Financial Newsletter Sunshine Coast

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The FPR are designed to ensure that adequate provision is made for certain eligible person(s) regardless of whether or not
they’re mentioned within the Will. While a client is free to prepare a Will that reflects their wishes, this can potentially lead to
outcomes that are considered unfair and unreasonable for eligible persons (such as a spouse, de-facto spouse or child of the
deceased).

A Will can be challenged in any State or Territory via the Courts if an eligible person's maintenance, education or advancement
in life has not been properly provided for. When challenging a Will, the eligible person would seek to have non-estate assets
included in the notional estate to be distributed to beneficiaries/eligible persons.

Peter Hewish, Senior Estate Planner, Australian Executor Trustees, says many assets that are readily excluded from a client’s
estate using traditional strategies could potentially be considered part of the client’s notional estate and classified as a relevant
property transaction.

Hewish states the NSW Supreme Court (‘the Court’) will designate whether property or assets form part of the deceased’s
notional estate. The Court will determine whether the disposal of an asset could be classified as a relevant property transaction
and whether it falls within the specified time limits.

If appropriate, the Court will decide (based on the circumstances of the case) whether to make an order to:

• overturn the relevant property transaction and claw back the asset into the estate; and/or
• re-write the Will after taking all relevant matters into account and distribute the proceeds to the beneficiaries/eligible
  persons.

1. RELEVANT PROPERTY TRANSACTIONS

A relevant property transaction could include:

• 
  a benefit to a spouse or one particular child over another by using a binding nomination for superannuation or
  beneficiary for a life insurance policy;
• 
  owning property as a joint tenant and upon death, by operation of the right of survivorship, the other joint tenant attains
  full ownership; or
• 
  gifting to a charity or family while still alive.

According to Peter Hewish, a binding death benefit nomination that a client uses to have their superannuation paid to their
spouse or a particular child upon their death could be classified as a relevant property transaction. On the other hand,
purchasing a property as joint tenants to use the right of survivorship upon death could also be captured. Hewish states
financial advisers may be surprised to know the right of survivorship can be overturned and a binding death benefit nomination
can be challenged, all via the Court, using the FPR.

¹ The Family Provision Act 1982 (NSW) was repealed when the Succession Amendment (Family Provision) Bill 2008 commenced on 1 March 2009. Refer to Chapter 3 titled the Family Provision rules.

2. SPECIFIED TIME LIMITS

Challenging a Will must be done within 12 months of the date of death. The Court has the power to take into account relevant
property transactions within the client’s notional estate that have occurred:

• - within three years before the client’s death, if it was done with the intention of denying or limiting an eligible person
  provision from the estate;
• - within a year before the client’s death, if at that time, the person had a moral obligation to make proper provision for
  the eligible person; or
• - on or after the client’s death.

The concept of notional estate is limited to NSW law and may impact clients who are domiciled or own property in NSW.

ACHIEVING THE DESIRED ESTATE PLANNING OUTCOMES

Not all challenges can be foreseen but including preventive measures within your clients’ financial plan could assist
them to lessen the risk in consultation with their solicitor. Hewish mentions there are no guarantees when it comes
to challenges to estates. Since traditional strategies are unlikely to be effective in isolation, advisers should also
consider:

• • planning further ahead so that transactions intended to achieve the desired estate outcomes are completed outside of
  the specified time limits; and
• • making a statement of testamentary intentions to explain why the benefits of their client’s estate have been limited or
  denied to certain parties.

ARE TRUST STRUCTURES A VALID ALTERNATIVE?

Using a discretionary family trust could be a valid safe haven for your clients to ward off a potential estate challenge under the
FPR. However, if your client has control over a discretionary family trust, the Court could still classify the assets within the
discretionary family trust as a relevant property transaction. This can be due to the fact the client did not dispose of assets held
within the trust to become part of their estate.

Peter Hewish also states an alternative strategy may be gifting into a family trust outside the three year time limit and having no
control over the trust. Generally, this may be an effective strategy but clients need to seek specialist legal advice.

SUMMARY

The complexities involved with the concept of notional estate within NSW law can make it difficult for clients to achieve their
estate planning goals. Traditional strategies may not prevent assets being included in their estate and distributed against the
clients’ wishes. Not all estate challenges are successful but advising clients of these changes and how they may impact their
estate planning goals is important.

Futuro Financial Services Pty Ltd wishes to acknowledge and thank IOOF for providing content for the preparation of
this document.

Disclaimer: This document was prepared by Futuro Financial Services Pty Ltd ABN 30 085 015 (AFSL number 238478) without taking into account any person’s particular objectives, financial situation or needs. It is not guaranteed as accurate or complete and should not be relied upon as such. Futuro Financial Services Pty Ltd does not accept any responsibility for the opinions, comments and analysis contained in this document, all of which are intended to be of a general nature. Accordingly, reliance should not be placed by anyone on this document as the basis for making any investment, financial or other decision. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend investors obtain financial advice specific to their situation before many any financial investment or insurance decision.

Disclaimer
All representations and information contained in Futuro in Focus are made in good faith and are believed to be correct at the time of preparation. Articles are of a general nature and they do not purport to be specific investment advice. Individual needs or other considerations have not been taken into account, thus information contained herein should not be relied upon as a substitute for detailed advice. Futuro Financial Services will receive fees or brokerage from the provision of advice or placement of investments. You may, by contacting our Privacy Officer on 07 3018 0400 or by writing to Futuro Financial Services Privacy Officer GPO Box 942 Brisbane QLD 4001, request not to receive further editions of Futuro in Focus.