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Many people do not realise that a Will, even if signed correctly, can still be challenged after a person dies.

It is important, therefore, to give careful consideration as to how to distribute your property on death, to limit the risk of a bitter (and potentially expensive) dispute between family members or loved ones after you die.

Who do I need to provide for in my Will?

Under the Family Protection Act you owe a duty to provide “adequate provision” for the proper maintenance and support of your:

  • Spouse, civil union partner or de facto partner (this duty is paramount).
  • Your children;

In some circumstances, you may also owe a duty to:

  • your grandchildren (especially if their parents are deceased or if their parent is unable to provide for them),
  • your stepchildren (if you were maintaining them or were eligible to maintain them immediately prior to your death) or
  • your parents (if you had been maintaining them immediately prior to your death or you have no surviving spouse/partner or children).

What is adequate provision?

Each case depends on its own facts. The Court looks at a range of factors including:

  • The size of your estate (the property you own/have an interest in);
  • The age of the person(s) claiming;
  • The financial need of the person(s) claiming;
  • The closeness of the relationship;
  • Whether the person(s) claiming has already been provided for during his/her lifetime;
  • Whether there are other competing claims;
  • Your reasons for why you have structured your Will as you have.

For example, the amount that you will need to provide for your young children differs to that of adult children. Your duty to provide for children who have regularly assisted you in your senior years may differ to a child who you have been estranged from for the last 30 years.

Where you have a duty to provide for more than 1 person, thought will need to be given as to how you can provide for them all.

 What can the Court do if I have not made adequate provision?

The Court can adjust what provision is made for the person claiming under your Will. If the Court does this, this will mean that the share of others under your Will will be reduced.

Will the Court always make changes?

No, not necessarily. The Courts recognise a person’s right to distribute their assets as they see fit. They will only intervene to the extent necessary to provide the person claiming with adequate provision, taking into account the factors set out above.

What about my spouse or partner? Are there any other ways they can claim against my property?

On your death, your spouse/partner is entitled to choose to either:

  • Take what is provided for them in your Will (if anything); or
  • Choose to make an application under the Property (Relationships) Act for division. If this is done, it is presumed that all “relationship property”, which includes items such as the family home, family chattels and all property acquired by either spouse/partner after the commencement of your relationship, will be shared equally.

If, in your Will, you give your spouse/partner less than half of what they would be entitled to under the Property (Relationships) Act, there is a significant risk that they will choose to make a claim under that Act, rather than elect to take under your Will.

To limit the risk, you and your partner/spouse would need to enter into a Contracting Out Agreement limiting your partner/spouse’s right to claim half your relationship property on death.

Are there any other ways my will can be attacked?

Your Will could also be attacked if you made a promise during your lifetime to provide for someone in your Will who carried out services or work for you. The Court could declare that that person has a right to be provided for from your estate.

Services can include not only things done for you during your lifetime, but also companionship, affection and emotional support (if it exceeds what would be normally expected of that person).

The amount of payment will not necessarily be what you promised them. The Court will consider:

  • The circumstances in which the promise was made, the services were provided or the work was performed;
  • The value of the services or work;
  • The value of the promise;
  • The size of your property; and
  • The nature and amounts of other competing claims.

What can I do to prevent claims against my estate?

The most important thing you can do is to discuss your wishes, your personal circumstances and your property with your lawyer at the time you are making your Will. This is especially important if you have children from a previous relationship to your current one or if you do not want to equally provide for your children.

Other things you can do include:

  • Keeping written notes of why you have made your Will as you have (especially if you suspect that there may be future issues). These notes often sit alongside the original of your Will and will assist the Court if a claim is ever made.
  • If your personal circumstances change, then consider reviewing your Will (e.g. if you have children, or if you marry/enter a de facto relationship, separation or divorce). Marriage automatically ends a Will, unless the Will was made in contemplation of your marriage. Divorce automatically ends any provision for your spouse/partner under the Will unless the Will states that the provision will continue on divorce.
  • Talk to your solicitor about protecting separate assets of yours which you do not want your spouse/partner to share in. A contracting out agreement (also known as a prenuptial agreement) might be appropriate as noted above.
  • Be careful about making promises to people to provide for them in your will.

Should you need any assistance with this, or with any other matter, please contact Paul Cowey at Parry Field Lawyers (348-8480).

You may have heard that trusts are a good protector of homes against relationship property claims. Indeed they may be – but they are not watertight protection. There are various ways that a trust can be attacked. It is therefore important to be aware of these situations so that you are less likely to fall victim to one of them.

