Opinion
NSW notional estate provisions – helpful for some victims of financial elder abuse
30th May 2019
There is no excuse for taking advantage of the elderly members of our society. As a lawyer who specialises in wills and estate matters, I see the good, the bad and the ugly sides of many families when a loved one passes away.
The common scenario I see is an estate drained of assets due to a child asserting control over their elderly parent and taking advantage of them when they are at their most vulnerable. This financial abuse can go as far as the child convincing their parent to transfer their house to them for as little as $1. The reasons a child might give their parent to convince them to sign over their house can be wide and varied.
When the elderly parent dies they may leave a spouse or other children whom they intended to look after financially, but this is now impossible, because regardless of whether the deceased had a will there is little or nothing left in the estate. In order to rectify this injustice in Queensland, we need to look at equitable claims such as:
- lack of testamentary capacity;
- undue influence;
- unconscionable conduct; and
- estoppel.
These claims can be complex, expensive and difficult to prove. However, in New South Wales, a claim can be made easier for those who are eligible persons for the purpose of a family provision application.
Family provision applications
Chapter 3 of the Succession Act 2006 (NSW) (the Act) contains the provisions relating to family provision. The court has the power to make an order for provision which essentially alters the terms of a will or the distribution under intestacy to benefit an eligible applicant. An eligible applicant who has been left without adequate provision for their ‘proper maintenance, education or advancement in life’.
The advantage of family provision claims in New South Wales is that the Act contains ‘notional estate’ provisions. These provisions are found in Part 3.3 and they allow the court to designate property as ‘notional estate’ in limited circumstances. Basically, the notional estate provisions allow the ‘clawing back’ of assets to the deceased’s estate for the purpose of a family provision order.
Notional estate overview
Given the lengthy and complex nature of notional estate provisions, I touch on only a couple of components for the purpose of this article.
Section 3(1) of the Succession Act 2006 (NSW) defines notional estate as ‘property designated by a notional estate order as notional estate of the deceased person’. Notional estate can be property that is not part of the deceased’s estate or property which has already been distributed. When we talk about property here, we are not only referring to real estate. Property can be variety of assets, even superannuation.
Property can be designated as notional estate only where there has been a ‘relevant property transaction’. The Act outlines in ss75 and 76 what ‘relevant property transaction’ means. The definition in s75(1) states that ‘a person enters into a relevant property transaction if the person does, directly or indirectly, or does not do, any act that (immediately or at some later time) results in property being:
(a) held by another person (whether or not as trustee), or
(b) subject to a trust,
and full valuable consideration is not given to the person for doing or not doing the act.'
Section 80 of the Act places some restrictions on the timeframes for property transactions. The transactions that the section applies to are:
- a transaction that took effect within three years of the death of the deceased and was entered into with the intention, wholly or partly, to deny or limit provision to an eligible applicant;
- a transaction that took effect within one year of the deceased’s death and at the time the deceased had a moral obligation to provide adequately for the eligible applicant and that obligation was substantially greater than the moral obligation of the deceased to enter into a relevant property transaction; or
- a transaction that took effect after the deceased’s death.
Using the scenario mentioned above, say a child (James) convinces his father (Bob) to transfer his house to James for $1. Bob dies six months later, leaving a surviving spouse and James. James wants to sell the house and wants his mother out of the house. The property transaction that occurred here is one that would be caught by the notional estate provisions.
Conclusion
Unfortunately, I have seen the James and Bob scenario quite often. With no notional estate provisions in Queensland (and most other states), the harsh reality is that you cannot help some people who would otherwise have a valid family provision claim.
The advantage of being able to include a family provision application as an additional claim to other equitable claims is that it’s a safe alternative for those who have a valid claim.
Depending upon the client and the specific case, it is sometimes appropriate to pursue a family provision claim on its own. The family provision process in New South Wales is efficient and cost effective, which often makes it easy to resolve a claim and less stressful for the client. For these reasons some clients may prefer this avenue.
Danielle Little is the founder and principal of Little Estate Lawyers. Starting her legal career in 1997, Danielle’s experience spans over many years, working in both New South Wales and Queensland. Danielle worked for almost a decade in a large multi-national firm where she gained extensive experience in plaintiff injury claims, litigation and estate matters. Since 2015 Danielle has worked in the area of Succession Law and specialises in Wills and Estate matters. Danielle has many years of experience negotiating the resolution of claims for clients. She provides sensible advice and solutions to help clients make informed and realistic decisions in relation to their claim. Danielle has an interest in capacity issues and is passionate about assisting family members protect their vulnerable loved ones. This interest has seen Danielle expand her practice to estate planning, financial abuse matters and estate administration. Danielle is currently undertaking a Masters specialising in Wills and Estates which she will complete this year.
The views and opinions expressed in these articles are the authors' and do not necessarily represent the views and opinions of the Australian Lawyers Alliance (ALA).
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