How do I Protect my Estate from a Family Provision Claim?

What is a Family Provision Claim and Who Can Make One?

A family provision claim (or testator’s family maintenance claim) is a legal application made by an eligible person seeking a share, or larger share, of a deceased person’s estate. Essentially, the claimant argues that the deceased failed to make adequate provision in the Will for their proper maintenance and support.

The eligibility criteria to make a family provision claim varies across Australia, so it is important to consider the legislation relevant to your jurisdiction. Generally, those eligible to make a claim are close family members such as a spouse, de facto partner and biological or adopted children. Other individuals such as stepchildren, former spouses, and certain family members who were financially dependent on the deceased (in specified circumstances), may also be eligible to claim in some jurisdictions.

Reasons Estate Disputes Arise

To minimise potential claims against your estate, it is helpful to consider why some disputes arise in the first place.

Family dynamics play out in different ways, particularly when a loved one dies, and the emotional burden of the loss can complicate already difficult relationships. Conflict between family members, especially in blended families or when there is an estranged relationship, can lead to challenges and disputes over the deceased’s intentions.

Family provision claims can arise when individuals believe that the distribution of assets is fundamentally unfair. For example, a child may have provided significant care during a parent’s final years while other siblings conducted their lives with little interruption. The ‘carer’ may have incurred personal and financial expenses or missed opportunities due to these commitments, and the Will may not take account of this.

Some Wills are out of date and do not reflect changes in the deceased’s circumstances, such as marriage, divorce, or new family members. This can create confusion and disputes regarding the deceased’s wishes. Similarly, vague or ambiguous terms in a Will can cause disagreement or uncertainty among beneficiaries.

Steps to Help Minimise Family Provision Claims

1. Prepare an Effective Will

Possibly the most important safeguard against a family provision claim is to prepare an effective Will. A Will that clearly outlines your intentions for the distribution of your assets leaves little room for misinterpretation of your testamentary wishes. Your Will should be carefully drafted, taking account of your financial and personal circumstances, family dynamics and any potential sources of conflict.

2. Consider Potential Claimants

While you are technically free to distribute your assets as you wish, it is wise to acknowledge the potential claims of eligible individuals. Providing some level of provision, even if it is less than they might expect, could demonstrate that you considered their needs and could potentially deter them from making a claim.

3. Review your Will Regularly

As your life circumstances change, it is important to review and update your Will to reflect this. When you experience significant life events such as marriage, divorce, the birth of a child, or the acquisition of substantial assets, it is a good time to review your Will.

4. Check your Superannuation

Benefits held in your superannuation fund generally do not form part of your estate for distribution under your Will. Rather, the trustee of your super fund decides how to direct the funds, unless you have a current binding death benefit nomination in place. You should regularly check your superannuation details to ensure you have nominated your desired beneficiaries and completed a binding death benefit nomination. Getting financial advice on the tax implications for your proposed beneficiaries is also a good idea.

5. Check Property Ownership

How co-owners hold their respective interests in property is an important consideration in asset protection and estate planning. Holding property as joint tenants means the interests are held as a whole and cannot be separately apportioned. Joint tenancy is subject to the rules of survivorship, meaning that if a co-owner dies, the surviving co-owner/s is automatically entitled to the deceased’s share in the property. Conversely, property held as tenants in common can specify the individual shares held between each owner which need not be equal. Unlike a joint tenant, a tenant in common may transfer, sell or leave their share in the property to a beneficiary in a Will.

6. Trusts

A trust is a separate legal structure that holds your assets. There are different types of trusts used to achieve different outcomes and trusts can offer benefits such as preserving/protecting assets, providing for minor children or vulnerable individuals and tax planning. Because of the complicated legal, financial and tax implications of trusts, it is important to seek professional advice when setting one up.

7. Communicate with your Family

Open and honest communication with your family about your estate plan, where appropriate, can help manage expectations and potentially reduce the likelihood of future disputes. Explaining your decisions and reasoning can help your loved ones understand and accept your wishes.

Conclusion

Failing to address a potential family provision claim can leave your estate vulnerable to costly and time-consuming legal disputes. It may be impossible to guarantee that a family provision claim will not be made against your estate, but there are proactive steps you can take to minimise potential claims. Seeking professional advice tailored to your circumstances can help safeguard your legacy and ensure your final wishes are honoured.

This information is general only and does not constitute legal advice. We strongly recommend seeking advice relevant to your circumstances from an experienced lawyer.

If you or someone you know wants more information or needs help or advice, please call +61 2 9283 3344 or email [email protected].