Wills & Estates Law Update: family provision, estate planning, tax changes & dealing with lost wills

Late Family Provision Application and Notional Estate - NSW Court of Appeal

The NSW Court of Appeal decision in Spencer-v-Blyth & Anor [2006] NSWCA181 was handed down on 6 July 2006. The case involved an appeal against a decision of Associate Justice Macready.

The decision at first instance allowed Alexander Spencer, the de facto partner of the late Betty Neville, to bring a family provision claim outside the 18 month limitation period allowed for such claims by s16(1)(b) of the Family Provision Act 1982 (NSW). The facts of this matter meant there was no actual estate from which an order under the Act could be met. Therefore before the claim could be considered on its merits the de facto partner needed to obtain an order under the Act designating the house, the only relevant asset, as notional estate of the deceased. The house had previously been transferred to the beneficiaries. In order to obtain an order designating the house as notional estate, the de facto partner had to satisfy the requirements of ss27 and 28 of the Act. Associate Justice Macready refused to make an order designating the house as notional estate because no special circumstances had been shown.

In the appeal, the Court held that the de facto partner, as the appellant, had to overcome two hurdles to succeed in his appeal. The first was the limitation period in s16(1)(b) of the Act. The second hurdle was the need to show special circumstances in s28(5)(d).

It appeared the Court was of the view that the claim could proceed outside the limitation period because of the absence of prejudice to the other beneficiaries. The main issue in the appeal was the second hurdle and whether the requirement in s28(5)(d) of the Act had been satisfied. S28(5)(d) would not allow the Court to make an order designating property as notional estate of the deceased unless it was satisfied:-

"(d) that there are other special circumstances...which justify the making of an order so designating the property."

The Court held that whilst the absence of prejudice to the other beneficiaries overcame the first hurdle, that absence of prejudice by itself did not constitute special circumstances which would allow the appellant to overcome the second hurdle. Proof of something more was required and as this had not been done, special circumstances had not been shown and the appeal was dismissed.

The Court of Appeal decision is also a useful reminder that, in appropriate circumstances involving notional estate, owners of assets distributed to them from a deceased estate need to be joined as defendants in family provision legal proceedings.

Estate Planning - Children With Disabilities

Australian pension entitlements can be affected by asset deprivation rules which greatly restrict the giving away of assets or income as gifts to family.

The Australian Government has announced new rules commencing on 20 September 2006 which will assist families to give away assets to secure the financial future of any children of the family with severe disabilities. The new rules will not penalise parents or immediate family members who wish to make financial provision for the care and accommodation of any of their children with a severe disability.

The new rules are expected to allow parents or immediate family members to place up to $500,000 into a trust for the future benefit and care of a child with severe disabilities. The asset deprivation rules will not apply to this financial provision and pension entitlements will not be affected.

New Categories of Deductible Gift Recipient (DGR)

The Income Tax Assessment Act 1997 has recently been amended to create six new general categories of DGR. Deductions can be claimed for gifts to the following types of organisations that have DGR status:-

• charitable service institutions
• scholarship funds
• animal welfare charities
• Australian disaster relief funds
• developed country disaster relief funds
• war memorial repair funds.

Lost Will and Divorce - Application for Grant

Bartier Perry recently acted in an estate where the original Will had been lost, and where the primary beneficiary and executor (the testator's wife) was divorced from the deceased testator 2 days before he died. The matter raised two interesting issues:

• A grant of probate of a copy of a lost Will can be obtained where the circumstances of the loss can be explained to the satisfaction of the Court. In particular, it has to be established that the lost Will had not been destroyed by the testator with the intention of revoking it. In this case, as the marriage between the primary beneficiary and the deceased testator had obviously broken down, the presumption that the deceased had revoked the Will was even harder to overcome.
• A Will is not revoked by divorce - the law provides that a divorced spouse beneficiary is deemed to have died immediately before the deceased testator. In this case, the Will made provision for substitute beneficiaries, being the deceased's children, and accordingly they inherited the estate. The appointment of the divorced spouse as executor was taken to be omitted from the Will in accordance with section 15A (1)(b) of the Wills, Probate and Administration Act 1898.Consequently, an application had to be made for letters of administration with the Will annexed.

We were successful in having letters of administration with a copy of the lost Will annexed being granted to one of the children of the deceased. The Court was satisfied by the evidence that the Will had been lost and not revoked.