This guest post was written by Andreyev Lawyers, and republished with their permission.
Estate planning laws in all Australian states grapple with the tension between a Will-maker’s testamentary freedom (the right to give their property to whom they choose) and a Will-maker’s moral obligation to provide for those persons the community thinks they should.
Farmers often leave all of their rural interests to only one of their children, whilst their remaining children inherit ‘off-farm assets’, often of lesser value. If a non-farming child is not happy with their share, do they have any right to challenge the Will?
Family provision legislation throughout Australia allows biological children (and others) to make a claim from the deceased’s estate for proper maintenance, education or advancement in life (or a variation thereof). This is often referred to as ‘challenging the Will’, or a claim for further and adequate provision.
What are the Court’s considerations when the most significant asset in an estate is a rural property or business, such as a family farm? In a recent New South Wales Court of Appeal case, Salmon v Osmond NSWCA 42, the Court was faced with this very question.
The deceased died leaving assets that mainly comprised of five grazing properties on which he had conducted a cattle business. The deceased was survived by his wife, Esmae, and seven children. His Will named Esmae and his son Michael as his principal beneficiaries, whilst leaving lesser gifts to his other children. In his Will the deceased explained that he had apparently favoured Michael because:
Michael had assisted the deceased in farming for many years, often for very little reward;
Michael had in general allowed the deceased to amass the assets that he had during his lifetime; and
Assistance had been given by the deceased and his wife to their other children from the distribution of assets during the deceased’s lifetime, which in monetary terms, were equal to the bequest left to Michael.
Two of the deceased’s daughters, Kerryn and Donna, brought proceedings seeking additional provision from the deceased’s estate.
Under the Will, Donna was given a legacy of $10,000. As for Kerryn, the deceased released a debt of $14,000 allegedly owed by her to him.
The primary judge, Ball J, dismissed Donna’s claim, but ordered additional provision for Kerryn, in the form of a legacy of $200,000.
The executors of the Will appealed against the order made in favour of Kerryn.
The Court allowed the appeal. In making its decision the Court of Appeal relied on the following principles:
A testator’s explanation of why he made certain dispositions is a relevant factor in family provision cases. However, the testator’s motives are not necessarily determinative of a claim for family provision if the Court nonetheless finds that adequate provision has not been made.
In deciding whether or not adequate provision has been made to a claimant (and if not, what provision ought to be made) the Court is to have regard to the testator’s competing obligations to other claimants.
Further, it is not the Court’s function to rewrite the Will
The Court found that Ball J altered the disposition of the estate to such an extent that the deceased’s wish that Michael be the principal beneficiary was not given appropriate weight.
Although the Court recognised that Kerryn had:
a good relationship with the deceased;
assisted on the farm when she was young; and
now separated from her partner, had few assets of her own and faced a difficult future,
Michael also had strong competing financial circumstances. From the evidence presented, the Court found that:
Michael had devoted a large part of his life to the farm, often for little reward;
Michael had provided invaluable assistance to his parents and to the deceased in particular;
Michael’s future livelihood depended heavily on the farm income, although the farming operation was not very profitable and indeed at times was marginal;
A reduction in the size of the farm would exacerbate its marginal profitability; and
Although Michael and his family could live off the proceeds of the properties if sold, that would be inconsistent with the deceased’s intentions.
In light of Michael’s competing circumstances and his contribution to the farm as opposed to Kerryn, the Court of Appeal found that provision for Kerryn by the primary judge was disproportionate to the amount provided to Michael under the Will, especially in light of the costs of the proceedings. Therefore, the Court of Appeal decided, that although the deceased had failed to make proper maintenance for Kerryn, it would reduce the provision made for Kerryn by Ball J from $200,000 to $50,000 (still an increase on her original inheritance of essentially nothing).
We note that the Court required the provision of $50,000 to be made to Kerryn from Michael’s share of the estate, although she was to bear her own legal costs. In making the order, the Court found that it was not obvious that the farm would be unviable if one of the properties was sold. In this regard, the Court considered it relevant that, under the terms of the deceased’s Will, had Esmae died first, one of the five properties would have been left to Kerryn and the deceased’s other son Luke.
So in summary, when considering claims involving farming assets, the Court:
Does not look to rewrite the deceased’s Will;
Accepts that a testator’s reasons for the disposition of their assets are relevant, but nonetheless do not take priority over a finding of fact that adequate provision has not been made to the claimant;
In determining the question of adequate provision looks at the testator’s competing obligations to other claimants; and
Where the need of an applicant for further provision outweighs the need of those who are to inherit the farm under the Will, the court is prepared to make an order that requires the sale of farming property.
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