Hayley Mitchell, partner at Cooper Grace Ward, said at last month’s CGW Adviser’s Conference that although the FPA in Queensland is quite straightforward, in other states, eligibility requirements will be slightly different.
“In Queensland, you are eligible if you are a spouse of the deceased, a child including stepchildren or a financial dependent and under the age of 18, or a parent of the deceased if they didn’t have a spouse or children,” Mitchell said.
However, she said in other states the court has to answer two questions, the first of which is: has the applicant been left without adequate provision from the estate?
“If it’s the spouse, for example, and they don’t receive anything under the will the answer to that question is pretty easy – yes, but if they’ve been left with something, we still then go on to assess the second question. And that is, what is adequate provision for the applicant?” she asked.
Mitchell said there are some essential time limits in claiming FPA, including that the person intending to claim must do so within six months and must provide written notice to the executives that they intend to claim. They then must file their claim within nine months of the date of death.
“That’s filing their application with the Supreme Court or the district court, depending on the size of the estate. These factors are not in the legislation in Queensland, but NSW has gone the extra step and legislated it,” she said.
In assessing whether there is adequate provision, the court looks at several factors depending on the circumstances in the case, with one of the most important being the size of the estate.
It will also look at the health and personal needs of the applicant and whether they have special needs or a disability. It will also consider if the applicant is at retirement age or if they can generate an income for themselves.
“There are also questions around what contributions that applicant made to the estate and whether they assisted in building up the wealth in the estate,” she said.
Mitchell said many disputes around estate planning and FPAs eventuate because the parties on either side do not trust the evidence that the other side has put forward.
“Quite often your clients will want to go to the extent of having the applicant provide their bank statements for the last 10 years and proving their level of spending and that’s where some of that family dynamic and those difficulties in navigating and setting the expectation for your client comes in,” she said.
“For a spousal relationship, you’re looking at how long the relationship was – a 40-year marriage or a two-year de facto relationship? Quite often you will see issues of distance and whether there was any disentangling conduct.”
It is also necessary for the courts to look at the competing needs of all the other beneficiaries that are included under the will.
“The courts don’t believe that they can rewrite the terms of the will to make provision for this applicant, so they’ve got to consider those beneficiaries that have been chosen and what their competing needs are,” Mitchell said.
“You can see where the difficulty is at the front end and advising their clients about what their expectations are is difficult because this is all kind of chucked in a washing machine.”
She added under FPA there are often questions around superannuation and insurance depending on whether there are any nominations in place.
“The court cannot order provision from assets held in trusts, assets held in companies, joint tenancies, superannuation and insurance if it is paid outside of the estate.”
“These are the sorts of things that need to be dealt with in the estate planning side to try and minimise the risk or reduce the value of the estate if there is the risk of a dispute later.”
