Contesting a Will - Your Local Blue Mountains' Solicitors

Challenging a Will in NSW

Treated unfairly?

Have you been unfairly left out of a Will, received nothing where there is no will, or received less than your fair share of a deceased estate?

If you are an eligible person and you have the requisite financial need and there are sufficient assets in the estate, you may be entitled to claim against the estate.

We can advise you if you are eligible to apply and act for you in commencing a family provision application in the Supreme Court of NSW.

Sometimes a family dispute becomes so heated that a person decides to cut their spouse, child, or another dependent out of their Will. However, the family provision section of the Succession Act 2006 (NSW) throws a wrench into plans to disinherit a person for their wrongdoing by allowing close family members to apply for better provision.

Family provision laws reflect the moral obligation society places on certain people to provide for their dependents.

Who can challenge a Will?

Under the Succession Act 2006 (NSW) (the Act), people legally entitled to challenge a Will are those:

named in the Will (the beneficiary); and
who would stand to inherit if the Will was invalid (i.e. those who have been ‘disinherited’ or excluded from inheriting).

People entitled to contest a Will on the grounds that they are insufficiently provided for are:

Spouses;
Former Spouses;
De facto partners living with the deceased when they passed away;
Children, including adult children and adopted children (and step children who were dependent on the deceased);
Grandchildren who were dependent on the deceased;
Members of the deceased’s household who were dependent on the deceased (including those in ‘close personal relationships’ with the deceased); and
Parents who were dependent on the deceased.

A claimant must satisfy the court that the Will does not make adequate provision for their maintenance, education or advancement in life.

What are grounds for challenging a Will?

Grounds for an objection or challenge to the validity of a Will include that it:

does not reflect the testator’s true intentions; or
is unfair, excluding the deceased’s dependents or someone who should have been included; or
is a forgery.

When can a Will be challenged?

A testator’s right to distribute their estate as they see fit is subject to legislation intended to protect those for whom the deceased had a ‘moral responsibility’ to provide. A Will may be challenged when a loved-one feels that the testator failed to meet this responsibility based on grounds recognized by law.

It’s preferable to challenge a Will before probate is granted, but it’s possible after a grant if you can satisfy the court as to:

your reasons for not challenging the Will earlier; and
the validity of the grounds for your challenge.

Is there a time limit for challenging a Will?

A challenge should be made within 12 months after the date of death although the court may extend that period in certain circumstances.

Do I have to go to court to challenge a Will?

Whenever possible, Will disputes are resolved through a settlement agreement or mediation to reduce legal costs, facilitate an earlier resolution and preserve family relationships. However, if mediation and negotiation fails, you must commence court proceedings.

How much does it cost to challenge a Will?

The cost of a claim depends on how long it takes to resolve.

What am I likely to receive if my challenge succeeds?

If you successfully contest a Will, the court will set it aside. Legally it will be as if the Will never existed.

The estate will be distributed according to the second-to-last Will (if there is one).

If no other Will can be found, the estate is divided as if the deceased never made a Will, in accordance with the intestacy rules in the Succession Act 2006 (NSW). In that event, the provision made for relatives and dependents is determined by who survived the deceased.

If your challenge succeeds, the estate normally pays your legal costs. However, the Judge ultimately decides what if any costs order to make.

What is Notional Estate?

New South Wales allows notional estate claims against deceased estates. A notional estate claim is an application to the Supreme Court of NSW to reacquire into the deceased estate assets distributed before the testator’s death. It allows family members and other dependents to claim certain assets that the deceased disposed of in the three years before their death. The intent is to prevent someone from trying to circumvent a family provision order by gifting their assets away before their death.

What is a family provision claim?

An eligible person can file a family provision claim to the Supreme Court of New South Wales when they feel that they have either not received their entitlement from a deceased estate, or when they have been left out of a Will altogether.

A family provision claim must be filed within a year of the deceased’s passing unless there are special circumstances. It applies only to property that would have been legally included in the deceased estate at the time of death.

What is a notional estate claim?

The Succession Act 2006 (NSW) allows the court to designate an asset that is not currently part of the deceased estate as “notionally” part of the deceased estate. For property to be eligible for a notional estate claim, the deceased must have owned the property in the last three years. In this context, property refers to all types of assets, including life insurance benefits and superannuation.

A notional estate claim is only possible if a family provision order has already been issued. A notional estate order can be made after probate has been granted and the estate distributed (sec 79 Succession Act 2006). The estate must have insufficient assets, or there must be other eligible claimants to a family provision order, or “special circumstances”.

To be designated notional estate, the property must have been transferred to someone else without appropriate financial recompense (as opposed to “full valuable consideration” being money or an equivalent asset). A transfer by the deceased for a nominal fee or as a gift would not constitute full valuable consideration.

