In this podcast, Dan Toombs talks with Estate Litigation Lawyer, Ann Eagle about everything you need to know if you want to challenge a Will in Victoria.
TRANSCRIPT
The general rule when making a will is that the testator, that is the person in the will has the right to give his or her property to who they wish. But that’s not exactly true, thanks to a piece of legislation called the Administration in Probate Act Rule. To find out more on with an eagle and an estate planning lawyer from Harris Lieberman. And what’s all this about?
The Administration and Probate Act is a piece of Victorian legislation which governs how deceased estates are to be managed. And it’s got all sorts of provisions in it about, you know, applying for probate and all that sort of stuff. But it also includes what we call part four, which is the sections that you’re talking about, which govern family provision claims, or as they were traditionally called testator’s family maintenance claims. So there’s legislation in every state of Australia that governs this, and there are some little nuance differences between them.
But as a general rule, every state’s got them. And what it’s about is making sure that there isn’t a member of the testator’s family who should have had provision made for them but didn’t.
Right. So how does somebody go about making a claim if they think that they’ve been left out?
OK, well, the first step would be to see what’s in the will. If you’re getting a provision under the will, it could be that it turns out that that is sufficient and we don’t need to go any further.
Alternatively, the if you’re not receiving much under a will or in some cases you’re not receiving anything under the will, we need to look to see first whether you’re a person who’s eligible to make a claim for a while. Just about anybody could make a claim. The next-door neighbour could make a claim. The niece could make a claim. The second cousin twice removed, could make a claim. And there was a bit of tightening up a couple of years ago, which means we’ve now got a list of eligible people which can finance it pretty much to close family members.
So we’re talking spouses, children, domestic partners, in some instances, even former spouses, in some instances stepchildren. But generally speaking, it’s those close family members. And then if you’re an eligible person, there’s then a whole range of things that the court will take into account in determining whether or not further provision should be made from the estate.
So when it comes to estate litigation and, you know, we’re talking today about, you know, the testator’s family maintenance claims, but is there other types of claims within the realms of that legislation? Yes, there are. So in some cases, the other sort of state litigation that you might come across will be when there’s some uncertainty as to the validity of the will. So you may have a situation where there are question marks over the testator’s capacity to make the will in the first place, or much more rarely a suggestion that the testate or was coerced into making the will.
But that’s about invalidating the will itself rather than saying, well, the will is valid. I just don’t like what I’m getting out of it.
And how does somebody actually make a claim to get the claim off the ground?
You need to make an application to the Supreme Court depending on the value of the estate.
And although you could negotiate a settlement with an executor without going to court, executives are in a bit of a tricky position because if they were to settle up with the claimant in order to give money to the claimant, they’ve got to take the money from somebody else.
So it’s not just the pool that they’re drawing from.
And so unless all of the people impacted agreed that the claimant should get some additional money, then the matter would have to go to court because the court would have to approve any settlement. So even if the executor agrees that this is a valid claim, unless they can get all of the beneficiaries on board, they’ll have to make an application to have it approved by the court.
So this person that makes the claim would need to do so fairly promptly, because I’m assuming that once probate is granted, then then the executor will be wanting to distribute.
Yeah, that’s right. So under the Victorian legislation, a claim it has six months from the date that that grant of probate is made and they need to have commenced their proceedings in that six-month timeframe. You need to get moving on it if you’re wanting to make a claim. And an executor needs to be a bit careful, too, if there’s even a suggestion that someone out there might be thinking of making a claim. We always advise our executor clients to hold off making any distribution until after that claims challenge period has expired.
Now, we have talked a little bit about, you know, the fact that these matters go to court, but do they literally go to court or do they find themselves settled, you know, outside a courtroom?
With most litigation, the vast majority of these claims do settle prior to a formal hearing. Both the county and Supreme Court have very good mediation processes and these matters are all referred to mediation. You must hold a mediation and mediations are a really good vehicle to getting everyone in the room so that the issues can all be dealt with and you can get those other beneficiaries on board in terms of getting their consent so that any settlement that’s reached is binding and can be approved by the court.
So what is actually taken into consideration in determining whether or not this person is actually entitled to anything out of the estate?
Well, the first thing is, are they eligible? Yeah, that’s the first test. And then the court has the legislation has a list of matters that the court will take into account.
And in a nutshell, it’s things like the nature and duration of the relationship between the claimant and the deceased. So was this a short relationship, a long relationship, a close relationship? What was the nature and duration of that relationship? Importantly, the court will take into account the size of the estate and how any extra provision for the claimant would affect on other beneficiaries. So there are unfortunately some examples where the estate is just too small. So the person might be an eligible claimant.
