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Family Provision Claims by Adult Children in NSW

  • Wills and Estates Law
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  • December 7, 2017

Family Provision Claims by Adult Children in NSW

Diamond Conway Legal Article

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Family Provision Claims by Adult Children in NSW

By Martin Pooley, Senior Associate

 

Even where an adult child is living an independent life and may own a home, has other assets, has the support of a spouse or partner, and is capable of meeting his or her day to day financial commitments, that financial position will not necessarily prevent that adult child from making a claim for provision or additional provision from his or her late parent’s estate.

Where a Court is considering whether to make a family provision order and what order, if any, ought to be made for the applicant, the question for the Court as set out in s59 of the Succession Act 2006, is whether the deceased has failed to make adequate provision for the applicant’s proper maintenance, education, and advancement in life at the time when the Court is considering the application. The second question for the Court is what order for provision, if any, ought to be made.

In determining these two questions the Court will need to consider all of the circumstances of the case and the factors set out in s60(2) of the Act which include:

  1. the relationship the applicant had with the deceased;
  2. the nature and size of the estate;
  3. the financial resources and the needs of the applicant, other claimants and beneficiaries;
  4. the nature of any obligation owed to the applicant and to other claimants and beneficiaries;
  5. any provision made to the applicant during the deceased’s lifetime;
  6. the testamentary intentions of the deceased;
  7. the character and conduct of the applicant and any other relevant person before and after the deceased’s death;
  8. contributions made by the applicant to the deceased’s assets and the other factors set out in s. 60(2).

In the judgement of Associate Justice Hallen  (as he then was) in the case of Butler v Morris [2012] NSWSC 748 he provides at paragraphs 106-107 a very detailed summary of the case law relating to claims by adult children and states that the following principles are useful to remember:

  • The relationship between parent and child changes when the child leaves home. However, a child does not cease to be a natural recipient of parental ties, affection or support, as the bonds of childhood are relaxed.
  • It is impossible to describe in terms of universal application, the moral obligation, or community expectation, of a parent in respect of an adult child. It can be said that, ordinarily, the community expects parents to raise, and educate, their children to the very best of their ability while they remain children; probably to assist them with a tertiary education, where that is feasible; where funds allow, to provide them with a start in life — such as a deposit on a home, although it might well take a different form. The community does not expect a parent, in ordinary circumstances, to provide an unencumbered house, or to set his or her children up in a position where they can acquire a house unencumbered, although in a particular case, where assets permit and the relationship between the parties is such as to justify it, there might be such an obligation
  • Generally, also, the community does not expect a parent to look after his, or her, child for the rest of the child’s life and into retirement, especially when there is someone else, such as a spouse, who has a primary obligation to do so. Plainly, if an adult child remains a dependent of a parent, the community usually expects the parent to make provision to fulfil that ongoing dependency after death. But where a child, even an adult child, falls on hard times, and where there are assets available, then the community may expect a parent to provide a buffer against contingencies; and where a child has been unable to accumulate superannuation or make other provision for their retirement, something to assist in retirement where otherwise they would be left destitute.
  • If the applicant has an obligation to support others, such as a parent’s obligation to support a dependent child that will be a relevant factor in determining what is an appropriate provision for the maintenance of the applicant. But the Act does not permit orders to be made to provide for the support of third persons whom the applicant, however reasonably, wishes to support, where there is no obligation to support such persons.
  • There is no need for an applicant adult child to show some special need or some special claim.
  • The adult child’s lack of reserves to meet demands, particularly of ill health, which become more likely with advancing years, is a relevant consideration. Likewise, financial security and a fund to protect against the ordinary vicissitudes of life, is relevant. In addition, if the applicant is unable to earn, or has a limited means of earning, an income, this could give rise to an increased call on the estate of the deceased.
  • The applicant has the onus of satisfying the court, on the balance of probabilities, of the justification for the claim.
  • Although some may hold the view that equality between children requires that “adequate provision” not discriminate between children according to gender, character, conduct or financial and material circumstances, the Act is not consistent with that view. To the contrary, the Act specifically identifies, as matters that may be taken into consideration, individual conduct, circumstances, financial resources, including earning capacity, and financial needs, in the Court’s determination of an applicant’s case.

Case Study 1 – Brand v Brand [2015] NSW SC 52 – 11 February 2015

In this case Justice Pembroke dealt with an estate including notional estate which had a value of $598,840 with notional estate of $35,698 which was monies already distributed from the estate by way of a partial distribution to all of the beneficiaries.