Transfers of relationship property to a trust

If you have:

  1. Transferred “relationship property” to a trust since the beginning of your marriage or de facto relationship; and
  2. That transfer has defeated the claim of your partner i.e. they cannot claim an interest in it because it is now owned by a trust rather than their partner

then the Court can require you to compensate your partner or order the trust to pay income to him/her.

One of the key pitfalls to be aware of is that a family home is always classified as relationship property. So, if you decide to protect your home and transfer it to a trust after you are already living together with your partner in the property, this may be too late. The home has already become the family home and your partner may have an entitlement under this scenario.

Transferring property in order to defeat your partner’s claim

This is a broader test than the previous one. If there has been a transfer of property made (it is not restricted to trusts) in order to defeat any person’s relationship property claim, then the Court can overturn this transfer.

The property need not be relationship property at the time it is transferred to the trust. What is needed is:

  • That the home would have been relationship property on separation if it had not been transferred into a trust. Therefore, a transfer shortly prior to the beginning of a de facto relationship or marriage may even satisfy the test, as long as the intention requirement (below) is met; and
  • When you transferred your home to a trust, you must have had knowledge of the consequences of that transfer i.e. that you might be depriving your partner (or soon to be partner) of a share of an asset which they may have an entitlement to. You do not need to have a conscious desire to remove that asset from the Court or your partner.

Your trust is declared a “sham”

The Court can declare a trust to be a sham if there is evidence that the settlor (the person who effectively set up the trust) never really intended the trust to take effect.

This is a hard test to prove as most people do not set out with this intention. However, the following factors could assist with a sham trust argument:

  • The home has been transferred to the trust at less than full market value;
  • The settlor continues to treat the trust property as his own;
  • There are no trustee meetings;
  • The other trustees are rarely consulted;
  • No occupational rent is paid to the trust if the home is used by the settlor (though the trust might receive occupational rent by way of the settlor meeting trust debts, such as a mortgage);
  • The trust bank account is rarely used; or
  • The settlor does not ever turn his/her mind to the interests of other beneficiaries.

If the Court declares the trust to be a sham, it does not exist. The property in the trust will be treated as the settlor’s own property, which in turn can potentially be categorised as relationship property.

Illusory trust

An illusory trust is when a trust is declared to not exist because the settlor is able to control the trust entirely for his/her benefit. In particular, there is no way for the beneficiaries to hold the trustees accountable. Under the trust deed, the trustee (who in this case will also be a settlor and beneficiary) may have unrestricted powers, even though this may be contrary to the interests of other beneficiaries.

If the Court declares that the trust is illusory, it will have the same effect as a sham trust. The property will return to the ownership of the person who settled the trust.
The way to ensure that this argument is never raised is to consult with your lawyer about trustee powers at the time when the trust is being formed to ensure that they are balanced and reasonable.

Constructive trust

Finally, a Court can declare a “constructive trust” over a trust asset if:

  1. Your partner has made a contribution (in more than a minor way) to maintaining and enhancing the property;
  2.  At the time, you both expected that your partner would share in the property and this expectation is reasonable; and
  3. The contribution must greatly outweigh the benefits received. i.e. the contributions your partner made (money, time, labour etc) need to exceed the benefit of occupying the property.

This argument is more likely to be raised where the parties have lived in the trust property on a long term basis and the partner has made significant contributions during this period.
If a constructive trust is declared, the Court may grant the applicant an ownership interest by declaring that the trust holds the property on trust for the applicant in such shares as it determines. When assessing what share of the property your partner may be entitled to, the nature and value of the contributions will need to be considered.

What can you do to prevent the likelihood of any of these grounds of attack being successful?

The best protection that you can have against attack is to enter into a property agreement within the first 3 years of your relationship, declaring that your interest in the trust and its assets are your separate property.

Other measures include:

  • Consulting with your lawyer about the desired purposes of the trust, trustees, beneficiaries and terms of the trust prior to formation;
  • Ensuring that your home is transferred to a trust prior to commencing a relationship (if at all possible);
  • Understanding and carrying out your trustee duties with diligence – e.g. ensure that meetings are had and minutes taken, use the trust bank account for the payment of outgoings, have financial accounts prepared;
  • Consider whether you and your partner should be paying occupational rent to the trust when occupying trust property;
  • Do not allow your partner to make any major contributions to the property e.g. provide finance or labour for extensive renovations, unless there is legal documentation in place to record the arrangement;
  • Consider renting out the property to someone else rather than living in it together.

This article is not a substitute for legal advice and you should talk to a lawyer about your specific situation. Please contact Lois Flanagan at Parry Field Lawyers (348-8480) loisflanagan@parryfield.com