“Need” or greed? The question of “financial need” in claims for further provision from deceased estates
By Deborah Kliger, Lawyer, MST Lawyers
Under Part IV of the Administration and Probate Act 1958 Victoria (“the Act”), certain persons may apply to the court for further provision from a deceased estate. In determining whether to make an order for further provision (“a maintenance order”) the court may consider, amongst other factors, the financial resources (including earning capacity) and financial needs of the applicant, any other applicant and other beneficiaries.
The plaintiff’s financial resources was a critical issue in the recent Supreme Court decision of Ligeti v Ligeti [2016] VSC 448. In this case, Judge Keogh dismissed a daughter’s application for further provision out of her late father’s estate. Taking into account the plaintiff’s significant financial resources (including assets valued in excess of $2,000,000), Judge Keogh held the deceased adequately provided for the plaintiff’s proper maintenance and support. Accordingly, Judge Keogh found the plaintiff did not establish a “financial need” sufficient to warrant a maintenance order.
The facts
The deceased passed away on 28 December 2013. In his last Will dated 12 May 2003 he left 4,000 National Australia Bank shares worth approximately $138,800 to the plaintiff. The deceased left the balance of his estate worth in excess of $2,000,000 to his second wife (“the defendant”). In 2003, during the deceased’s life, he gifted the plaintiff the sum of $300,000.
The plaintiff issued an application pursuant to Part IV of the Act seeking a maintenance order on the grounds that the deceased failed to adequately provide for her in his Will. The defendant resisted the plaintiff’s claim for further provision, asserting the plaintiff had been adequately provided for.
Relevantly, the plaintiff had made significant contributions to the welfare of her immediate family over almost three decades. In 1962 the plaintiff’s mother (the deceased’s then wife) suffered a psychological breakdown and was diagnosed with schizophrenia. From the mid-1970’s, the plaintiff assumed the role as her mother’s carer, performing household duties and preparing meals for her. In 1983 the plaintiff’s brother Peter, who had been diagnosed with schizophrenia and depression, moved in with the plaintiff and her mother. The plaintiff also assumed responsibility for Peter’s care. From time to time, the deceased provided limited financial assistance to the plaintiff. The plaintiff continued to care for her mother and brother until their deaths in 1998 and 2003 respectively.
When can the court make a maintenance order?
The court’s power to make a maintenance order is set out in section 91 of the Act. To make an order of this kind, the court must be satisfied that:
a) the deceased had a responsibility to adequately provide for the applicant’s proper maintenance and support; and
b) the provisions of the Will do not make adequate provision for the applicant’s proper maintenance and support
In determining the above matters, the court may consider a range of competing factors (listed under section s91(4)(e)-(p) of the Act). Amongst other things, those factors include:
a) the size and nature of the deceased estate and any estate liabilities;
b) the financial resources (including earning capacity) and the financial needs of the applicant, any other applicant and other beneficiary;
c) any voluntary contribution of the applicant to building up the estate or to the welfare of the deceased or the family of the deceased
What is “financial need”?
In Ligeti, Judge Keogh determined the only current financial needs of the plaintiff were:
a) Some building and repair works to be performed on her home, valued at approximately $94,471; and
b) The purchase of a new car
In August 2016, when the plaintiff’s application came before the court, the plaintiff’s gross annual salary was in excess of $200,000. She also had assets (including a home, shares and superannuation) valued at $2,630,314. The plaintiff acknowledged she could afford to pay for the home renovations and a new car. Taking into account the plaintiff’s significant assets, her limited financial needs and the provision the deceased made for her (both under his Will and during his life), Judge Keogh held the deceased adequately provided for the plaintiff and dismissed the plaintiff’s application for further provision.
Take home messages
The concept of “financial need” in claims for further provision from deceased estates is relative. What constitutes “financial need” will vary in each case, depending on a variety of factors including the size of the estate and the plaintiff’s financial position.
New legislation on estate claims was introduced on 1 January 2015. The legislation affects any claim made against an estate where the deceased died on or after 1 January 2015. The new laws prescribe categories of “eligible persons” who can make a claim against a deceased estate. Importantly, the legislation places a greater emphasis on the effect a maintenance order would have on the amounts received by the other beneficiaries of the estate. Accordingly, it is likely to be tougher for financially stable applicants to claim further provision if there are other beneficiaries in financial need.
If you wish to apply for further provision from a deceased estate, protect your estate against potential claims, or for any other Wills & Estates enquiry please contact our Wills & Estates team by email wills-estates@mst.com.au or by telephone +61 3 8540 0200.
