1. What is a family provision claim?

a family provision claim is also known as a “claim” or court proceeding for further entitlement from an estate, as “contesting a Will” or as an application for “further and better provision.”  These claims or applications are made where an “eligible” person has been left out of a will completely or where they seek a greater share from an estate.

2. Who is able to make a claim?

We sometimes receive queries where a client is concerned that their sibling or friend might make a family provision claim, however, only certain applicants as defined within the Succession Act are “eligible”.

“Eligible applicants” include a:

• “Spouse”, defined as including a husband, wife, de facto partner, civil partner and a dependent former spouse.  It is possible for someone to have more than one spouse if, for example, they remain married but have entered into a new de facto relationship;

• “Child” which includes stepchildren and adopted children;

• “Dependent” – means a person who was being wholly or substantially maintained or supported by the deceased at the time of their death and who is:
  • A parent of the deceased;
  • A parent of a surviving child under the age of 18 of the deceased person; or
  • A person under the age of 18.

3. Are there any timeframes to be complied with?

an applicant must notify the executor in writing within 6 months from date of death of their intention to make bring a family provision claim.  They must then file the application in the Court within 9 months from date of death. 

The Court has discretion to allow an application to be held out of time after considering factors such as the reason for delay, whether the estate has been distributed and whether the beneficiaries of the estate would be prejudiced by allowing the application to proceed.

4. What are the steps that must be taken for a claim?

When an applicant files an Application for further provision, they must also file an Affidavit which sets out information in support of their case and a draft directions order which sets out a proposed timeline for the steps leading up to a trial of a matter.  The executor can either agree with the proposed dates or negotiate dates with the applicant. 

The directions order sets out dates for:

• The executor to serve material on any person who may be affected by the claim;

• The filing of a Notice of Address for Service by anyone who wishes to be separately represented;

• The filing of affidavit material by all parties;

• A compulsory without prejudice meeting to be held, usually between lawyers to narrow the issues and negotiate a settlement;

• The parties to attend mediation (this is a compulsory step);

• The matter to be set down for a trial if the matter does not settle at mediation.

5. What does the court consider?

Once eligibility has been confirmed, the court considers the claim on a two-step process:

• Whether there has been “adequate provision” for the applicant’s proper maintenance and support;

• If so, then what provision, if any, ought to be made out of the estate for the applicant.

Relevant factors included the value of the estate, the applicant’s financial circumstances and future needs and the competing needs of all beneficiaries.

6. Who pays for the claim?

The parties may negotiate costs, however, if they are unable to agree and the matter proceeds to a trial then costs are in the court’s discretion.  A successful party will usually have some proportion of their legal costs paid by the other party.

If the applicant is successful, then the estate will usually pay for the applicant’s standard costs.  If an applicant is unsuccessful then the Court may order that they pay their own costs, or even that they pay the executor’s costs.

The Court will consider the size of the estate, any reasonable offers that were made and if a party has failed to comply with the rules or a practice direction of the Court.

We recommend obtaining legal advice when considering filing an application.  We can assess the likely outcome of an application and advise of possible risks at an early stage.

7. What if I leave them a small gift?

We are sometimes asked whether a claim can be prevented if a testator leaves someone a small sum of money and we have seen Wills where a beneficiary is left a gift as small as $1 in an attempt to prevent a claim.  However, the relevant consideration is not whether an applicant has been left a distribution but whether that distribution is adequate for their needs.

At Perspective Law we are experienced in family provision claims, including acting for applicants or for executors defending the claim.  We can also provide advice when drafting your estate plan if you have concerns that a claim may be made on your estate.  If you wish to discuss your options, please contact Tony Crilly tony.crilly@perspectivelaw.com or Lauren Nolan lauren.nolan@perspectivelaw.com. Call us today at Perspective Law on 07 3839 7555 or go directly to our website and start the process on-line www.perspectivelaw.com.

The new edition of the Contract for Houses and Residential Land (17^th ed.) and Contract for Residential Lots in a Community Title Scheme (13^th ed.) were released late January of this year, and already the property world is buzzing. One of the biggest amendments to the contract terms, is under clause 6.2 the new ability of either party to obtain an extension for up to 5 working days if they are unable to settle due to delay or inaction of the Financier. More than one notice can be given but settlement must not be more than 5 business days from the original date.

In an obvious response to the media coverage of the incident in late 2021, where a retired couple claimed the deposit (a significant $65,000.00) on a young first home buyer couple who were unable to settle as a result of the Financiers delay, the Real Estate Institute of Queensland in collaboration with the Queensland Law Society have attempted to ameliorate what some would consider the harsh reality of our “time is of the essence” provisions.