An asset may also be classified as notional if it is held in a structure that is not eligible for inclusion in the estate but is still effectively controlled by the deceased. Such an asset is not included in the estate because of the deceased’s omission or failure to act.

Disadvantage Requirements

A notional estate order cannot be made purely on the basis that the deceased arranged their finances in this way. There must be evidence that:

the transfer directly or indirectly disadvantaged the deceased, the claimant, or a principal party to the transaction; or
someone acted or did not act in a way that prevented the claimant, deceased or another principal party from benefiting.

Other Considerations

The court’s decision will be based on whether the reasons for granting the order are more persuasive than the general imperative to not interfere in the existing provisions of the estate. They will also consider the merits of the case and whether justice would be served by making the order, and any other matters they may consider relevant.

Once the court designates an asset as notional estate property, it will be dealt with as if it is actual estate property. A notional estate order extinguishes the rights of the former property owner to the extent outlined in the order.

Time Limits

A notional estate claim can only apply to a transaction:

in the last year of the deceased’s life, when the deceased had a moral obligation to adequately provide for the claimant which was more significant than the moral obligation to engage in the transaction; or
within three years before the deceased’s death with the intent to limit provision for eligible claimants; or
after the deceased’s death.

What is disentitling conduct?

Disentitling conduct and family provision claims in NSW

Due to the emphasis on moral obligations in family provision claims, they can be resisted on the grounds of moral wrongdoing by the applicant.

The court can consider a broad range of conduct and character traits. It may refuse to award a person a benefit or reduce the benefit received. Any exclusion or reduction will depend on the extent of the person’s financial need, the severity of the disentitling conduct, and whether the general public would consider such conduct unreasonable.

The burden of proof is on the party resisting the family provision claim to prove the alleged disentitling conduct.

Statements in the Will

A will-maker (a testator) who wishes to remove their child from their Will can put a statement in the Will that they wish to have the child removed from provision under the Will. Or they can make a statement held with their Will explaining their lack of provision for a particular person. However, such statements do not finally determine the issue of family provision.

Statements left with the Will are often admissible but need to be treated with extreme caution.

A statement of this kind should not be prepared without legal assistance as they can work against the person defending a Will.

Signal of dementia

Testators in the early stages of dementia often allege disentitling conduct shortly before being formally diagnosed with dementia. Analysis can reveal such an allegation to be unreasonable. While the testator may still possess the legal capacity to make a Will, the testator’s health conditions may discount an allegation of disentitling conduct.

What are the effects of disentitling conduct?

Even if disentitling conduct is proven, it may be insufficient for the Court to refuse to make provision for an applicant. Family provision cases are usually divided into two broad categories:

where a person is ruled in or out of provision, which occurs only in the most extreme cases; or
where the applicant’s entitlements are assessed based on their conduct. Disentitling conduct may not be sufficient to entirely remove provision for the applicant from the testator’s estate, but the alleged disentitling conduct is taken into account in light of the actual amount of provision that is adequate and proper for the applicant.

Takeaways

Whether you are an executor or administrator defending a claim, or a beneficiary involved in the dispute, seeking advice from a lawyer maximises your chance of avoiding drawn-out litigation and successfully resolving the dispute. A lawyer can review the likelihood of your application succeeding and what defences may be available to the executor or administrator.

The validity and merit of the claim must be identified, then an agreement must be negotiated as quickly as possible to preserve the estate’s value and assist all parties to move on with their lives.

Financial Needs (NSW)

One criteria against which the Supreme Court of NSW assesses family provision claims is the claimant’s financial need. It is important that a claimant prove financial need: it is not enough to simply claim that they are experiencing financial need. A claimant should be able to account for their finances, income and expenses, and these circumstances should show a need for greater financial provision.

Family provision claims in NSW

A claimant needs to establish that there is inadequate provision in the Will for their proper maintenance, education and advancement.

In determining a claim, the Supreme Court of NSW can only look at the facts before them at the time. A claimant must provide proof of their financial need to enable the court to determine the adequacy of the provision for them in the Will.

The strength of a claim will partly depend on the size of the estate and the competing needs of the existing beneficiaries and other claimants.

Financial Need

The Succession Act 2006 provides that the court may only award an amount commensurate with the claimant’s proper support and maintenance. A claimant must gather sufficient evidence to establish financial need, disclosing to the court their assets, liabilities, sources of income, expenses and financial resources .

The court relies heavily on independent evidence of finances, such as bank statements. A claimant who is financially dependent on someone else will most likely have to give the court information about that person’s financial circumstances.

Financial need is both relative (i.e. different claimants’ competing needs) and objective (i.e. whether the claimant can meet their daily needs). This is particularly true of the testator’s adult children. The court generally considers adult children as being able to support themselves and to no longer be the deceased’s dependents.

