How much is enough?

We are often asked the question ‘how much should I leave for my children’, especially when children are not being treated equally or a child is estranged. Unfortunately, there is no magic answer. If the child is an eligible applicant under the applicable State or Territory legislation for estate claims, the individual should try and make adequate and proper provision for that child even if they do this reluctantly.

However, what is adequate and proper is very hard to determine especially when dealing with significant estates when some children and parents may be used to a certain lifestyle. This is further complicated by the concept of notional estate in New South Wales which does not apply elsewhere. This can bring in superannuation, property held as joint tenants, family trusts and assets gifted within three years of death into any estate claim. The recent New South Wales case (Estate Hemmes; Cameron v Mead [2018] NSWSC 85 (09 February 2018)), concerning the estate of the late John Hemmes highlights the difficulties:

• John died in March 2015 with an estate of a negative value of around $300,000. Not included in the estate was the family home and an interest in a self-managed superannuation fund (SMSF) together worth just under $40 million. Just before John died he also transferred $5.7 million into the names of two of his children.
• No provision was made in John’s Will for a third child, a son, Edward from another relationship. Edward did not have a relationship with John.
• Edward made a ‘notional estate’ claim against the half interest of the home and SMSF. He claimed $4.1 million.
• The Court held it was satisfied that Edward had been left without adequate provision for his proper maintenance, education or advancement in life out of the estate or notional estate of the deceased. However, Edward’s barrister argued that $4.1 million was a reasonable amount to set him up in life, whilst the executor’s barrister said if any money were to be awarded it should be much less than $1 million, as the Court should not grant a ‘wish list’ which covered establishing a business and buying a home.
• The Court granted Edward a legacy of $1.75 million taking into account the deceased’s ‘moral duty’ to make provision for him, the size of the deceased’s available notional estate and Edward’s aspirations, but also the deceased’s entitlement to testamentary freedom, qualified by the New South Wales Succession Act, an object of which is not to empower the Court to re-make his Will.
• Interestingly, the Court held that although Edward ought to be given a substantial award, he was not entitled to be established in accommodation beyond his and his fiancées’ reasonably foreseeable needs. It also held that the fact that there was no competing need for the $4.1 million did not justify Edward being entitled to all of this as notional estate.

What to do and how we can help?

Whatever you are thinking of leaving your children, whether it be equal provision (which does not prevent a child bringing an estate claim) or if you do not intend to leave one child anything for historical reasons, it is important that you obtain advice regarding this to ensure that you understand the issues and potentially take steps, to try to limit the chance of any estate claim (if one is made), being successful.

Hall & Wilcox is highly experienced in dealing with these issues. Although we understand that the succession planning process can be a complex one, our goal is to make this process as simple and straightforward as possible. We work closely with you and your advisers to understand your goals, and provide an easy to understand, step by step process, to achieve these goals.