tenant about to die immediately can be said to have an equal chance of surviving the joint tenant.
  • The Court of Appeal unanimously preferred the approach of Needham J. The consequence is that the choice to remain as a joint tenant is not full valuable consideration.
Different types of Estate
Distributed Estate

Charnock v Handley [2011] NSWSC 1408

  • In this case the deceased left his entire estate to the defendant who was a friend. The estate was very small having a net value of $62,827.
  • The plaintiffs were two adult children of the deceased. The entire estate had been distributed to the defendant.
  • The claim was brought out of time. Hallen AS J extended time because the plaintiffs provided an explanation for delay and in addition he held the defendant’s conduct was unconscionable because he failed to make full disclosure of the nature and value of the estate to the plaintiffs. His Honour held that this failure delayed if it did not discourage the making of a claim.
  • The case is instructive because it raised the question of whether the Court can designate property of the defendant as notional estate in circumstances where that property has not been acquired with monies received from the deceased’s estate.
  • His Honour held that there is no requirement under the Act that the property be designated as notional estate has to be the same as the property distributed or property into which the distributed property can be traced.
  • At paragraph 191 His Honour said
    • It follows, then, that if the court is satisfied that someone (the Defendant) has received a distribution from the deceased’s estate (the distributed property), it is possible to designate as notional estate, property of that person (moneys in the Navigator Personal Retirement Fund), even if that property is not something into which it would be possible to trace any specific property of the deceased.
  • His Honour proceeded to designate property of the defendant as notional estate and make modest orders for provision in favour of each plaintiff.
Property subject to notional estate

Property that may be affected if the Court makes an order for notional estate include the following assets:

  • transferred to the beneficiaries during the ordinary course of the estate administration; or
  • not owned directly by the deceased but over which the deceased exercised some form of control, such as assets in a superannuation fund or a family trust.

The effect of this is to substantially broaden the range of assets that could be the subject of a family provision order.

Clawback Provisions

The Court can designate property as notional estate by nullifying any transfer of assets made by the deceased with the intention of defeating a family provision claim. The Court has discretionary power over notional estates in NSW and  can even make orders because the deceased failed to transfer assets.  Examples of an act or a failure to act include

  • failing to sever a joint tenancy;
  • nominating someone other than the executor/administrator to receive a life insurance payment;
  • nominating someone other than the executor/administrator to receive a superannuation death benefit.  This can even include failing to amend a superannuation fund deed so that the death benefit could have been paid to the applicant;
  • transferring of assets for less than market value or entering into a contract to dispose of estate assets on or prior to death for less than market value; and
  • failing to exercise a power of appointment in a trust deed
Restrictions on notional estates

The Court’s authority to make a notional estate order is restricted, even if the Court considers that an order for provision is warranted.  In particular:

  • the actual estate property must be insufficient to meet the family provision order;
  • the Court must not interfere with reasonable expectations in relation to property (ie. the possibility of breaking up a farming property into smaller, unviable sections); and
  • the Court must consider the substantial justice and merits involved as well as any other matter the Court considers relevant
Timing in relation to Transfers of Property

These types of transfers are subject to time limits and must have taken place:

  • within three years prior to the date of death with the intention of denying or limiting the provision that could be made for the applicant;
  • within one year prior to the date of death at a time when the deceased had a moral obligation to make provision for the applicant which was substantially greater than the moral obligation to enter into the transaction; or
  • on the deceased’s date of death or after the deceased’s date of death by the executor/administrator