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Can assets I dispose of in my lifetime be subject of a family provision application against my estate when I pass?

What is a family provision application?

The Succession Act 1981 (Qld) (the ‘Act’) entitles eligible persons to make an application to the Court seeking provision or adequate provision from the deceased person’s estate.  This is commonly called a family provision application.

Who is an eligible person?

Pursuant to the Act, only ‘eligible’ persons can bring a family provision application against a deceased estate.  An eligible person includes a spouse, child or dependant of a deceased person.

A spouse includes a husband or wife, de facto partner, a civil partner and dependent former husband or wife or civil partner.

A child includes natural children, stepchildren and adopted children.

A dependant means a person who was being wholly or substantially maintained or supported by the deceased at the time of his or her death and who is: –

  1. a parent of the deceased; or
  2. the parent of a surviving child under the age of 18 years of that deceased person; or
  3. a person under the age of 18 years.
Can assets I dispose of in my lifetime be subject of a family provision application?

Some people will dispose of their assets in their lifetime having the effect of defeating a family provision application by an eligible person against their estate when they pass.

In New South Wales, Part 3.3 of the Succession Act 2006 (NSW) provides powers to a Court in certain circumstances when dealing with a family provision application against a deceased estate to take into account assets that are no longer (or never were) owned by the deceased person and make orders affecting the parties holding those assets or in respect of the proceeds of sale of those assets.   These Orders are referred to as “notional estate orders” and their purpose is to prevent actions or omissions by a person during their lifetime from having the effect of defeating a family provision application by an eligible person to a claim against their estate when they pass.

However, in Queensland, there is no such corresponding legislation permitting the Court to make Orders affecting assets properly disposed of by a person in their lifetime when determining a family provision application made by an eligible person against a deceased estate.

The Ademption Rule

Ademption occurs where the gift of a specific item of property in a will fails because prior to the testator’s death, the property is sold or otherwise disposed of. An example of this is when real property is gifted to a beneficiary in the will but is subsequently sold during the will maker’s lifetime to fund for example, a permanent aged care facility and the testator does not update their will to reflect the changed circumstances. The gift of the property is said to be ‘adeemed’ because the gift no longer forms part of the testator’s estate. The rule of ademption may significantly distort the testator’s intention and/or result in unjust outcomes.

Unlike NSW, in Queensland the law did not provide for specific exceptions to the ‘ademption’ rule.  However, the Guardianship and Administration and other Legislation Amendment Bill 2018 (Qld) has introduced changes to the Guardianship and Administration Act 2000 (Qld) and the Powers of Attorney Act 1998 (Qld) to create a statutory exception to ademption in circumstances where the gift has been addeemed by the actions of an attorney or administrator and not by the testator themselves as a result of for example, their lack of capacity.

The commencement date of the legislation is subject to proclamation and will mean that when an attorney under an enduring power of attorney or an administrator deals with the testator’s property that is a gift under a will, the beneficiary is entitled to the same interest in any surplus money or other property arising from the sale or other dealing with the property. This will give effect to the testator’s intentions before he or she lost capacity.

The Courts have also considered exceptions to the ‘ademption’ rule in circumstances where a beneficiary suffers an unjust disadvantage not contemplated in the will.  For example, the Court may intervene where there has been fraud.  When considering whether an exception of the ‘ademption’ rule should be applied, the Court may consider the will maker’s knowledge and intention about the disposal of an item or property in their lifetime. Ultimately, whether an exception to the ‘ademption’ rule applies will depend on the circumstances of each case.

If you or someone you know would like more information or some advice about whether these matters affect you, please contact us on (07) 5458 6855 or email mklein@kleinlegal.com.au.