In the deceased’s Will he left one third of his estate to his nephew, his first wife’s mortgage debt of $62,066 was to be paid, and the balance of the estate was to be divided equally between his two sons, three of his nephews and his niece. It was estimated that the deceased’s two sons would each receive about $61,000.

The deceased’s son Peter from his second marriage was aged 51, had little assets other than $91,000 of superannuation. He was married with five children (including a newborn baby),was living in housing commission accommodation, and employed on a casual basis as a petrol station attendant. His wife received income of $400 a month plus Family Tax benefits. He suffered from injuries to his back and epilepsy which affected his working capacity. He had a good relationship with his father and had lived with deceased for about 4 years from 2003-2007 when the deceased became ill.

The deceased’s son Stephen from his first marriage was aged 63 years and was living in rented premises with his wife. He and his wife had recently received an inheritance from his mother’s estate of about $221,000. He and his wife had expended some of these monies but at the time of the hearing they had cash assets of $110,000, a demountable home in a caravan park worth $45,000 where their daughter resided, and two motor vehicles worth $17,000.  He presently worked two days a week as a volunteer in a charity and was on a Newstart Allowance. His wife received a carer’s pension of $705 per fortnight as her husband had suffered a stroke and was on medication.

The position of the competing beneficiaries was that the nephew who was to receive one third of the deceased’s estate, was in a very strong financial position and none of the deceased’s remaining nephews or his niece put on any evidence as to their financial positions. Counsel for the defendant conceded that the other beneficiaries named in the Will would suffer no hardship if they were to be deprived of their legacies under the Will. As a separate matter the deceased’s first wife was dead and her estate was now fully distributed to Stephen.

Judgement – 60% to youngest son and 40% to eldest son

Justice Pembroke ordered that after payment of the defendant’s and the plaintiffs’ costs of the proceedings from the estate the balance of the net estate be divided with the youngest son Peter to receive 60% and the eldest son Stephen to receive 40%. The other nieces and nephews were not to receive their legacies beyond the partial distribution they had already received. The first wife’s mortgage debt was not to be paid to her estate.

Case Study 2 – Goldsmith v Goldsmith [2012] NSWSC1486 (6 December 2012)

In this case Justice Hallen was dealing with the claim by an adult son in respect of an estate that had an approximate value of $800,000 and was mostly comprised by the deceased’s home at Cronulla.

The deceased had three children and the bulk of the deceased’s estate was left to two of her children. The deceased’s second son, Ian was only left a legacy of $10,000 with the explanation that he had received financial assistance during her lifetime.

Although there were claims made by the deceased that she had been attacked by Ian, Justice Hallen did not accept that Ian had acted in a violent way towards his mother but simply formed a view that there might have been some disharmony at some point in the last years of her life.

Ian was estranged from his mother during the last ten years of her life but His Honour noted that Ian had played a significant role in her life for a 9 year period prior to this estrangement where he was living with his mother and father and assisted them. His Honour noted that these facts did not disentitle Ian to provision but did restrain the amplitude of the provision that should be made.

Ian’s financial position was that he had $22,050 in assets, $35,500 in debt and $49,000 in superannuation. His income in the year ending June 2010 was $45,801. He lived with his wife in a house that she owned. His wife’s home, car, and savings had a total value of $210,000 and she had a mortgage debt of $150,000. She also had superannuation of $124,532.

The financial position of the deceased’s two other sons was that the younger son aged 49 had assets of $882,500 and debts of $25,000. The oldest son aged 54 chose not to disclose his assets. His Honour noted that neither of these sons put themselves forward as competing claimants.

In the evidence it was accepted that Ian had received financial assistance from the deceased in the period 1989-1997 mostly whilst he was living with the deceased. The amount of this assistance was disputed but it was submitted by the defendant that of the sum of $93,451 received at least $36,000 was directly for Ian’s benefit.

Judgement – Ian is awarded 27.5%

Justice Hallen determined that the plaintiff’s financial position was difficult in that he had relatively few assets and that his working life was coming to an end in circumstances where his working capacity might be restricted by problems with his shoulder. He noted that the plaintiff had no monies for future contingencies and in the circumstances where there were no competing beneficiaries he awarded the plaintiff  27.5% of the nett  proceeds of the sale of the deceased’s home (which was essentially the only asset in the estate) after the payment of all costs including the costs of the proceedings.

Case Study 3 – Butler v Morris [2012] NSWSC

In Butler v Morris Associate Justice Hallen dealt with a very small estate worth approximately $330,000 – $360,000.

In the deceased’s Will she left 70% of her estate to her 46 year old daughter who had lived with and cared for her in the last five years of her life when she was very dependent on her daughter for her care.

