By Edward Skilton, Special Counsel, Private Advisory Team, Mills Oakley
4th September, 2014
NOTE: These changes have now been debated in 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 is scheduled to be debated in Parliament today (but may potentially be delayed for another couple of weeks). If passed, it is due to come into force on 1 July 2015 if not proclaimed earlier. The aim of this article is to highlight some of the pros and cons of the Bill and recommend action points for clients and their professional advisers.
If the Bill is passed, it will become much harder for adult children to challenge Wills in Victoria. Further, the existence of a written agreement signed by potential claimants in which they agree not to challenge a Will, may become an absolute defence to a Will challenge commenced in spite of the 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.
o Disabled (see below for the definition);
o Under 18 years; or
o Under 25 years and studying full time; or
o None of the above but wholly or partly dependent on the deceased for their maintenance or support.
Grandchildren and registered caring partners can only qualify as eligible applicants if at the date of the deceased’s death they were wholly or partly dependant on the deceased for their maintenance and support.
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) but the narrowing of the definition of eligible applicants has been 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. Perhaps we should expect to hear of previously estranged adult children and grandchildren seeking to move in with an elderly parent or grandparent, establishing partial dependency shortly before the date of death. 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.
o an intellectual, physical or psychiatric impairment, which is likely to be permanent; and
o the impairment results in substantially reduced capacity to communicate, socially interact, learn, move around or provide self-care or self-management.
This appears to go some way to ensuring that particularly vulnerable children are eligible to make a claim but, again, we should expect that there will be cases where the meaning of “disability” is tested.
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.
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.
Private Advisory (Melbourne)
T: +61 3 9605 0834