Will challenges – how much could they get?

In Australia, we have what is known as ‘freedom of testation’. That is, a person is free to leave their assets to whomever they wish when they die.

This freedom, however, is subject to a legal obligation to make adequate provision for the proper maintenance and support of certain people. This legal obligation is often the source of claims made against deceased estates by disappointed beneficiaries seeking a larger benefit, and by others who may have been left out of a Will entirely and believe they should have been provided for by the Willmaker.

Where it is agreed or otherwise determined by a court that a deceased person owed a legal obligation to provide for a certain person, there are three questions that need to be answered:

1. Do the claimant’s circumstances reveal a genuine need for provision to be made for their proper maintenance and support?
2. Does the Will provide for the claimant’s proper maintenance and support?
3. If the Will does not sufficiently provide for the claimant, then how much further provision should be awarded for their proper maintenance and support?

The Court will only award the minimum amount of further provision required to achieve a sum that is adequate for a claimants proper maintenance and support. In other words, the Court will only interfere with the wishes of the deceased to the minimum extent required.

Often an estate is not large enough to ideally satisfy the needs of every competing beneficiary, and the question of ‘how much’ becomes an exercise in balancing compromises. However, where there are large estates which have ‘more than enough to go around’, the principle of the ‘minimum’ extent is really tested. Broadly, the Court has tended to accept that it can be more generous with awards of further provision where there are large estates.

In this sense, the concept of ‘adequate’ provision is more elastic, and the Court has a certain amount of discretion to exercise in determining the extent of further provision. However, just how elastic is the concept has been more of a grey area.

Lemon v Mead [2017] WASC 71

In 2017, the Western Australia Supreme Court was faced with this issue, when it heard a dispute concerning the estate of the late mining magnate Michael Wright. The estate was valued at approximately $865 million. Under the terms of Mr Wright’s Will, two of his daughters were left approximately $400 million each, whereas a third daughter was left an amount in a discretionary trust which amounted at most to about $3 million. The third daughter made an application for further provision and was initially awarded an additional $25 million.

The basis of this award was that in an estate so vast, there was no need for the Court to weigh up any balancing factors which might ordinarily limit the exercise of its discretion. Consequently, the Master held that there was no limit on the Court’s discretion and awarded what was regarded to be an extremely large sum.

The decision caused a significant stir in the legal profession given the sheer extent of further provision awarded, and the concept that in certain circumstance there was no limit to the amount of further provision a Court could award. The estate’s executors appealed the decision and sought to reduce the amount of the award. On appeal, the Court held that the Master had misapprehended the nature and limits of the Court’s power to grant further provision.

The appeal was successful, and the award of further provision was reduced so that a total of $6,142,000 from the estate was granted to the third daughter, being an additional $3.142 million over what was provided to her under the Will. This provision would allow for the purchase of a property in metropolitan Perth valued at $1.5 million, and provide an annuity of $100,000 for the remainder of her life.

The significance of the appeal is that, even in exceptionally large estates where there is ‘more than enough’ to provide for every beneficiary without compromising the needs of another, the Court’s discretion to award further provision is limited.

In Lemon v Mead the Western Australia Supreme Court acknowledged that it is ‘impossible to describe, in terms of universal application, what adequate provision for proper maintenance will entail for a parent of an adult child’. In other words, there is no hard and fast formula (such as that used in this case to provide for the purchase of a house and a lifetime annuity) for the calculation of provision.
There are, however, a number of important guiding principles which should be kept in mind when addressing the question of ‘how much is enough’.

1. The extent of the deceased’s obligation will be evaluated on all the facts which existed at the date of death – whether the deceased knew them or not – and will take into account future issues which could impact apon the claimant’s life, whether that be health or financial stress.
2. The freedom to leave assets the way one chooses is an important consideration to be made in every case. The jurisdiction of the Court to award further provision was never intended as a free licence to the Court to re-write every Will. In this sense, the Court will only interfere in a Will to the minimum extent necessary to give effect to the purpose of making adequate provision for a person’s proper maintenance and support.
3. The Court’s jurisdiction is always limited, even in the case of large estates. For this reason, the Court must assess claims for further provision by reference to the needs of a claimant and the foreseeable contingencies which might affect them later in life.
4. The word ‘proper’ means something different to the word ‘adequate’. ‘Adequacy’ is concerned with the amount of a distribution, whereas whether the amount is ‘proper’ depends on the standard of living which the distribution should support. A small amount might be ‘adequate’ for maintenance, in the sense that it might be sufficient to cover the cost of necessities, but might not be ‘proper’ having regard to the amount of available funds in an estate, and the lifestyle which a claimant became accustomed to during the deceased’s lifetime.
5. On the flip side, particularly where small estates are concerned, an amount may not be adequate to cover certain expenses, but when considered in light of there being a small amount of money available to spread between competing beneficiaries, it may be proper all things considered.
6. The words ‘maintenance’ and ‘support’ relate not only to expenditure for basic essentials but extend to provision which would enable a person to get ahead in life and in comfort.
7. When the Court is considering what amount is adequate for the proper maintenance and support of a claimant, it will also evaluate the nature of the relationship between the claimant and the deceased, which might have had a legitimate impact on what could be considered ‘proper’ in all the circumstances.
8. When examining the nature of a relationship, the Court will take into account the extent to which a claimant may have made sacrifices or else served the deceased in some way – such as by making financial contributions towards the building up of the estate, or by contributing to the deceased’s welfare. However, financial or emotional contributions to an estate are not pre-conditions to an award for further provision.
9. When considering a claim, the Court will take into account the extent of the deceased’s duty to other persons eligible to make a claim on the deceased’s estate and to their particular circumstances.
10. The Court will not use what has been gifted to one beneficiary as a guide to what should be distributed to a claimant. Provision is always a needs-based assessment having regard to what is ‘adequate’ for ‘proper’ maintenance.
11. Finally, provision under a Will may not be adequate or proper because of the ‘strings attached’ to that provision, even if the amount itself is not in issue. In these types of cases, the Court may vary the terms of a Will to alter how a distribution is to be paid or structured, whilst leaving the amount itself intact.

The affirmation of these principles by the Western Australia Court of Appeal, and numerous subsequent cases across various State jurisdictions has important implications. In particular, it serves as an important safeguard against the trend of cases where either:

1. A claimant seeks a ludicrous amount of further provision because an estate is very large; or
2. Huge time and effort (and therefore, legal costs) are expended in fighting over the valuation of an Estate because a claimant seeks to inflate the Estate as a justification for inflating a claim for further provision.

Conclusion

‘How much is enough’ will always be the question in claims for further provision. However, it is now clear that in much larger estates, the total value of the Estate no longer really matters beyond a certain point. Decisions are based on need, not a percentage ‘fair share’. A claimant shouldn’t expect more than what their needs require, even if it is a lesser share than siblings or not as much as they think is a ‘fair share’ of a large estate.

For further advice or assistance on how your Will could be challenged, please contact our Wills, Trusts & Estates team.