The deceased left 30% of her estate to her 43 year old son who had lived with the deceased and her husband for most of their lives up until the last three years before her death when he was living in his own apartment.

The deceased left nothing to her 50 year old intellectually impaired daughter who had been in institutional care since 1972.

In this case both beneficiaries had received substantial financial support from their mother. The daughter had received approximately $280,000 in the seven year period prior to the deceased’s death and the son had received a loan of  $48,500  to assist him in purchasing an apartment, of which he had only repaid $2,720 of this debt.

The son had about $100,000 equity in his apartment, credit card debts of $30,000 and combined annual gross income with his wife of $99,000 per year. His superannuation was $130,000.

The daughter who was to receive 70% of her mother’s estate had a very difficult financial position in that she and her husband had little assets other than their car and their possessions, credit card debt of $53,000, and estimated annual gross income of $75,880 per year. They also had two dependent children and had been living in the deceased’s house rent free for the past nine years including two years since her death. 

Judgement – son’s provision only increased marginally from 30% to 37%

The son’s provision was increased from 30% of the deceased’s estate to 37%, the daughter who was in institutional care received 13%, and the other daughter’s share was reduced from 70% to 50%.

Case Study 4 – Kohari v NSW Trustee & Guardian [2017] NSWSC 1080

In this case Justice Parker dealt with an estate worth $1,040,000.00 where the deceased left his entire estate to his de facto partner of 26 years. The deceased did not leave any money to the two sons of his first marriage.

The plaintiff in this case was the youngest son of the deceased with whom he had no contact since the child was 18 months old because the deceased did not think he was the father of the child. The deceased had left his wife and children because of his suspicions of his wife’s infidelity.

The youngest son’s circumstances were very dire in that he was 38 years old, had no qualifications, had been unemployed for 17 years, was obese, reliant on social security, and supported a wife and four children in rented premises. He had no assets and debts of $25,000.

The deceased’s partner had a strong competing claim as she needed a home and her only asset was an investment property in Queensland worth $250,000 which she jointly owned with the deceased. The rent from this property provided her with a rental income to supplement her pension of $405 per week. The deceased’s partner wished to purchase a home in the Central Coast which was estimated to cost $630,000 and needed additional monies for further contingencies.

Judgement – son receives legacy of $100,000

Justice Parker awarded the son a legacy of $100,000 and in doing so commented that the son’s financial circumstances appeared to be, at least in part, of his own making. He did not consider that it was reasonable for the son to expect to receive an unencumbered home from his late father but considered that it would be reasonable to give him a deposit to assist him to purchase a home.

Justice Parker considered that the deceased’s partner had a very strong competing claim on the deceased’s estate in that it was common ground between the parties that the relationship should be treated as a marriage. Further, it would have been reasonable for her to expect to continue to live in the deceased’s home at St Peters in Sydney had it not been compulsorily acquired by the government for the construction of a motorway. The proceeds of sale of the St Peter’s home comprised the majority of the funds in the estate. However as the deceased’s partner was intending to live on the Central Coast where houses were cheaper there was some scope to provide some provision to the son.

Case Study 5 – Peters v Salmon [2013] NSW SC953

In this case Justice Ball dealt with claims by two adult daughters of the deceased in relation to an estate that essentially comprised five grazing properties worth $1,800,000. The deceased was survived by his wife and seven children.

In his Will the deceased left to his wife two of the grazing properties worth $1,200,000.He left to his son Michael who had worked on the farm throughout his life two of the grazing properties worth $510,000. Michael had previously been gifted by his father another property which was now valued at approximately $950,000.

The deceased left to one of his other sons the fifth grazing property which was worth $180,000. Very minor legacies or releases from small debts were granted to each of the five other children of the deceased.

The only provision made for the deceased’s 56 year old daughter Kerryn  was that she be released from a debt of $14,000. Kerryn sought additional provision as her financial position was not strong as she was in the middle of a separation from her long term partner and was only likely to receive about $218,000. With this money she would not be able to purchase their apartment which was worth about $450,000 without having a substantial mortgage debt. Kerryn was working very long hours as a sales assistant in a shopping centre and had earned $70,000 per annum in the previous year.

The only provision made for the deceased’s 53 year old daughter Donna  was that she receive $10,000. Donna sought additional provision to reduce her mortgage debts. Donna was married and together with her husband owned three properties worth $1,010,000 including a new home owned by Donna’s husband where they resided at Coffs Harbour, Donna’s former home at Moonee Beach, and land at Moonee Beach which they jointly owned and where they planned to build units. They had mortgage debt of $526,000 leaving equity in these properties of $484,000. Donna’s husband earned $97,000 per annum in the previous year and she had been consistently earning approximately $60,000 as real estate agent.

