ESTATE PLANNING – How is the need of a Family Provision Applicant assessed? (Large Estates)

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When planning the succession of your estate upon your passing away, it is important to consider the risk of possible Family Provision Claims which may arise, and may result in Family Provision Applications being brought to change your testamentary dispositions.

In determining the outcome of Family Provision Applications, the Court applies a two-limb test, the first of which is to consider whether adequate and proper provision has, or has not, been made for the applicant. Part of this test involves the Court making an assessment of the applicant’s need.

  1. One aspect of the applicant’s need is their financial need. The case of Bosch v Perpetual Trustee provides the classic interpretation of this principle:

‘It must be shown that in a broad sense the applicant has need of maintenance and support. But an applicant need not be in necessitous circumstances: the size of the estate and the existence of any other moral claims on the testator’s bounty are highly relevant’.[1]

  1. In the context of a large estate, the principle of an applicant’s ‘need’ is relative. In a lot of cases involving significant estate wealth, it may be difficult to describe an applicant as being in need in anything other than a relative sense. However, there can be no doubt that in large estates, substantial provision can be made for relatively wealthy applicants where in the same circumstances, except for the size of the Estate, it may not be made.
  1. The case law shows that applicants may succeed in a claim even where they have more than sufficient resources of their own, on the basis that all relevant factors must be balanced against each other to come to a conclusion as to whether ‘proper’ provision has been made. Therefore, even significant wealth held by an applicant may not be a barrier to a successful claim.
  1. For example, an illustration of these principles can be seen in the case of Colebatch v Colebatch,[2] where:

a.  The Court considered the need for additional provision for an applicant who was left a gift of $1,000 out of the $1.2 million estate of his father.

b.  The applicant was a neurosurgeon earning approximately $187,000 per annum, with his salary steadily increasing each year and good job security. His assets including real estate and cars totalled approximately $3.1 million and he had substantial superannuation available to him in retirement. The applicant also had a mortgage liability and other debts of approximately $380,000.

c.  The Applicant sought provision that would allow him to conduct repairs and renovations on his home, an amount to decrease his mortgage, and a further fund to provide security for the ‘exigencies of life’.

d.  Acknowledging that the applicant was a relatively wealthy man who was well provided for both currently and in the future, the Court nevertheless increased his provision under the Will by $300,000.

  1. In addition to the concept of ‘need’ being relative, it is also not limited to solely ‘financial need’. As can be seen above, and particularly with large estates, contingencies may be taken into account, as it is considered that the size of the Estate can justify a wider approach – the Court’s amenability to taking into account these contingencies will increase with the increasing size of any given Estate[3]. Examples of contingencies provided for by the Court in previous cases involving large estates include:
  • a hedge against future misfortune or ill health;[4]
  • taking into account the incidence of taxation and inflation on the assets of or provision made for the applicant;[5]
  • assistance with the applicant’s superannuation;[6] or
  • a fund which may be invested to provide some modest accretion to the applicant’s income for his or her life expectancy.[7]

For more information on this topic, see our website article, “FAMILY PROVISION APPLICATION CASES INVOLVING LARGE ESTATES”.

[1] Bosch v Perpetual Trustee Co [1938] AC 463, 478.

[2] [[2007] NSWSC 30

[3] John K De Groot & Bruce W Nickel (2007) Family Provision in Australia (Third Edition), Lexis Nexis Butterworths, Chatswood, p. 12.

[4] Re Leonard [1985] 2 NZLR 88.

[5] Re Buckland (No 2) [1967] VR 3 at 5. Effect of inflation – Goodman v Windeyer (1980) 54 ALJR 470 at 474.

[6] Falkingham v Falkingham (2002) ACL Rep 395 NSW 41.

[7] Dobb v Hackett (1993) 10 WAR 532.