Deceased

Deceased estate litigation

Succession Act claims

We are often called upon to advise clients in relation to claims on estates in relation to such things as challenging the validity of the Will (such as due to lack of mental capacity when the deceased person made the will or duress) or what is known as a Succession Act claim or a family provision claim (where a person says that adequate provision was not made for them in a Will). We discuss the latter here.

The purpose of the Succession Act is to seek to ensure that “adequate” provision is provided from a deceased’s estate to the family members of a deceased person (and others). Claims under the Act are based on needs.

Important facts

  • Claims must be made within 12 months of the date of death of the deceased (although in limited circumstanced, this time limit can be extended).
  • To make a claim, you must first establish that you are an “eligible person”.
  • Assuming you are an “eligible person”, you must demonstrate needs beyond the provision that was made for you in the Will (if any) for your proper maintenance, education or advancement in life.

Who is an eligible person?

Those who are eligible to make a claim for a provision out of deceased estate include:
  • A spouse of the deceased at the time of the deceased’s death;
  • A person in a de facto relationship with the deceased at the time of death
  • Children (including adopted children) of the deceased;
  • Former spouses of the deceased;
  • Someone with whom the deceased was in a close personal relationship* at the time of their death;
  • Those who have, at any time, been wholly or partly dependent upon the deceased:

- were either a grandchild of the deceased; or

- were, at any time, member of a household of which the deceased a member.

* A “close personal relationship” is a relationship other than a marriage or a de facto relationship between two adult persons, whether or not related by family, who are living together, one or each of whom provides the other with domestic support and personal care but not for reward or on behalf of another person or organisation.

What is involved?

To make a claim, the proceedings are usually commenced in the Supreme Court by way of Summons and evidence will be required in an affidavit setting out the nature and history of the relationship, contributions made to the deceased’s property and wellbeing, details of your financial need and any other relevant factors.

Simply having financial needs and showing some level of dependence on the deceased is not the end of it. The Court will have to weigh up many other factors, such as the size of the estate, the deceased’s wishes (such as those stated in a statement of testamentary intention or other similar document), competing claims from others, circumstances and events that may tend to dis-entitle a person from a benefit and so on.

Time and costs involved

Litigation is a lengthy and time-consuming process and it is an emotional one with family relationships being strained by what may be contained in affidavits or said in the witness box at a hearing. That said, often the estate pays the costs (or a large proportion of them) involved in such cases so it may not be a financial burden to enforce your rights.

Most cases settle prior hearing and usually at a mediation that can be arranged by the Court or by private agreement between the parties. Settlement is often advised to avoid the risks, costs (and emotional cost) of litigation and to help preserve any family relationships.

Often we act for the executors of an estate, but we also act for beneficiaries and those that are not mentioned in Wills at all.
Further information

If you would like any more information in relation to Wills, deceased estate litigation or estate planning/business succession issues generally, please contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au

So what actually is Probate?

WHAT IS PROBATE?

An application for Probate ought generally to be made with the Supreme Court within 6 months of the date of a person’s death. If more than 6 months has elapsed, the Court may require evidence in the form of an affidavit explaining the reasons for the delay.

Many entities that record asset ownership (such as the Department of Lands, banks, aged care facilities and share registries) will not release or transfer the assets of a deceased estate until Probate is obtained. If real property (land) is involved, a Grant of Probate will be required.

HOW DO YOU APPLY FOR PROBATE?

Probate is obtained by making an application to the Supreme Court. Documents including a Summons, Inventory and Affidavit or Executor are filed and various notices are published. Most people use a lawyer to do this for them.

If the executor’s application for probate is approved or granted, the executor is given a sealed document called a “Grant of Probate”.

If a deceased person does not have a Will, their estate is not administered after obtaining a Grant of Probate however, a similar document called “Letters of Administration” can be obtained by family members, such as a surviving spouse or children. The estate is then distributed as governed by the laws of intestacy – a statutory formula for how a person’s estate is divided if they don’t have a valid Will.

IS PROBATE NECESSARY FOR JOINT ASSETS?

