Notional Estate Orders are very useful PDF

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Notional Estate Orders are very useful. All Australian jurisdictions should adopt the concept. There is no need for reluctance. Critically discuss this statement. ever, operate to revoke where the marriage is only voidable, unless the marriage is voided during the testator’s lifetime (Re Roberts [1978]). ever, operate to revoke where the marriage is only voidable, unless the marriage is voided during the testator’s lifetime (Re Roberts [1978]). The New South Wales Law Reform Committee (NSWLRC) first considered the adoption of notional estate laws in 1977.1 The report compelled issues surrounding the family provision legislation, specifically the inclusion of notional estate laws. The committee highlighted that ‘on one hand there is, the interest of a person in arranging his affairs in his way and the interest of a transferee of property in securing his title. On the other hand, there is the interest of a family in not being disinherited. In trying to answer these questions, any reformer faces a dilemma’.2 The committee also recognised that if provisions were not put in place then its effectiveness will be limited.3

A notional estate order is defined as ‘an order made by the Court under Chapter 3 designating property specified in the order as notional estate of a deceased person.’4 Notional estate orders are a feature specific to the New South Wales legal system, that were created to prohibit an individual from transferring possession of property during their lifetime in order to prevent a family provision order being placed on that property. It allows the court to treat properties that are not part of a person's estate as if they were. This is

1 New South Wales Law Reform Commision, Testator’s Family Maintenance and Guardianship of Infants Act 1916 (Report No 28, 1977) 2 Ibid [2.22.3] 3 Ibid [2.22.2] 4 Succession Act 2006 (NSW)

referred to as their "notional estate." These assets will then be used by the court to make a provision for a successful applicant. Only if an applicant is successful, and only if there are sufficient assets available, will the New South Wales Supreme Court make a notional estate order. Transactions or dealings that take place within three years of a person's death (or that occur on or after a person's death) are considered notional properties. Under s57 of the Succession Act 2006 (NSW) an eligible person that can apply for these orders are spouses, former spouses, de factos, children, any person who was dependant on the deceased and grandchildren.

A notional estate order will only be made if the deceased exchanged property in a specified manner. According to Section 75 of the Succession Act5 a person enters into a relevant property transaction if the person does, directly or indirectly, or does not do, any act that (immediately or at some later time) results in property being: held by another person (whether or not as trustee), or; subject to a trust. ‘If the Court is satisfied that the deceased person entered into a relevant property transaction before his or her death and that the transaction is a transaction’6 then a notional estate order can be made. Notional estate assets include assets that were gifted or transferred during the deceased lifetime, and assets that are not directly owned by the deceased person such as a trust or superannuation.

Before classifying these gifts as part of a notional estate the court will consider the following: time limits, the value of the estate, the circumstances in which the deceased property was gifted or transferred as well as the merits of the claim. If any of the above

5 Ibid s 75. 6 Ibid.

considerations are not valid the court will not make an order. The Supreme Court of New South Wales will only make a notional estate order if a claimant is successful with their claim and the estate has funds to support the compensation. Only transactions that take place within three years of a person's death (or that take place on or after a person's death) are considered relevant. There are also provisions that have been put in place where notional estate orders may be made where estate was affected by relevant property transactions. These laws are often referred to as 'clawback' provisions as their aim is to enable the court to 'claw back' the property discarded of by the testator in his/her lifetime, or if the testator failed to take steps to ensure that the property over which the testator has ownership in his/her lifetime remains the possession of his/her assets. When it comes to determining whether or not a notional estate can be accepted, time constraints are crucial. The time period in New South Wales for a family member to seek a family provision is 12 months from the date of death of the deceased. If the complainant is out of time or making an appeal in respect of an estate that has already been the subject of a family provision order, the Court cannot impose an order relating to it unless exception circumstances warrant the order.

There are also a number of restrictions on the power of the court to designate property as notional estate.7 The court can only make a notional estate order if it satisfies four provisions. These provisions are: the deceased left no estate; or the deceased’s estate is insufficient for the making of the family provision order or costs orders that the court thinks should be made; or orders should not be made wholly out of the deceased’s estate because there are other persons who could apply for family provision orders, or there are special

7 Ibid s 83(1).

circumstances;8 or the deceased’s estate has been distributed and no estate remains, or the remainder is insufficient for the court making family provision orders or costs orders.9 These restrictions on power ensures that the court cannot make orders that impose on the family of the deceased, however the restrictions can limit a claimants ability to seek a notional estate order on a estate.

