An executor is the person appointed to manage the administration of an estate when a Will-maker (testator) dies. Similarly, an administrator will be appointed by the Court if the testator dies intestate (without making a Will).
As the official Legal Personal Representative (LPR), an executor or administrator has an important role in representing the interests of the estate. He or she must oversee the estate’s proper administration and, where the deceased left a Will, ensure its provisions are upheld.
Executors and administrators will deal with estate lawyers, accountants, financial advisors, estate agents, creditors and beneficiaries.
Occasionally, an LPR will face a contest to the fairness of the provisions of a Will or distribution on intestacy. This is known as a family provision claim under the Succession Act 2006 (NSW) and generally involves emotion and conflict, additional costs and inconvenience.
This article explains the processes involved in a family provision claim and the LPR’s obligations in answering a claim against the estate.
It does not consider a challenge to the validity of a Will, for example, that the Will is void for lack of formality (not correctly signed / witnessed), lack of mental capacity, duress or fraud.
Family provision claims
An eligible person may make a claim against the estate of a deceased person if he or she believes they have been unfairly treated under the Will or the proposed distribution is unfair. An eligible person includes:
- the spouse or de facto partner of the deceased at the time of his or her death;
- a former spouse of the deceased person;
- a child of the deceased person;
- a person who was wholly or partly dependant on the deceased and who is the deceased’s grandchild or was a member of the deceased’s household at the time of his or her death;
- a person who was living in a close personal relationship with the deceased at the time of his or her death.
The claim must be made with the Court no later than 12 months from the date of the deceased’s death unless extenuating circumstances exist.
Once eligibility is established, it must be shown that the deceased person failed to leave the applicant with adequate provision for his or her proper maintenance, education and advancement in life. If this can be shown, the Court must then determine what provision, or further provision, if any, should be made for the applicant from the deceased’s estate.
The Court will consider a range of factors including the financial position of the applicant, the circumstances, financial position and needs of other beneficiaries, the size of the estate and the relationship between the deceased person and the applicant.
A moral duty and obligation for the deceased to provide for the applicant in light of generally-accepted community standards will also be relevant.
The role of the Legal Personal Representative
In responding to a family provision claim, the LPR will have a primary duty to uphold the provisions of the Will (or distribution on intestacy) and preserve the estate assets.
In doing so however, the LPR should consider resolving a meritorious claim that is likely to succeed in Court proceedings. If this is the case, the LPR should aim to negotiate a settlement and avoid costly litigation that may deplete estate assets, noting that the legal costs of a successful claim are usually borne by the estate.
Some claims will be morally justified by persons who may not have been adequately provided for, or a Will may not accurately reflect what the testator may have intended had he or she been aware of the full circumstances of the claimant.
A decision regarding the likely success of a claim, based on the LPR’s personal knowledge of the deceased and his or her family should be made with the guidance of a lawyer. The needier a claimant is, the more likely he or she is to succeed in a claim.
A range of possible outcomes can be discussed enabling the LPR to make an informed decision as to whether to negotiate a settlement, pay the claim or defend it in Court.
Defending the claim
If a claim proceeds to Court the LPR must provide all evidence relevant to the claim made, as well as any genuine evidence required by a beneficiary to be put to the Court.
To avoid exposure to personal liability, the LPR should not distribute any part of the estate unless extenuating circumstances apply. In this case, the LPR should obtain urgent legal advice.
On becoming aware of the claim, the LPR must provide other potential claimants with notice, allowing those persons an opportunity to also make a claim which can be heard in one set of proceedings.
The LPR will file an affidavit setting out the nature and value of assets and liabilities and the net amount for distribution after allowing for liabilities and estate expenses. Details must also be provided of potential notional property (see below), any person or entity holding property as trustee for the estate, eligible persons or persons beneficially entitled to distribution from the estate, and those who have received notice of the claim.
As the matter progresses, a further affidavit responding to the applicant’s claim and the matters raised in his or her affidavit evidence will also be required.
The claim can be settled at any stage prior to the Court hearing. Mediation is generally ordered by the Court which can assist in resolving the dispute without further legal cost, or at least narrowing the issues in dispute. Most cases are resolved at mediation and terms of settlement prepared to document the agreement reached.
A Court may order property that does not evidently form part of an estate to be brought back and included in the estate assets. Notional property includes property that was disposed of by the deceased or an executor in circumstances where full value was not given for the transfer, or where the deceased omitted to do something that would otherwise cause the property to be included in the estate assets.
Time limits apply and the court will only declare an asset as notional estate if certain criteria are met and, should an order for provision be made, the estate assets would be insufficient to satisfy that order.
Reducing the potential for family provision claims
It is important to be aware of the circumstances that may lead to a family provision claim. Following are some steps that can be taken to help reduce the likelihood of a claim against your estate.
- Ensure your Will is properly drafted, formalised and regularly reviewed to take account of changing personal and financial circumstances.
- Consider those that may be eligible to make a claim on your estate and whether they have been adequately provided for in the Will.
- If you wish to leave an otherwise eligible claimant out of your Will, ensure that your reasons for doing so are legitimate and made known to your personal legal representative or documented with your Will.
- Discuss your estate plans with an experienced lawyer and seek guidance on how to minimise the risk of a family provision claim.
If you are the executor or administrator of an estate facing a potential family provision claim you should obtain legal advice immediately.