Do you have the freedom to exercise total testamentary freedom when you write your will? You do have some freedom, but you also have a moral obligation imposed on you by the law.
In each of the states of Australia, the law casts a moral obligation upon a will maker to make adequate provision for certain persons. The definition of ‘certain persons’ differs from state to state. In Queensland, a will maker ought to make adequate provision for the following persons:
· Former spouse (in limited circumstances);
· A dependent (in limited circumstances).
It is at the discretion of the court as to whether or not family provision claims are successful. Not every applicant will be successful and not every applicant is eligible.
The important thing to remember with family provision claims is that the test is not to establish what the deceased intended under the will. The court must simply decide whether or not provision ought to be made to the applicant based on a number of things:
- Whether any provision you have already received is adequate for your proper maintenance, education and advancement in life.
- Competing claims of other eligible persons or beneficiaries. You may not be the only person who was cut out of the will.
- The nature and duration of your relationship with the person who has passed away.
- Your financial resources and earning capacity.
- The size of the estate. For example, you may pass all the criteria to make a successful family provision claim, but if there is only $20,000.00 in the estate, then there is very little scope for a Court to order provision.
- The financial circumstances of people you cohabit with, such as your spouse or de facto.
- Contributions you made, both financial and non-financial, to the person who has passed away.
- Any provision the deceased person made for you during their lifetime.
The area of law surrounding family provision claims is complex. Advice should always be sought urgently as there are tight time frames. In Queensland, you only have 9 months from the date of death and notification must be made within 6 months from date of death.
Courts now recognise that parents have a moral obligation to provide for their children even if they are disappointed with their children, or children’s life choices, or chose not to engage in the relationship with their children. Even estranged children and children who barely knew their parent have been able to establish to the court that the deceased owed them a moral obligation and have successfully contested a will so they secured their inheritance. This is true even for children who were born outside of a marriage (so-called love children), even where the child hasn’t even met their parent.
The concept of moral duty was first addressed in Bosch v Perpetual Trustee Co (Ltd) (1938) case and the Privy Council forwarded the following examination relating to the concept of moral duty:
“Their Lordships agree that in every case the Court must place itself in the position of the testator and consider what he ought to have done in all the circumstances of the case, treating the testator for that purpose as a wise and just, rather than a fond and foolish, husband or father.”
In the Bosch v Perpetual Trustee Co (Ltd) case, it was not just enough for the Court to take into account what a wise and a just father or a mother would do in specific situations being fully aware of the relevant circumstances of the case. The Court should rather place itself in the position of the testator and decide what should be done.
How to Uphold Your Moral Obligation
People generally don’t like surprises, so communicating your plans to your heirs is an essential part of the estate planning process if you’re hoping for relationships to remain intact down the track. Being open and discussing your decisions and reasoning with family can make the process much more peaceful. Unequal inheritance of an estate doesn’t have to be unpleasant. Estate litigation is less likely when there is no big surprise.
It is okay to decide that the inheritance you leave your children is unequal, if it’s fair. In the case of one family, two daughters are being treated differently to account for the learning disabilities of one and the successful career of another. Both daughters met with the parents where the rationale for their decision was explained. The self-sufficient daughter (who will receive less) was given the opportunity to appreciate the decision and was persuaded by the idea. What may have become a divisive issue is avoided with open communication and understanding.
Sometimes parents play favourites and this might be to reward one child for something or to punish another. Giving your children an unequal inheritance can be a bit like playing with fire, but there are ways that the fire can be kept under control so that it doesn’t become a raging inferno.
A testamentary discretionary trust may be useful in this scenario. You can tailor the terms of a testamentary trust to suit your particular circumstances. For example, you can restrict access to the assets in a testamentary trust in appropriate circumstances, such as where a major beneficiary has an addiction or is unable to manage a significant inheritance. Testamentary trusts can also provide that a beneficiary has a right to live in a house while preserving the assets for the ultimate beneficiaries (effectively a life interest).