The Freedom to Dispose of your Assets in your Will and its Limit
If a Will is written down, signed by the Willmaker and validly witnessed by two witnesses, then how can it be attacked? If a Willmaker follows all the rules and sets out their wishes clearly and concisely, do they have the freedom to do whatever they wish with their assets?
We call this “Testamentary Freedom”. Unfortunately for some, and fortunately for others, there are limits to it. The most common restraint on Testamentary Freedom comes in the form of Family Provision Applications (FPAs). All Australian States and Territories allow an eligible person (the meaning of “eligible” here differs between jurisdictions) to make an FPA on a person’s estate.
An FPA applicant, in essence, goes to Court with the complaint that they were not gifted enough by the estate of a deceased. If successful, the applicant will be awarded some “provision” from the estate. This amount can vary significantly, depending on the circumstances.
In Queensland, those who are eligible to make an FPA are:
a spouse of the deceased,
a child (including a stepchild or adopted child) of the deceased, and
a “dependant” of the deceased.
A dependant is someone who was maintained or supported in some way by the deceased during their lifetime.
Once an FPA is made by an eligible person, the Court may look at a wide set of factors to determine whether it shall be granted. However, Courts will often look at whether there is a “need” for that provision by the applicant. Consider the following two examples:
David’s mother passed away, and her Will states that the whole of her estate is to pass to her friend. David is a single parent with three minor children, one of which has a physical condition which requires medical treatment for at least the next few years. David has next to no assets, and his income is barely enough to make ends meet.
David makes an FPA to Court for provision from his mother’s estate.
John’s wife passed away, and her Will states that John is to receive a third of her estate, and the rest is to pass to their only son. John is an accountant, with an investment portfolio and several investment properties. His son is an adult and is financially secure himself. John has an income that is significant enough to pay for bills with plenty left over to save.
John makes an FPA to Court for provision from his wife’s estate.
David clearly has a much higher “need” for provision, and based on these factors alone, a good argument could be made for his success in Court. John has a much lesser “need”, and is less likely to be successful.
One other aspect to note is that John’s wife actually gifted him a third of her estate. While this doesn’t prevent John from making an FPA (applicants may make an application regardless of what they may have received from the Will), the Court will assess this against John’s favour, compared to David, who received nothing.
These two examples certainly fall into both extremes, and most cases will not be as clear-cut.
Other factors that the Court may consider are:
the relationship of the applicant and the deceased,
whether the applicant provided the deceased with any kind of care during the deceased’s lifetime, and
any other competing interests.
The final point is an important one. Say for example, that David’s mother’s friend (who received the entire estate), is also a single mother with significant financial needs without the means to meet them, then the Court will consider that too. It may not disentitle David from provision, but the amount awarded to David will be adjusted to ensure that the friend is provided for as well.
What is perhaps the most important aspect of FPAs that makes them stand out from any other Court process is that the Court will often direct that the applicant’s legal fees are to be paid from the estate of the deceased, even if the applicant is unsuccessful. The reason for this is that an applicant should not be dissuaded from making an FPA just because they are unable to pay for the legal costs associated with doing so.
So what does this mean for Willmakers and their lawyers? It means that Willmakers must consider their familial circumstances when making a Will. Of course, a key risk is that a person will successfully make an FPA to Court, however, what should also be considered, is the risk that a person brings an FPA to Court at all.
Is there a “black sheep” of the family who may come back and make an FPA to Court? And if so, what can be done about it?
There is no way to completely prevent an eligible person to make an FPA. Any kind of contract or promise by a potential applicant will be invalid in disentitling them (although a Court may consider such a contract in its assessment). There are however, ways to lower their chance of success. A Willmaker who does not wish to provide for a child in their Will often has reasons for doing so. For example, a child ran away and the parent hasn’t seen them in 20 years, or the child regularly steals from the parent and only contacts the parent to ask for money. Any such reasons should be set out in a way that would be readily available to the Court, should an application be made.
Another reason that this is a good idea is it may disincentivise a potential applicant from actually making the application if the reasons are set out, lowering their chance of success, keeping in mind that the estate of the deceased may have to pay for the legal fees of an unsuccessful applicant.
It is essential that Willmakers are aware of Family Provision Applications. If not, then they risk significant costs to their estate, and potentially subjecting their loved ones with the legal headache of having to defend against such an application at a time that should be spent grieving.
For specialised and holistic advice, book a consultation with Direct Lawyers to recognise and account for all risks in your Estate Planning.