By Edward Skilton, Special Counsel, Private Advisory Team, Mills Oakley Lawyers
18th September, 2014
NOTE: These changes have now passed Parliament. Please click here to view our updated post.
The Justice Legislation Amendment (Succession and Surrogacy Bill) 2014 (“Bill”) was recently introduced by the Legislative Council and was debated in Parliament this week (after being delayed for a couple of weeks). It has now passed the Council. If passed by the Assembly, it is due to come into force on 1 July 2015 if not proclaimed earlier. The aim of this article (updating our article of 4th September 2014) is to highlight some of the pros and cons of the Bill and recommend action points for clients and their professional advisers.
The earlier draft Bill would have made it much harder for adult children to challenge Wills in Victoria. Further, in the earlier draft Bill, a person who signs a written agreement not to challenge a Will would not be eligible to challenge a Will, irrespective of any changed circumstances. Both of these proposals were removed from the Bill following debate in the Council. Under the amended Bill, adult children can challenge their deceased parent’s Will irrespective of their financial need, irrespective of whether they signed an agreement not to do so.
The Bill, of course, does not simplify the complex interrelation between Wills, superannuation, discretionary trusts, private business objectives and tax (to name but a few components to a succession plan). Sometimes a succession plan is fluked, but usually its success requires careful analysis of objectives, gaps and appropriate recommendations, whatever tools provided or threats contained in current and proposed laws. The development and maintenance of a succession plan will often require a team of advisers including a client’s lawyers, accountant, financial and risk adviser, banker and other professionals all working together to ensure that the client’s succession plan is stress tested from various angles.
The right to bring a claim against a deceased estate for further (financial) provision is found in Part IV of the Administration and Probate Act 1958 (Vic) (“APA”). The last major amendment to succession dispute laws in Victoria was in 1997. That change opened the door to non-family members challenging Wills. Since then, we have observed that many claims against estates are commenced not only by spouses, or, by and on behalf of disabled or young children, but also by estranged adult children and grandchildren, companions, carers, nieces and nephews. The 1997 changes to the APA reflect a view that families and relationships are complex and that allowing family and non-family to challenge Wills ensures that people who are deserving of financial provision are not prevented from bringing claims.
These restrictions on children have been removed from the Bill and children can now challenge irrespective of age or financial circumstances. Grandchildren and registered caring partners can only qualify as eligible applicants if they were wholly or partly dependent on the deceased for their maintenance and support. The earlier draft required that they be wholly or partly dependent as at the date of death but this requirement has been removed, suggesting that this test is satisfied if a grandchild or registered caring partner was at any time a dependent.
This proposed change addresses the first and second arguments referred to above in relation to the current position (respecting the deceased’s wishes and trying to reduce total legal costs). The proposal in the earlier draft Bill of narrowing of the definition of eligible applicants to restrict adult children challenging Wills was criticised for failing to acknowledge the complexities of modern families. It has been pointed out that if, for example, an elderly person fell victim to a “gold digger” or “helpful neighbours” their adult children should be able to commence a claim to restore wealth to the bloodline of the deceased person who changes their Will to disinherit their descendants. Removing the restrictions on adult children challenging Wills is a big concession and not one that all Will makers are happy with, particularly if they are concerned about an estranged adult child challenging their Will. Grandchildren are still restricted under the amended Bill in that they must demonstrate financial dependency. Perhaps we should expect to hear of grandchildren seeking to move in with an elderly parent or grandparent, establishing partial dependency. Indeed, future disputes could centre on the definition of “partly dependent” and we can find examples of such cases in the context of disputes relating to the tax dependents of a deceased superannuation fund member.
“(6) Subject to subsection (7), the Court may make any order as to the costs of an application under section 91 that is, in the Court’s opinion, just.
(7) If the Court is satisfied that an application for an order under section 91 has been made frivolously, vexatiously or with no reasonable prospect of success, the Court may order the costs of the application to be made against the applicant.”
Section 24(1) of the Supreme Court Act 1986 (“SCA”) confers on the Court a general discretion as to the costs of a case:
“Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.”
The SCA and APA do not necessarily read consistently together but the practical effect has mostly been that whilst in litigation generally the loser pays the costs, in Will challenges, the deceased’s estate pays. By removing sections 97(6) and 97(7) from the APA, the Bill may pave the way to unsuccessful applicants being ordered to pay costs. Unlike most litigation, where there is a winner and a loser, in Will challenges, a “win” is often a grey area. If an applicant is awarded $1, in a sense they have been successful and so perhaps we should not expect this proposed change to have much of an impact on the pressure to settle a case as the fear of legal costs depleting the estate is likely to be present in all but the weakest of cases.
The concepts of relationships, family wealth and obligations to provide an inheritance are constantly evolving and so too must succession laws through new Acts of Parliament and case law, or else succession laws will soon lose any semblance of relevance to modern life. This does not mean that succession laws will always reflect your sense of what is fair and just.
We would encourage any reader who is concerned about their succession plan or that of their client, not to worry about the changes nor to put the succession plan in the too hard basket, but to contact us to discuss how we might help to develop a robust plan to put them in the best possible position to be able to achieve their objectives and provide peace of mind for them and their loved ones.
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