There’s a well-established legal principle in Australia that one has the freedom to leave their estate to the persons or entities of their choosing. So long as you have what’s known as testamentary capacity, you’re free to make a Will that excludes or leaves very little to those closest to you. It’s also possible to die without a Will. In such a situation, the laws of intestacy determine to whom the estate passes according to your next-of-kin, which may end up excluding those to whom you had a moral duty to provide.
Whether it’s by choice or not, leaving someone out of your estate to whom you have a duty to provide is not risk-free. In fact, it can create costly, timely and stressful headaches not only for your legal personal representative (LPR), but also your other intended beneficiaries. Using the estate of late businessman Geoffrey Edelsten by way of example, this article explores the laws around estate challenges and the ways in which you may be able to reduce the risk of a claim against your estate.
Who can challenge an estate?
Under Victorian laws, there are certain people that can make a claim against your estate. This includes but is not limited to your partner and children, as well as your grandchildren and household members if they were dependant on you for their proper maintenance and support. It does not include your siblings, parents or more distant relatives if they did not reside with you. Former partners with unfinalised family law property settlements are also eligible to claim provision out of your estate.
Those who decide to claim against your estate must prove that at the time of your death you had a moral duty to provide for them and that your estate fails to make adequate provision for their proper maintenance and support.
The outcome of such a claim will depend on a range of factors, including your reasons for exclusion, the nature and length of your relationship with the claimant and any contributions they made to your estate or welfare, the size and nature of your estate, your obligations to persons other than the claimant and the impact a successful challenge would have on their inheritance, and the claimant’s age, financial resources, special needs, character and conduct.
The above factors are all at play in the estate of the late businessman Geoffrey Edelsten, whose only child and estranged son, Matthew Beard, has sought further provision out of his $1 million estate after being left $50,000, with the balance gifted amongst friends, charities, his former school, the Carlton Football Club and his LPRs.
Pitfalls of leaving someone out of your Will
There are various reasons why you may choose to leave someone out of your Will – you’d prefer to benefit a charity, you’ve become estranged from a close family member, or as the late Geoffrey Edelsten stated in his Will, perhaps you consider you’ve already “provided substantial financial support” to your loved ones.
Whilst you may feel very strongly about disinheriting someone in the above categories, before you go ahead making a Will that leaves someone out, we recommend seeing a lawyer about the risks involved. These may include that:
- your LPR will have the difficult task of trying to negotiate, settle or defend such a claim;
- the legal costs of dealing with such a claim are often paid from the estate, meaning less inheritance for your intended beneficiaries, and more money for lawyers; and
- the time needed to resolve or await claims may mean the distribution of the estate to your intended beneficiaries is delayed, which may leave them in a financially vulnerable position.
Reducing the risks of a claim
Beyond dying with nil or very little assets, often the best way to protect your estate against such claims is to engage a lawyer to create an estate plan.
A lawyer can provide you with advice about minimising assets that form part of your estate on your death and are therefore vulnerable to such claims. This includes non-estate assets like superannuation and life insurance that are capable of being paid directly to a nominated eligible beneficiary on your death.
It may be that you owe duties to multiple people and you’re unsure as to how to best manage them. This is frequently the case in blended families where duties to a new spouse may clash with duties owed to children to a previous relationship. A lawyer can advise on ways to balance these duties in your estate plan, which may include that any real estate you solely own is left to your partner for their life with a maintenance fund, and that such real estate passes to your children on your partner’s death.
If you ultimately decide to exclude or leave very little to someone who could claim against your estate, a lawyer can help you to prepare your LPR and intended beneficiaries to deal with such a claim. A lawyer can advise you on the supporting evidence that will be needed to defend a claim and the best way to provide this information to your LPR.
As your Will becomes a public document once probated, like Geoffrey Edelsten’s, there’s a good case for keeping your reasons for exclusion out of the actual Will to avoid “airing your dirty laundry” in this way. A Will also commonly represents one’s parting act and last words to their family, so outlining the rationale for disinheriting someone in this document can be inflammatory and counter-productive to reducing the chances of a claim. A case in point again being the estate of Geoffrey Edelsten, where the reasons for exclusion outlined in his Will did nothing to prevent his son’s claim.
If you’d like to discuss your estate plan and ways to minimise the risks of a claim, get in touch with our team of experienced wills and estates lawyers on 9318 4188. You’ll otherwise find details of our fixed fees and packages at https://www.mcmanuslawyers.com.au/your-estate-plan.
Article written by Taylah Hollands, Wills & Estates Lawyer, McManus & Co Lawyers.