What you need to know about a notional estate

Date: Oct 10, 2014

These days, estate planning is becoming increasingly difficult, thanks to the wide variety of assets that individuals now hold, including complex financial products like superannuation.

In this situation, people who are planning the future of their estate, or are considering contesting the will of a recently deceased individual, will need to understand the importance of a notional estate.

What is a notional estate? 

In New South Wales cases involving contested estates, the court considers a deceased person's actual estate and any property that may be part of his or her notional estate.

A deceased person's actual estate is comprised of the assets deceased person has in his or her possession at the time of death. For example, an actual estate includes assets such as personal bank accounts and real estate held either solely by the deceased person or as tenants in common with another.

In Family Provision cases the court may declare there are assets that do not form part of a deceased person's actual estate but do form part of their notional estate. Assets are only declared to be part of a person's notional estate where the deceased person does or does not do something which results in the property being held by another person or subject to a trust and the deceased person does not receive adequate benefit for that transfer. The act or omission of transferring the property has to occur within three years of the deceased person's death.

Examples of property that may be declared notional estate include:

1. Shares in a family company gifted by the deceased person to another two years before the deceased person's death

2. A superannuation death benefit where the deceased person made a binding death benefit nomination five weeks before his or her death.

3. Real estate which the deceased purchase outright but held as joint tenants with another New South Wales is the only state where a notional estate will be factored into an estate dispute.

Does a notional estate only apply in New South Wales?

While the concept of a notional estate is unique to the NSW legal system, that doesn't mean that it only applies to those who reside in the state. In fact, any property that is held within the state can be declared notional estate, even if the deceased passed away elsewhere in the country and had no other connection to the area.

This is especially relevant for shares or land that is situated within NSW, as these will often form part of an individual's notional estate, and can therefore be the subject of an estate dispute.

It is important to note that the court will not declare an asset part of the deceased's notional estate unless a claimant proves:

1. He or she meets the other requirements set out in the Succession Act 2006 (NSW); and

2. there is not sufficient funds in the deceased's actual estate for adequate provision to be made.

If you would like to contest an estate or property held in New South Wales which may be declared a notional estate, make sure you contact a wills and estates lawyer. They will be able to offer much greater information on the process of contesting this will, while also offering advice that is specialised to your situation.