Protecting your Wealth for Future Generations: Estate Planning Update


You’ve worked hard during your lifetime to accumulate wealth.  You’ve made a Will.  But will your assets actually go where you want them to go? In this article, our Estate Planning group, discusses family provision claims and the ways in which you can protect your estate to ensure your wealth passes in accordance with your wishes.

It is a commonly held assumption that, by making an appropriate Will, you ensure that your assets pass to those persons you wish to benefit from your hard work during your lifetime.  While the general principle is that you should be able to leave your estate to whomever you wish, and making a valid Will is the first step in this process, the Succession Act 2006 (NSW) restricts that freedom by allowing certain classes of people to make a claim on your estate if they consider they have been left with “inadequate provision for their proper maintenance, education or advancement in life”.  Such claims are commonly called ‘family provision claims’.

What is a family provision claim?

family provision claim is an application to the Court seeking provision from a deceased estate.  Claims can be brought by a wide range of people (typically, people who have been dependent on you at some point during your lifetime) including:

  • a spouse or former spouse;
  • a person with whom you are living in a de facto relationship with at the time of your death;
  • a child;
  • a person who was at any time wholly or partly dependent on you and is either your grandchild or was a member of your household at any time (i.e. a former de facto partner); and
  • a person who was living in a “close personal relationship” with you at the time of your death.

The Court will consider a number of factors in determining whether there has been adequate provision for the proper maintenance, education or advancement in life of an applicant.  However, the key factors of any decision will generally be the size of the estate, the applicant’s financial resources and earning capacity (including the lifestyle to which they have become accustomed) and the competing needs of other potential beneficiaries.

Can I avoid a family provision claim?

In short, the answer is no.  However, there are strategies you can adopt to minimise the chances of a claim being successful.

Family provision claims generally ‘attack’ assets that form part of your actual estate on your death (i.e. assets held personally by the deceased).  Accordingly, one strategy available to avoid a family provision claim being successful is to structure your assets so that they do not form part of your estate on your death.  This could be achieved by:

  • gifting assets to beneficiaries during your lifetime;
  • creating joint tenancies over assets between yourself and the intended beneficiary;
  • holding assets in discretionary trust structures controlled by you; or
  • putting in place binding death benefit nominations in respect of your superannuation so that it is paid directly to beneficiaries on your death.

Obviously, there are a number of considerations you must consider when determining whether to implement the strategies outlined above including taxation and the loss of control over assets.  In addition, these strategies may not be as effective in NSW as in other jurisdictions, as legislation in NSW enables the Court to treat certain property that does not actually form part of your estate on your death as being ‘notionally’ part of your estate.  This means that, even where assets do not form part of your estate on your death, the Court may take these assets into account when determining the outcome of a family provision claim, increasing both the prospects of a claim succeeding as well as the potential amount the Court may award to the applicant.

Other strategies that can be adopted to protect your assets include:

  • making provision for potential applicants either in your Will or through the use of life insurance policies;
  • entering into a binding agreement with a potential applicant during your lifetime that documents a proposed property settlement in the event of your death; or
  • obtaining a formal release from the Supreme Court of New South Wales from the operation of the statutory provisions.

While implementing strategies to avoid potential claims being made on your estate can be useful, you cannot contract out of the family provision legislation and these strategies act only as ‘hurdles’ to the bringing of any claim.  Ultimately, the family provision legislation is complex and you should obtain independent legal advice if you intend to make a Will that leaves out a potential beneficiary or does not provide beneficiaries with adequate provision for their proper maintenance, education or advancement in life.

This article is not legal advice.  It is intended to provide commentary and general information only.  Access to this article does not entitle you to rely on it as legal advice.  You should obtain formal legal advice specific to your own situation. Please contact us if you require advice on matters covered by this article.