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Background

The Plaintiff made application for approval of a family settlement with respect to the estate of her 80 year old husband (“the Defendant”), who suffers from dementia, and is a “protected person” within the meaning of Section 38 of the NSW Trustee and Guardianship Act 2009. The Defendant became a protected person in December 2014, when the Supreme Court made management orders declaring he was incapable of managing his affairs.

Prior to the making of these orders, the Plaintiff had been managing the Defendant’s estate by means of Enduring Power of Attorney and Appointment of Enduring Guardian documents put in place in 2009. The Plaintiff, aged 72, and the Defendant commenced their relationship in 1993 and married in 2008. The Defendant had five daughters (“the Applicants”) with his first wife. 

The Applicants moved the Court to authorise the making of a statutory will on the Defendant’s behalf, to ensure testamentary provision was made for them. The Plaintiff and the Applicants agreed that they are the only people entitled to receive benefit from the Defendant’s estate. They also agreed that the Plaintiff should receive appropriate provision from the Defendant’s estate, consistent with Luciano v Rosenblum (1985) NSWLR 65, where Powell J stated:

“As a broad general rule … the duty of a testator to his widow is, to the extent to which his assets permit him to do so, to ensure that she is secure in her home, to ensure that she has an income sufficient to permit her to live in the style to which she is accustomed, and to provide her with a fund to enable her to meet any unforseen contingencies”. 

The parties submitted to the Court that the family settlement would include, under Section 95 of the Succession Act, a release of their respective rights to apply for family provision relief, effectively pre-empting the possibility of family provision litigation arising after the Defendant’s death.


Statutory Will


The Court had to ensure that the proposed statutory will was an “appropriate” will and one that would be “reasonably likely” to be made by the Defendant if he had testamentary capacity: Section 22 of the Succession Act.

The Defendant made a will in 2000. His marriage to the Plaintiff in 2008 revoked that will and, as the Defendant was a Solicitor, the Court found he could hardly have been unaware of this fact.

The Defendant lives in a nursing home facility, and has a life expectancy of around six months. The Plaintiff remains the Defendant’s principal carer. The Court made orders that the NSW Trustee & Guardian is at liberty to authorise the Plaintiff to receive a reasonable living allowance from the protected estate until the Defendant passes away.


The Defendant’s estate is worth approximately $2.9 million. The proposed statutory will would see the Plaintiff receive assets worth about $1.4 million and a right of residence to the retirement village property in which she currently resides. The Applicants would each receive around $300,000.


Family Settlement

The Court had to deal with the issue of whether it was in the interests, and for the benefit, of the Defendant to approve a family settlement. The interests of the protected person must be paramount to any orders made: Secretary, Department of Family and Community Services v K [2014] NSWSC 1065.

Orders were made allowing the Plaintiff or the Applicants to expend on the Defendant “such sums as may be reasonable for amelioration of his personal circumstances or for his personal enjoyment”, to serve as a reminder that the protected estate remains his and is to be managed for his benefit: W v H [2014] NSWSC 1696.

The Court emphasised that the family settlement and statutory will, while binding on the Plaintiff and Applicants, in no way binds the Defendant or the management of his protected estate.

“Parties may reach agreement between themselves, but they cannot govern the Defendant or constrain the Court, the NSW Trustee and Guardian or the Defendant’s protected estate manager for the time being in management of the Defendant’s affairs”.

The Court was satisfied that the family settlement and statutory will were in the best interests of the Defendant because the parties were in agreement as to the terms and have released their rights to family provision claims, thus saving the estate from bearing costs. 


Orders

The Court made orders that:

- Statutory will is approved on the terms agreed to by the parties.
- The parties release their respective rights to make a family provision claim.
- Nothing in the orders made or the statutory will operates to bind the Defendant, or the manager
  of his protected estate.
- NSW Trustee & Guardian is at liberty to authorise the Plaintiff to receive a reasonable living
  allowance from the protected estate.
- NSW Trustee & Guardian may authorise any of the parties to expend money from the protected
  estate for the reasonable amelioration or personal enjoyment of the Defendant.

This case shows that the Court will allow a family settlement and the making of a statutory will in certain circumstances. This can be beneficial and cost-effective where family provision litigation is anticipated upon the death of a person lacking testamentary capacity.

A full copy of the decision may be found here.

For any questions in relation to this topic or any other Estate Planning matter, please call us on 1300 727 813, or email us.

Related articles:
- Your Will - Can It be Disputed?
- I'm Too Young To Worry About That!


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