If the deceased person owned assets jointly with other people (such as a spouse), probate is not required to deal with those particular assets because, at law, those assets pass to the surviving joint owner immediately on the other joint owner’s death.

Where a deceased estate comprises only of a few assets of small value, it is common for banks and the like to dispense with the requirement to obtain a grant of probate provided that the executor provides an indemnity for any claim made by others for wrongly releasing the asset.

WHAT HAPPENS AFTER PROBATE?

After a Grant of Probate is obtained, the executor can get in all of the deceased’s assets, pay any estate liabilities and distribute the estate as required by the Will, subject to there being no unsatisfied claims by creditors or family members such as those under the Succession Act 2006. Often distribution takes place around 12 months after death.

WHAT DOES IT COST?

There are 2 aspects of dealing with an estate and the costs for each part are charged separately: the first part is the cost of obtaining Probate or Letters of Administration; the second party is actually administering the estate as required by the Will.

The cost of applying for probate is determined and fixed according to a scale set out in Schedule 3 to the Legal Profession Uniform Law Application Regulation 2015, with the cost being calculated by applying the statutory formula to the total value of the estate.

The costs of administering the estate after probate (selling or transferring the assets) are not capped, are usually charged at hourly rates and an estimate of costs should be provided.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to probate, estate planning or business succession, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.

Wills with testamentary trusts – why you need one

WHAT IS A TESTAMENTARY TRUST?

A Testamentary Trust is simply a trust established by a person’s Will.  As opposed to more “simple” Wills, where beneficiaries receive the benefit of any gift personally, with a Testamentary Trust, the beneficiaries receive the benefit of the gift but rather than having it legally owned by them personally, a trustee holds the relevant asset in trust for them.

Wills with Testamentary Trusts are recommended by many lawyers, accountants and financial advisers for various reasons, including asset protection and taxation advantages.

ASSET PROTECTION

Because of the legal ownership being different to the beneficial interest, Testamentary Trusts can offer beneficiaries significant and important advantages such as asset protection. As the trustee of the Testamentary Trust owns the asset (not the primary beneficiary personally), creditors and trustees in bankruptcy of the relevant beneficiary cannot gain access to the asset.

Often, beneficiaries are in business for themselves and have implemented asset protection measures so as to keep their assets safe from claims by third parties. The last thing that beneficiary may want is to receive an inheritance in their personal name, effectively undoing all of their efforts to safeguard their assets!

There can be significant tax advantages in taking an inheritance through a testamentary trust, in addition to asset protection.

Testamentary Trusts can be drafted so as to have the beneficiary effectively control the trust and for that control to be relinquished on the occurrence of certain events, such as bankruptcy or divorce/marital separation, with a nominated person to act in the role of trustee whilst that incapacity remains.

TAXATION BENEFITS – INCOME SPLITTING

Rather than taking a gift in a personal capacity as would usually be the case with a more “basic” Will, with a Will that incorporates Testamentary Trusts, beneficiaries have the ability to split income earned among other people in their family such as spouses, children, grandchildren or any other company or trust in which they have an interest.

Where an estate has income producing assets such as an investment property, under a more “simple” will, the person who received that gift would have the income earned from that asset added on top of the income they already receive from their employment or investments. This could mean that they go into the next marginal tax bracket and pay significantly more tax.

A Testamentary Trust allows the income earned to be split amongst the various family members, many of whom are likely to either not be working (so the tax free thresholds become available) or earn lower incomes (and are therefore in lower taxation brackets).

Children that receive income from a Testamentary Trust are taxed at marginal rates as if they are adults (as opposed to the usual discretionary / family trusts, where they are taxed at unearned income penalty tax rates) so for a family with a non-working spouse and several children, significant income can be received whilst very little or no tax may be payable on the testamentary trust income.

FURTHER INFORMATION

Craig Pryor is principal solicitor at McKillop Legal. For further information in relation to estate planning, business succession or any other commercial law matter, contact Craig Pryor on (02) 9521 2455 or email craig@mckilloplegal.com.au.