Will disputes: notional estate orders in NSW
When a challenge is brought for further provision under a Will in NSW, it is important to consider the implications for superannuation and family trust assets.
In the fourth instalment of our estate disputes series, we look at property transactions that take place prior to an individual’s death, and the Court’s powers to nullify the transaction and restore the estate.
How does the Court intervene on property transactions prior to death?
The Court can intervene on a property transaction that occurred during the life of the deceased, which in some way reduced their estate value or disadvantaged an eligible person. Such intervention is typically linked to the eligible person’s application to the Court for further provision under a Will.
Transcript
Joel Whale
[Transcript]
Well notional estate orders are unique to NSW, and they can form part of a family provision claim. They generally involve a property transaction that occurred during the life of the deceased, which in some way has reduced the value of their estate or disadvantaged an eligible person who has applied to the Court for further provision.
Practically speaking, the Court intervenes to make an order by designating the property from that transaction, as going back into the asset pool, for the purposes of the family provision order. And this ensures that there’s enough funds to meet a successful claim.
But when it comes to applying for an order, there’s a couple of hurdles to overcome.
Firstly, what was the value of the property transaction? If the transaction involved a nominal fee or gift, than that would likely qualify for an order. For example, real estate, the holiday house or farm may have been gifted to a family member for no consideration.
And secondly, when did the transaction take place? If it took place within three years before the deceased’s death or on or after the deceased’s death, then the transaction would be relevant to the order.
Importantly for our referrers and their clients, notional estate orders can be broad in scope and extend to superannuation death benefits and family trust assets, which don’t form part of a deceased’s estate.
And this is why it’s really important to take a holistic view to succession planning, and ensure death benefit nominations and the family trust are kept under review. This is a simple step to avoid unintended consequences and future disputes. Also, if there’s concerns about a claim being made, seeking advice and planning ahead to restructure assets as soon as possible, can help manage the three year window.
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SubscribeIn practice, the Court makes a ‘notional estate order’ to designate the property from that transaction, as going back into the asset pool for the purposes of the further provision. This ensures there will be enough funds in the estate to meet a successful claim.
What is required to obtain a notional estate order?
Two factors that are particularly relevant to an application for a notional estate order are:
- value of the property transaction – the order is relevant if the property transaction involved a nominal fee or gift. For example, if real estate was gifted to a family member for no consideration; and
- timing of the property transaction – to qualify for the order, the transaction must have taken place within three years before the deceased’s death (or on or after the deceased’s death).
Why are notional estate orders relevant to superannuation and family trust assets?
Notional estate orders can be broad in scope and the Court has applied these orders to property transactions involving superannuation death benefits and family trust assets, which don’t form part of a deceased’s estate.
It is therefore important to take a holistic approach to succession planning, and ensure death benefit nominations and the family trust are kept under review, to avoid unintended consequences and future disputes.
Key takeaways
Notional estate orders are unique to NSW; they can apply to superannuation and family trust assets, and can form part of a family provision claim.
If there are concerns about certain property transactions in the years prior to death or a claim being made, getting advice and planning ahead to restructure assets as soon as possible can help manage the risk of dispute.