If a claimant does not provide evidence of financial need, their claim is unlikely to succeed.

What is client legal privilege?

Client legal privilege (also known as legal professional privilege) is a common law right that allows you to obtain confidential legal advice. The privilege:-

protects communications about potential litigation (litigation privilege) and legal advice (advice privilege);
protects clients’ rights; and
facilitates the administration of justice.

Client legal privilege belongs to the client. Information covered by client legal privilege may only be disclosed if the client instructs the lawyer to do so.

Clients’ rights

Lawyer-client privilege is based on the right to privacy and protection from the state.

Administration of justice

The administration of justice requires clients to be able to speak freely to their lawyer and to disclose everything relevant to the advice they seek.

Legislation

Section 118 of the Evidence Act 1995 (Cth) sets out the common law right to client legal privilege. It provides that evidence is not to be given if adducing it would result in disclosure of:

a confidential communication between lawyers acting for clients; or
a confidential communication between a client and a lawyer; or
the contents of a confidential document prepared by the client or the lawyer

for the dominant purpose of a lawyer providing legal advice to a client.

Section 119 of the Evidence Act provides that a client may object to evidence being adduced if it would result in any of the above being disclosed.

What does client legal privilege mean?

Client legal privilege means that:

confidential communications between clients and lawyers cannot be compulsorily produced in court or in response to a subpoena; and
a lawyer may only disclose privileged information to a third party if the client has specifically authorised them to, or if privilege has been waived, lost, or does not apply.

A client can implicitly or expressly waive client legal privilege.

Illegal purposes

Client legal privilege does not cover communications made for improper or illegal purposes.

Statutory exclusions

Legislation can alter or remove client legal privilege.

What is a deed of family arrangement (in NSW)?

A deed of family arrangement is a document that legally changes the way a deceased person’s assets are divided amongst beneficiaries. It can either change the terms of a Will or change the distribution of a deceased person’s assets if there is no Will.

It can also provide the legal personal representative of the estate (the executor or administrator) with protection from any future claims.

For a deed of family arrangement to be valid, it must be:

signed by the legal personal representative; and
signed by and have the consent of all the beneficiaries (over 18 years of age) entitled under the original Will or the rules of intestacy.

When would I need a deed of family arrangement?

Circumstances in which a deed of family arrangement may be useful include:

When the beneficiaries wish to change the terms of the Will.

A deceased person’s Will may sometimes need to be changed to suit the beneficiaries’ circumstances. A deed of family arrangement allows the beneficiaries to change the distribution of assets to better suit their needs.

When someone dies without a Will, the distribution of their assets is determined by a formula set out in the Succession Act 2006 (the rules of intestacy).

In NSW, the deceased’s spouse entitlement includes money from the estate gifted to the spouse (a ‘CPI adjusted legacy’). This is an automatic entitlement, regardless of how much the estate is worth.

If the deceased had adult children with families of their own, a deed of family arrangement could be used to reach an agreement where all of the deceased’s immediate family could be left something.

When an ‘eligible person’ wishes to challenge a Will

If a spouse, child, former spouse or a dependent has not received anything or feels that they have not received enough from the Will, they may be able to launch a family provision claim in court. This can take years to resolve and can be extremely expensive.

A deed of family arrangement can avoid court proceedings by allowing the aggrieved people together with the other beneficiaries to design a new plan for the distribution of the assets that everyone is happy with.

When can a deed of family arrangement not be used?

A deed of family arrangement cannot be used to reduce the entitlement of someone under 18 years, or for a person lacking mental capacity (e.g. with an intellectual disability): this would require a Court order.

Is Capital Gains Tax (CGT) Payable?

Section 128.20 of the Income Tax Assessment Act 1997 (Cth) exempts the passing of an asset to a beneficiary of a deceased estate from payment of capital gains tax (CGT).

A deed of family arrangement is covered by this exemption only if it is used to settle a claim to participate in the estate (such as a family provision claim). If the deed does not meet the requirements of the ATO ruling TR 2006/14, CGT may apply.

Is stamp duty payable?

There may also be stamp duty issues to consider when writing a deed of family arrangement.

Generally, an estate asset is either exempt from stamp duty, or the duty payable is very low (e.g. $100 in NSW).

In NSW, stamp duty liability as a consequence of transferring assets using a deed of family arrangement is only on the amount by which those assets exceed the value of assets the beneficiary would have received under the Will or the intestacy rules. (s63 of the Duties Act 1997 (NSW))

Where to now?

as to your eligibility to challenge a Will
the likelihood of a challenge succeeding,
a range of the likely costs of a challenge, and
the likely range to be awarded.