In Australia we are free to give our assets to whomever we want under testamentary freedom. The introduction of notional estates would severely curtail this freedom.10 A Supreme Court judge stated that testamentary disposition is a “prominent feature of the Australian legal system. Its significance is both practical and symbolic and should not be underestimated.”11Notional estate orders may interfere with testamentary freedom as they allow family members of the deceased to amend a will. When a will is altered by a court order, the deceased's final wishes and testimonies may be omitted. Adopting notional estate orders to other jurisdictions of the Australian legal system may interfere with this freedom.

The Succession Act 2006 (NSW) ( The Act) enables the courts to make family provision orders. Notional estate orders work hand in hand with family provision orders, if the court finds that the deceased failed to provide sufficient support for the applicants ‘proper maintenance, education or advancement in life’.12 Courts can make decisions abouts assets in and outside of the deceased estates. The Act requires the Court to make a notional estate order involving 8 Ibid s 88. 9 Ibid s 79.

10 Tasmania Law Reform Institute, Should Tasmania Introduce Notional Estate Laws? (Final Report No 27, September 2019) 11 Goodsell v Wellington [2011] NSWSC 1232 12 Succession Act 2006 (NSW)

properties that did not directly belong to the deceased at the time of death, if there are no estate assets or if the estate assets are inadequate for the family provision order.

Notional estate orders allow for the court to grant provisions for successful family provision claimants from a much wider pool of funds than are actually available in other Australian jurisdictions, due to notional estate rules. However, widening the scope of family provision laws to properties that aren't currently affected reduces a person's right to direct how their estate is allocated after their death. An example of where a notional estate order can be made is superannuation. Superannuation funds typically do not form part of the estate of the deceased; however, a court can designate it as part of a notional estate. A trustee of a superannuation fund to receive a death benefit can be deemed as a relevant property transaction, resulting that the death benefit could fall within the scope of a notional estate order. This was seen in Kelly v Deluchi13 where orders were made to designated part of the deceased superannuation fund assets to a notional estate. The order enabled the two children of the deceased to receive the legacies of the funds rather than his wife, which was not the mother of his children. The case was significant for the New South Wales legal system as it showed how a superannuation death benefit can form part of an estate under a notional estate order.

The Victorian Law Reform Commission reviewed succession laws in 2013 and came to the conclusion that New South Wales notional estate laws should not be adopted in the Victorian legal system. The committee concluded that: ‘In the absence of clear evidence demonstrating the need for such provisions to prevent people from depriving their families of provision in Victoria, or the effectiveness of such provisions in preventing people from 13 Kelly v Deluchi [2012] NSWSC 841

doing this in New South Wales, arguably notional estate provisions should not be introduced in Victoria.’14 The Tasmania Law Reform Institute also discussed both the advantages and disadvantages of notional estate laws. The institute concluded that ‘[on] one hand, extending the Court’s reach to assets not currently available imposes a further restriction on a person’s ability to choose how they want their estate distributed after their death. On the other hand, current laws provide scope for people to structure their affairs in ways that may undermine the objective of making sure that adequate provisions are made for a person’s spouse and children after their death.’15 In addition, The Queensland Law Reform Commission stated that ‘although it generally favoured the adoption of the New South Wales notional estate provisions, section 22(4)(b) of the Family Provision Act 1982 (NSW) would need to be “reworded and clarified” in light of the existing case law.’16

To conclude notional estate orders are specific to the New South Wales legal system, they allow the court to treat properties that are not part of a person's estate as if they were. In doing so, the claimant has access to a wider pool of funds then originally in the deceased estate, that is able to be claimed. However, the orders reduce a person's right to direct how their estate is allocated after their death which can somewhat take away the notion of testamentary freedom. Adopting notional estate orders in all Australian jurisdictions have been reviewed by other states which all concluded that there are both many advantages and disadvantages into making these orders available in all Australian jurisdictions. There should

14 Victorian Law Reform Commission, Succession Laws (Consultation Paper, October 2013). 15 Tasmania Law Reform Institute, Notional Estate Laws (Fact Sheet 1) 16 Queensland Law Reform Commission, National Committee for Uniform Succession Laws (Report No 58, July 2004)

be some reluctancy as being able to change a will can leave claimants with too much power in regard to the last wishes and testimony of a deceased....