Family Provision and the Notional Estate

We have discussed Notional estate orders before, these are issued by the Court with the intention of making available for family provision orders assets that are no longer part of the estate of a deceased person because they have been distributed either before or after the deceased’s death (either with or without the intention of defeating applications for family provision).

In NSW the Family Provision Act 1982 (NSW) defines the ‘notional estate’. Given superannuation and the more common use of other asset-holding structures, like trusts, a deceased’s personal Actual Estate is often worth very little.  The Actual Estate is often only one part of the assets a Deceased would have the benefit of if they had not died.

A person’s Notional Estate becomes very significant in the area of family provision claims. If an eligible claimant for family provision under the Succession Act 2006 (NSW) believes they have not been adequately provided for, their claim is no longer limited to the Deceased’s Actual Estate – it also takes into account the Deceased’s Notional Estate – if the Actual Estate is insufficient to provide for the successful claimant.

Roy Kelly died in December 2009 aged 69 years. Roy married Denise in May 1962 and had three children Mark, Peter and Michele. Denise died in June 1981.

Roy remarried in January 1982 however the relationship didn’t last and the marriage was annulled in February 1984.

Roy married Mary in September 1985, this marriage lasted until his death. Mary was previously married and had three children Michael, Kaylene and Jennifer.At the time of Roy’s marriage to Mary, his daughter Michele, and Mary’s three children lived together for some time.

Roy’s last will made in July 2009, probate of which was granted in August 2010. Roy left $50,000 to Mark, $75,000 to Peter and Michele explaining that he had left Mark less because their relationship had not been constant. Roy left $10,000 to his friend, Errol.

Roy left 40% of his life insurance policy to be divided equally amongst the children of Peter and Michele; with 60% to be divided equally amongst Mark’s daughters.

Roy left his Rolex watch to Peter; his Toyota Landcruiser and Caravan to his stepson Michael; and the balance of his residuary Estate to Mary.

Roy’s estate, at the date of death had a gross value of $281,117. Additionally he shared an interest as a joint tenant, with Mary, in real estate worth $400,000, and a self managed superannuation fund (SMSF) worth $1,234,702.

In February 2012, Mary as sole director of the trustee of the SMSF allocated Roy’s death benefit to herself.

The Court made orders to designate part of the superannuation fund assets as notional estate to enable payment of legacies to the two children, as a corollary the sums of the legacies were increased as result of the family provision order.