They might have a good claim. But we’re talking about a small estate and there are other beneficiaries who are also entitled to the testator’s provision. And the court just ends up in a situation where the estate is too small to be spread around a very large estate. Different considerations. And so importantly, those obligations that the deceased may have had to other beneficiaries need to be taken into account.
And then it comes down to the house financial resources age, those sorts of things of both the claimant and the other beneficiaries. Because just being able to establish that you’re a person who’s been eligible to make a claim doesn’t mean you’ll be successful if you can’t establish that you’ve got any sort of financial need that the test date or should have taken into account, you won’t be successful. And there have been some recent cases in the last few years of adult children who are financially well off being unsuccessful, even though on the face of it, it was, you know, there were large estates and you would think that the child should get something from it.
When the child turned up to court and they, you know, very well off, the court will say, well, sorry, you haven’t established that you’ve got any need that required the test date or to make provision for you.
Are there other considerations and whether the testator was financially maintaining the claimant at the time of death, whether the testator had given the claimant significant benefits during their lifetime? Because sometimes you can imagine a parent might give some significant benefits to one child during their lifetime and then in their will, they do a bit of a balancing act and the other children stand to benefit under the will. Well, the court will take all of that into account.
It’s a thorough examination, isn’t it?
Absolutely.
And everyone has to lay their financial situations bare. That puts a few people off. When you say, okay, you’re going to have to tell every other member of the family what your financial circumstances are. Some people think I know that I want to do that.
So for that person, they get to the other side and they have had success. What sort of orders can the court make in that regard?
So the court can basically rewrite the will if they need to. So generally speaking, if there were specific legacies or specific gifts to go to specific people, they try to leave them untouched and they look first to the residue of the estate. But sometimes the that won’t work and sometimes they are effectively rewriting the will. So the range of orders can be very broad. There are examples where perhaps a. We’re talking about a world that was made a long time ago, the person remarried, already partnered, didn’t update their will, and that widow or widower is the one who’s missed that and is making the claim.
And so in those sorts of circumstances, there might be provisions made for a life interest so that the adult children from the first relationship will still eventually get the inheritance. But in the meanwhile, the widows being provided for or sometimes assets just need to be sold so that these payments can be made.
Now, the big one is who pays the costs in all this?
That’s the question everyone ends up asking. What’s this going to cost me and who’s going to pay? So traditionally, estate litigation, the estate ended up paying all of the costs, both the estate’s costs and the claimant’s costs. And that could even happen when the claimant was unsuccessful. They may still have got an order that their costs be paid. The courts these days are being a little bit more circumspect than normal rule of litigation is that the loser pays the winner’s costs in these estate matters.
What tends to happen is a successful claimant will have their costs paid by the estate and unsuccessful claimant might get ordered to pay the estates costs as well as their own. But often, if the claim was not completely, you are unlikely to ever succeed.
Like if it was a reasonable claim. It’s just it hasn’t got up because of those things we talked about earlier. The court might say, well, each party bare their own costs. But the problem can be if you’ve ended up going all the way through to a hearing, the costs could be even if you’re trying to be cautious on costs and you’re trying to keep it down to a minimum, you could still be looking at, you know, 70, 80, 100 thousand dollars in costs.
And when you times that by two, because you’ve got the other party as well, you can say that pretty quickly. With modest estates, the costs of conducting this litigation just become unsupportable.
In the news, we often hear about these big estate litigation matters where somebody famous dies and there is having a shot. But by and large, you know, most estates are going to be relatively small. And I’ll tell you, I mean, executors and family members just must get an awful amount of anxiety when one of these claims is lodged.
If they do and we have a lot of discussions with the executors and the executor will be saying, but I need to uphold the will. It’s my duty to uphold the will.
And you just have to say yes. But would with the testator who appointed you to this job, would they want you spending all of this money on costs?
So sometimes it just has to be an economic decision, a practical decision where people say, you know what, they might get up and if they get up, it’s going to cost us a hell of a lot more. So let’s just look at this, do a bit of a risk assessment. Yeah. And make a decision. But by the same token, frivolous claims the court will not entertain them. So the people making claims need to be careful as well.
Yeah, they’ve done their homework, got all their material and are able to substantiate their claim.
And that’s not to downplay, I suppose, the fact that lots of people have a legitimate claim and should absolutely be given something out of the estate.
Yes, there’s a lot to it now. And obviously Harris Lieberman can help out with this type of work.
We asked for executives who are administering estates and we also asked for claimants. And I suppose that gives us a really balanced view of this type of litigation because we’re not myopic and focusing on one side of the equation. We’ve got that experience of working for both sides.
