Attempts to disinherit children do not fare well.
The main object of the Family Provision Act 1982 (“the Act”) and its successor, the Succession Amendment (Family Provision) Bill 2008 (amending the Succession Act 2006) (“the Bill”) is to protect eligible persons in need from capricious, malicious or inadvertent will makers.
Is it is possible to disinherit your children? Some will makers believe it is or should be.
The answer is that it is exceedingly difficult, in no small part due to the notional estate provisions which permit the Court to claw back transactions undertaken by a will maker which have the effect of defeating the operation of the Act (or Bill).
“Can I put my estate out of the reach of my grasping children and/or disinherit them because of their behaviour?”
The notional estate/relevant property transaction provisions have been and are likely to continue to be construed broadly. To do otherwise would be to defeat the operation of the Act and make available to will makers determined to disinherit their children a means by which to do so.
There are 2 methods available to disinherit children namely:
1. the parent can gift their estate 3 (or more) years prior to death in which case the notional estate provisions would have no effect [s23 of Act and s80 of the Bill];
2. a parent can make provision for their children during the parent’s lifetime and obtain a release in consequence of such an arrangement [s31 of the Act and s95 of the Bill].
After the death of the parent, anyone defending the will needs to satisfy the Court a release was desirable having regard to all the circumstances of the case and in particular that any agreement to give a release was to the advantage of the child; i.e, it was prudent for the child to give the release, the provision of an agreement to give a release was fair and reasonable, and that independent advice had been received and due consideration given to the independent advice.
It can be interesting explaining to a parent determined to disinherit their child, how the notional estate/relevant property transaction provisions operate. Both permit a Court to designate property as notional estate in circumstances were a deceased:
(a) does, or does not do an act that results immediately or at some later time in property being held by another;
(b) without full consideration (value).
Section 76(2) of the Bill sets out a number of examples of relevant property transactions including the failure to sever a joint tenancy (“survivor gets all” title) and the failure to exercise a power to appoint or dispose of property.
It is difficult for a parent to part with assets without payment of full consideration (value), even when there are informal arrangements. A gift to a preferred child 3 years before death who might be relied upon to act in accordance with the deceased’s instructions leaves open a finding by a Court that the preferred child felt bound to act in accordance with the parent’s wishes and the failure of the parent to express such wishes triggers the prescribed transaction provisions. Such a conclusion is likely where:
(a) the preferred child has received the property for no consideration (i.e. the parent got nothing in return) and has no real need of their own; and
(b) the Court is mindful of the policy objectives of the Act and the Bill and keen to avoid the creation of escape routes by which a parent places property out of the reach of their children.
Even in circumstances where the relationship between the parent/will maker and child is irretrievably fractured, a claim made on the fact of the parent – child relationship alone is sufficient basis for the Court to make provision assuming need and other requirements are met.
The Court regards provision for a spouse or child as the most compelling of moral duties particularly in the case of minors. It is difficult to conceive of circumstances where a minor’s conduct could extinguish such a duty.
Where adult children have not been successful in their claims, it is usually because of the competing needs of other beneficiaries/claimants.
Where estates are sufficient to meet needs, the two types of cases in which the Court has regard to the nature of the relationship and the conduct of the applicant child, are:
(a) where there is virtually no relationship between parent and child; and
(b) bare paternity/maternity.
Even in circumstances of relationship breakdown a Court assesses the strength of moral claims made by children by considering all aspects of the relationship between the child and the parent as well as all aspects of the needs of the child. Relevant to such considerations will be the size and nature of the estate and other legitimate claims upon the estate which in turn require a consideration of the nature of the relationship of those claimants with the deceased.
In Nicholls v Hall [2007] NSWCA 356 the Court of Appeal considered that a relevant circumstance between a parent and a child was simply that:
“the parent was responsible for bringing the child into the world and having done so assumed a duty to be concerned for the child’s welfare”. The Court accepted a distinction in relation to mere sperm donors.
In reality where an applicant is a child, demonstration of that child’s needs is often enough to warrant the making of provision. The child/parent relationship is a strong moral claim and survives circumstances of limited contact.
In line with developing community expectations the Courts appear to accept there are very few cases where the breakdown of the parent/child relationship is solely the fault of the child or the child’s conduct post-breakdown counts significantly against the child.
It may not be realistic to advise disgruntled parents to make peace with their children. It may not be practical to obtain a release. It is probably necessary to advise parents of the legal reality created by the Act and the Bill.
Contact our Managing Partner, Dominic Wilson on (02) 8268 4000 or by email at dwilson@craddock.com.au for practical and professional advice.