Early inheritance issues and family provision

sandstone carving, Parkes Courthouse, New South Wales, An early inheritance of a mortgage-free home was given to the younger daughter at the time of her marriage. It was well understood by all family members at the time that the other older daughter would receive her inheritance when the last parent died. This would be the parent’s home. Evidence was put of their parents’ expressed wishes to treat their two children fairly and to give each of them a property. They made wills to give effect to this. What could go wrong?

The mother was the last to die.  Her home was the only real property in her estate.  By her will she gave it to her eldest daughter.  The residuary estate was divided equally but after various expenses were paid there was nothing left. 

As said above the parents had given the younger daughter a home free of encumbrances some time ago.  She had subsequently sold it and used the proceeds to borrow and buy other properties, but these purchases weren’t successful.

Family provision claim

She sought further provision from her mother’s deceased estate.  Under the legislation she was an “eligible person” under the Succession Act 2006 (NSW) being a child of the deceased.  In deciding family applications in New South Wales, the court may have regard to a wide range of factors as provided under s 60 of the Succession Act 2006 (NSW) and without any particular priority.

In first instance it was decided that inadequate provision had been made on the basis of the applicant’s poor financial circumstances.  She was awarded a proportion (40%) of the net proceeds of the sale of the home left to her sister, with costs coming out of the estate. 

Appeal

The older sister appealed citing various grounds.

The Court of Appeal said the situation was not one of a poor relationship or estrangement.   It noted, as already mentioned, there was a clear understanding among the family members as to who was to get what.

The Court said the parties’ competing claims boiled down to the financial needs of one; against the deceased’s moral obligation – being the understood promise of receiving the family home, to the other. 

The Court said the question was “whether adequate provision was made for the proper maintenance, education and advancement in life of an applicant.” under subsection 59(c) of the Succession Act 2006 (NSW) of Chapter 3 on Family Provision . 

The problem was that the assessment of  the significance of being given an early inheritance in the court below was flawed.  One factor seemed to have been given more weight.  Evaluation at the time of the hearing is not only limited to financial need, as important as that is, but all relevant factors are required to be evaluated.  Such factors include previous gifts by the deceased, personal circumstances of the parties and family history.

The testator’s (willmaker’s) judgment and testamentary freedom

Both courts referred to the principle stated numerous times in case law that

“..respect should be given to a capable testator’s judgment as to who should benefit from the estate if it can be seen that the testator has duly considered the claims on the estate.”

And:

“The deceased will have been in a better position to determine what provision for a claimant’s maintenance and advancement in life is proper than will be a court called on to determine that question months or years after the deceased’s death when the person best able to give evidence on that question is no longer alive.”

The three Court of Appeal judges unanimously allowed the appeal.  All agreed that the application for family provision by the younger daughter ought to have been dismissed, and the primary judge’s evaluative assessment should be set aside.

Costs

The costs of both parties amounted to over $90,000. The Court of Appeal ordered the younger daughter to pay her sister’s costs in both the appeal and the proceedings in the court below.

 


Sgro v Thompson [2017] NSWCA 326

B Stead
BHS Legal
12 February 2019, updated 21 February 2019

Important notice: This article is intended for general interest and information only. It is not legal advice, nor should it be used as a substitute for legal advice. Always consult a legal practitioner and/or other professional for specialist advice specific to your needs and circumstances, and rely on that.

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Image: Sandstone detail, Parkes Courthouse, NSW, B Stead