Claims on Estates

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Claims on Estates

Estate Claims

Origins

The general rule is an individual has the right to make a will to dispose of their assets as they like, to whomever they please, without interference or intervention.Nicholas Radbone

In Australia there was a movement away from this view in the early 1900s due to two cases.  Firstly, a well-known bookkeeper Francis O’Neill left his entire estate to his mistress and illegitimate children, and left his wife and child destitute.  The second case was when John Norton, the owner of the ‘Truth’ newspaper, disinherited his wife and son and left the majority of his estate to his nine year old daughter and niece.

These cases caused significant public outcry and pressure for laws to encroach on testamentary freedom.  The first family provision law was enacted in Victoria in 1906 and commenced as a protective measure to ensure adequate provision for dependent widows and orphans.  Over time however the law has moved from maintaining dependents to the protection of an individual’s inheritance rights.

South Australian Law – Who can Claim ?

South Australian family provision law is governed by the Inheritance (Family Provision) Act.  Under the Act the spouse, domestic partner, child, and grandchild of the deceased are entitled to claim for maintenance or further provision.  Additionally, a person who has been divorced from the deceased, a stepchild who was maintained wholly or partly by the deceased, or in some circumstances a parent, brother or sister of the deceased are entitled to make a claim.

The strength of an individual’s claim will vary based on their personal circumstances and the applicant’s relationship to the deceased. Even competent and self-sufficient adult children are automatically eligible to make a claim under the Act.

When Must a Claim be Made ?

A claim can only be made after the Court has granted probate or letters of administration in relation to the estate.  Where a deceased died leaving a will, the Supreme Court grants probate, which is a legal document that authorises the executor or executors to manage the deceased’s estate.

Similarly, where the deceased passes away without a will or a partial will, the Supreme Court may grant letters of administration.  These authorise an administrator or administrators to manage the deceased’s estate according to law.

Time limit for making an application

Under the Act, an application seeking further provision from an estate must be issued in the Supreme Court and served on the executors or administrators within six months of when probate or letters of administration were granted by the Supreme Court.  Although an extension of time may be granted by the Court in limited circumstances, an application for an extension of time cannot disturb any distribution of the estate made prior to the application.  It is important that any claim be made and served as soon as possible after probate or letters of administration have been granted.

How is an Application Assessed

This is a two-stage process.

Firstly, the Court will consider whether the applicant has been left without adequate provision. The Court will consider amongst other factors the applicant’s financial position, the size and nature of the estate, the relationships between the applicant and the deceased and between the deceased and other persons who have claims to the pool of assets of the deceased.

Secondly, in the event that the Court considers that inadequate provision has been made, the Court will then consider what provision should be made for the applicant. With a large estate the proper level of maintenance is likely to be increased.

This assessment is not only economic, but also takes into account moral considerations.  It calls for a judgement of what provision the applicant ought to have made, not merely what the applicant needs.  It involves a judgement call of the “moral duty” of the deceased.

It is unusual, where a spouse, domestic partner or child has been left with nothing, for the applicant not to receive further provision.

It can be seen that the considerations taken into account by the Court and the awards made will be based on very subjective considerations.  In these circumstances examples of previous awards by the South Australian Supreme Court are very helpful to show how the Supreme Court may apply these principles in practice.

Delisio

The deceased had nine children, five boys and four girls.  The deceased died on 14 August 1999 having made a will on 30 January 1997.  By his will the deceased left all his property to his daughter Beate who was also appointed the executor and trustee of the will.

The net estate was valued at $149,432.18.

In this case:-

  1. Beate had suffered a nervous breakdown and suffered from anxiety.
  2. The deceased was an austere and dominating man who liked to do things his way and was rarely willing to compromise. His relationship with his various children fluctuated in terms of contact and warmth.  When he would fall out with a particular child they would not see each other for a considerable period of time.
  3. The Court held that it needed to have regard to all of the circumstances, including amongst other things the applicant’s financial position, the size and nature of the estate, the totality of the relationship between the applicant and the deceased, and the relationship between the deceased and other persons who might have legitimate claims upon his or her estate.
  4. The Court also held that an adult daughter is not required to show a special need or a special claim. An applicant under the Act need not show that he or she is in “necessitous circumstances” in order to succeed.
  5. Generally the financial position of the daughters making the claims were modest but reasonably secure.
  6. One of the daughters Margaret married in 1976 and divorced in 1992. She had two children by her marriage including Nathan who was 20 years old and was a tetraplegic receiving the disability pension.

In all of the circumstances the Court allowed a provision of $15,000.00 for each of the four applicants, a total of $60,000.00 out of an estate of $149.432.00.

Hellwig

In this case the deceased was married twice.  There were two children, Anthony and Terri, who were born to the first marriage.  The deceased subsequently divorced and re-married producing three further children, Shane, Tammy and Michelle.

By his will, the deceased left his entire estate to only one of his children.  Claims were brought by Michelle, Tammy, Anthony and Terri.

The size of the residuary estate for distribution was $130,000.00.

Anthony was raised solely by his mother and had little support.  He had been on sickness benefits for a number of years and could not work.

Terri was in a much better financial position than the other claimants and was a joint tenant with her husband of a property that had a net value of approximately $697,000.00.  She was also involved in a superannuation fund which had a value of approximately $440,000.00.  Her husband was earning approximately $35,000.00 per annum but she was unable to work.

The Court made provision for each of Michelle and Tammy of $30,000.00, for Anthony of $20,000.00, and for Terri of $7,500.00.

Pizimolas –v- Pizimolas and Another [2010] SASC FC 34

The female deceased had three children, Irene, Philip and Stavros.  The estate was valued at approximately $650,000.00 and comprised the family home at Norwood.

The testator made a will leaving her estate equally to her three children.  As a consequence of emotional, mental and physical disabilities, Stavros was in need of maintenance and had not been able to work since 2006.  Stavros had also assisted his mother about the family home and had lived in the family home to assist his mother after his father died.

In these circumstances the Full Court reached the conclusion that Stavros should receive a legacy of $100,000.00 in addition to his one third share of the residue of the estate.

Awards under the Act

Because the Court has a very wide discretion as to the orders it can make, and the basis upon which orders are made is very subjective, it is difficult to accurately predict a likely award.

Costs

The Court has a wide discretion to make such orders relating to costs as it considers just.  In most circumstances the Court will order payment of a successful applicant’s costs from the deceased’s estate.

If an applicant’s claim is unsuccessful then a Court may make no order in favour of an applicant for costs, and may order the applicant to pay the costs of the executor or administrator in defending the claim.

Given the above, it is prudent for an individual considering an application under the Act to obtain an opinion on the likelihood of success of the potential claim.  Testators should also seek advice on these matters and also on estate planning to protect their estate.

Please call or contact me should you wish to discuss or have any queries in relation to the matters above.

Nicholas Radbone