The deceased’s 87 year old window was in declining health and continued to live at her home   which was located on the most substantial of the five grazing properties known as Swansea which had a value of $900,000. She was reliant upon her son Michael who lived on the farm and intended to transfer the “Swansea” property which she was to receive under the Will to Michael such that he would hold the vast majority of the grazing property that constituted the farm.

Justice Ball noted that Michael had devoted a large part of his life to the farming operations on these grazing properties, often for little reward. During that time he provided invaluable assistance to his parents and the deceased in particular. That assistance enabled them to continue enjoy the lifestyle they desired. That Michael’s future livelihood depended heavily on income from the grazing properties and recent history suggested that would be a struggle which would be exacerbated if any of the properties which form part of it had to be sold. That although the properties could be sold and Michael and his family could live off the proceeds of sale,that would be inconsistent with the deceased’s wishes and was clearly not the basis of on which Michael had worked on the deceased’s properties for so many years. In relation to both the deceased’s widow and his son Michael Justice Ball determined that they both had strong competing claims on the deceased’s estate.

Justice Ball was not convinced that the deceased’s daughter Donna had been left without adequate provision having regard to her and her husband’s financial position. Her claim was dismissed.

Judgement – $200,000 for Kerryn, Nil for Donna.

In regards to the older daughter Kerryn, Justice Ball considered that she was in a difficult financial position as a result of the separation from her partner, that she had few assets of her own, and faced a difficult future having regards to her age and circumstances. Justice Ball considered that “appropriate provision would be a sufficient sum of money to enable her to buy out her ex partner’s interest in their home unit and to reduce the mortgage to a level where she could expect to repay it by the time she reached the age of 65”. That would leave her in a position where she owned the unit and had a modest amount of superannuation. On that basis he ordered that she receive provision in the sum of $200,000.

Court of Appeal reduces Kerryn’s award to $50,000

This decision was appealed and the Court of Appeal reduced Kerryn’s provision to a sum $50,000 noting that “there is no general requirement that adequate provision, for the purposes of section 59, requires ensuring that an adult child has her own home. The provision ordered by the primary Judge which was related to Kerryn having her own home was an error”. It was also held that the provision made for Kerryn was disproportionately high in the context of Michael’s competing claim on the estate and the fact that he was not in a position to repay any loan secured over the properties in order to pay this legacy of $200,000.

Case Study 6 – Doriana Mary Jones & Anor v Mauro Poletti [2014] NSWSC 715

In this case Justice Slattery dealt with an estate worth approximately $2,800,000 before the costs of the proceedings were taken into account.

In the deceased’s Will he left 85% of his estate to his eldest son Mauro and 15% of his estate to his younger son Marco. He did not leave anything to his two daughters who had been estranged from him for a 21 year period after the breakdown of his marriage and a lengthy Family Court dispute.

In relation to the issue of the estrangement Justice Slattery did not view the deceased’s daughters as being responsible for the estrangement and considered that  it was reasonable for them to assume that any attempt at reconciliation was likely to be fruitless.

Both of the deceased’s daughters were aged in their early 50s and were expending most of their income on living expenses. The deceased’s daughter, Patrizia was a widow and had a home worth $650,000 that had a mortgage of $250,000. She also had $110,000 in superannuation, a car worth $10,000, and $3,500 in shares. She had a gross annual income of $100,597.

The deceased’s other daughter Doriana who was married had joint assets which included a home worth $245,000 that had a mortgage of $130,000. She had a superannuation of $152,428 and her partner had superannuation of $365,000. She also had shares to the value of $12,818. The joint gross annual incomes of her and her partner was $126,583.

The eldest son elected not to disclose his financial position and was not raising his financial position as a competing beneficiary.  The youngest son was not a party to these proceedings and had not brought any Family Provision claim.

Judgement – $450,000 to each daughter

Justice Slattery awarded a legacy of $450,000 to each daughter together with their costs of the proceedings.

Court of Appeal – Provision reduced to 15% of the nett estate (roughly $390,000)

The Court of Appeal reduced the award of the provision to a 15% share of the nett estate to be met by their brother Mauro reducing his share from 85% to 55%. This ensured that Marco’s 15% share of the nett estate was preserved as under the previous orders of Justice Slattery ,Marco’s share would have been effectively reduced to about 9%.

Conclusion

Claims involving adult children who are financially independent are complex and there is no guarantee of success. At Diamond Conway we have a number of very experienced lawyers who can give you the best opportunity of succeeding with your claim.