Good will punting

Catchwords: Wills, Succession Act (nsw), family provision, wise and just testator, not fond or foolish testator, deed of family arrangement, release. claw back 3 years, relevant property transactions

Can you take the punt that at the reading of your will, there will be no angry faces? Many do, but unfortunately from the hereafter, you can’t do much about it.

After your death, an “eligible person” can apply under the Succession Act for provision, even though they may have been struck out of your will for personal reasons. These people include your present husband, wife, or de facto partner, a child, a former wife or husband or a dependent grandchild or member of your household at any particular time or a person in a close personal relationship.

The courts decides if ” adequate provision for the proper maintenance, education or advancement in life of the person” was made and then makes an order for family provision under S59 SA.

The court will, in effect, by making an order for provision, made a codicil (an amendment) to your will. The only way to get around this potential hazard to your estate is to execute an instrument as a “release of rights” under section 95 of the Succession Act if approved by the court, which amounts to a legal release of those rights by that potentially angry person. You then must take proceedings and make an application to seek court approval of the release, so that after death it is almost irrevocable.

If there is fraud or undue influence, the court can later revoke any approval, so you must be careful to make full disclosure of your assets and have a fair transaction.

The problem with this procedure is that it is gift driven, so you have to actually give something to secure a release; and it must be to the advantage of the recipient; prudent to receive it; and the recipient has taken  independent legal advice and considered it; and it is  fair and reasonable (S95(4) SA).

You may have to swallow some pride by making a pre-death gift, to ensure a safe passage for your estate after death. Also, you have to take court proceedings which can be expensive. However, if you don’t take these proceedings and that angry person makes a claim on your estate, the court will treat you as a wise and just testator. The court will put itself in your shoes and be forgiving, tolerant and understanding of your differences of opinion or the lack of success of the angry person.

In the farming scenario, a child who has been struck out of your will may have a good claim for provision for capital to continue farming. This could be expensive for the estate.

Care should be taken in making pre-death gifts to your preferred beneficiaries. Since you don’t know when your number will be up, gifts of property made (without full valuable consideration) within three (3) years of death with the intention of limiting future provision (S80(2)(a) SA) , can be “relevant property transactions” and a designated part of your notional estate and clawed back to meet that angry claim. These claims can tie up estates for a long time while the proceedings for provision are determined in court. All eligible persons, not just angry, can then claim. In the meantime, any distribution of the other gifts may be frozen.

Costs of the proceedings will generally be paid by the estate if the claim is successful or there are special circumstances.

The downside in not taking action through court while you are alive is the risk of expensive proceedings after death which your estate may have to pay for in meeting that angry claim. By taking that early action and not punting, when you leave something, it will mean something and your beneficiaries will be happy not angry.

Jonathan de Vere Tyndall

Article updated 7 January 2015, originally published in The Land 1 April 1999.

Editors note:The articles published contain comment only and not legal advice, for which you should retain a solicitor. No responsibility is accepted for the accuracy of the contents.