This brings Queensland contracts (well, REIQ residential contracts at least) in line with the position in other states in Australia. Victoria for example, allow for a ‘default notice’ to be served on the Buyer if settlement does not occur as scheduled, giving them 14 days to remedy the default (on payment of penalty interest). The new clause in the REIQ residential contracts grants a unilateral right to an extension of up to 5 Business days, provided it is exercised prior to 4:00pm on the Scheduled Settlement Date. There is no limitation on the number of extensions that can be requested, provided the cumulative time does not exceed the 5 Business Days.

There are some questions being raised in the aftermath of the release of these amendments however, as to who should bear the additional legal costs of extending the settlement and whether these provisions can be contracted out of. What it does make clear is that if settlement timing is important for you (for example, in a situation where you are Buying a property and Selling a property simultaneously or need to book removalists and the like) a review of the contract prior to signing is critical to ensure your interests are protected and youunderstand the possible outcomes of the contract you are entering into.

The New REIQ contract also adds clauses about smoke alarms, pool compliance, payment of deposits by direct transfer, new sellers warranties on enforcement notices, services passing through the land which do not have an easement and new definition of the Contract date to address signing electronically.

Please contact our team at Perspective Law for assistance in all your Property matters at Tony.Crilly@perspectivelaw.com or Katherine.Blood@perspectivelaw.com   

Our last blog outlined some of the major points about testamentary discretionary trusts.

This blog will address some of the other key features of a testamentary discretionary trust (TDT).

As previously discussed, two of the main benefits of a TDT are asset protection and tax minimisation. You can read more about these benefits here (link Lauren’s blog).

Some of the other benefits of a TDT include the ability to:

• incorporate the terms of a Special Disability Trust (SDT);
• defer capital gains tax (CGT) liability;
• stream capital gains and franked distributions to beneficiaries; and
• “mere expectancy” asset protection.

1. Special Disability Trust

A TDT can be drafted to incorporate the terms of an SDT.

One of the major benefits of a SDT is that contributions by immediate family members to the trust do not impact on the mean test concessions for the beneficiary to the extend the contributions do not exceed the total amount which can be gifted to a trust (currently $500,000).  

There are also significant CGT exemptions for any asset donated to a SDT, including the main residence exemption.

If the amount to be distributed to a SDT exceeds the assets test assessment exemption (up to $694,000 indexed 1 July each year) then the balance of funds can be held by a separate TDT.

Incorporating a SDT under a TDT maximises the benefit for a disabled beneficiary. 

2. CGT Rollover

The assets transferred to a beneficiary pursuant to a Will, will not trigger a CGT event, until the assets are sold or transferred to a third-party. This is referred to as CGT rollover.

The same CGT rollover also applies to an asset transferred to a beneficiary from the Trustee of a TDT.

This position was confirmed by the ATO in Practice Statement LA 2003/12. It states:

“The cost base and reduced cost base of the asset in the hands of the beneficiary is calculated in the same way as it would have been if the asset had passed to them from the deceased’s legal personal representative.”

The principal place of residence exemption under s 118-195 of the Income Tax Assessment Act 1997 may also apply to beneficiary of a TDT exercising a right of residence granted by the terms of the Will. It is imperative the Will gives each beneficiary a qualified right of residence in relation to property.

3. Income and Streaming Powers

Provided it is not prevented in the Will, a TDT can stream capital gains and franked dividends.

This is the same as an inter vivos trust, subject to the terms of the TDT.

The benefits of a Trustee’s power to stream were set out by the ATO as follows:

“This allows beneficiaries to offset capital gains with their capital losses, apply applicable discounts and, subject to integrity rules, get the benefit of any franking credits attached to a franked distribution.”

4. Asset Protection

Also discussed in our previous blog was the protection that a TDT gives to a beneficiary in the event of a family law claim or bankruptcy.

However, to afford such protection, the testator must be willing to impose strict controls, exclusions and fetters on the terms of the TDT. 

In the Family Law context, the Court has not been inclined to consider the assets in a TDT as matrimonial property, or the financial resources of a party, in circumstances where a beneficiary has a “mere expectancy”.

Factors relevant to considering whether a party has a mere expectancy include:

• Whether the party is a beneficiary to a trust;

• The number of beneficiaries in the trust; and

• History, frequency and value of the distributions made to the party during the operation of the trust.

A key question is whether a beneficiary’s interest in the trust is really “discretionary”.  For this reason, a single testamentary trust controlled by all children arguably provides better asset protection than separate testamentary trusts for each child. This may be worth considering if the prospect of a family law claim against a beneficiary is likely.

To discuss TDTs further, we encourage you to call Elizabeth Ulrick on 07 3317 4311 or email her at elizabeth.ulrick@perspectivelaw.com.