Family provision -An Annuity may not be Adequate

In a recent decision, the New South Wales Court of Appeal had to decide whether the annuity given by the deceased to his widow (‘the Appellant’) under his will was adequate to provide for the appellant’s proper maintenance and advancement in life.

An annuity pays you a guaranteed income for a period of time of your choice; you can choose whether you want to receive payments for the rest of your life, or for a fixed number of years. An annuity provides certainty, as you know how much income you’ll receive and the length of time it will last.

Geoffrey Steinmetz married his second wife Gayle in late 2011, following a long de facto relationship that had begun in 1988. The couple were financially independent during their marriage, however, Geoffrey paid for their mutual entertainment, holiday and household expenses. Gayle had provided full-time care for Geoffrey over a period of 15 years, during which he had suffered ill health.

Geoffrey made his last Will in hospital prior to a life-threatening operation in September 2016 (the ‘Will’); his son-in-law, a solicitor, took instructions and drafted a Will appointing Geoffrey’s two children from his first marriage as the executors and trustees. The Will left Gayle with all of Geoffrey’s personal items including the contents of his house and an annuity of $52,000 per annum (paid quarterly) for the remainder of her life (the ‘Annuity’). His two children were left the residue of the estate. The Will replaced one made 2013, which had provided more generously for Gayle.

When Geoffrey died his estate was valued at approximately $6.8 million.

Following Geoffrey’s death , Gayle (the ‘Applicant’) made a family provision claim under s59 of the Succession Act 2006 (NSW), submitting that the provision under the Will was inadequate for her proper maintenance, education or advancement in life and that although her assets were valued at around $700,000 she was living frugally.

A lower court dismissed Gayle’s application holding that the Annuity provided adequate provision for her proper maintenance by enabling her to continue to live in her home with an expected annual surplus of approximately $34,000.

“She will not have the benefits, the security, the holidays, the comforts and the additional financial advantages that she enjoyed during her relationship with the deceased. But as a matter of law, should she be entitled to expect more?”

Gayle appealed this decision.

The full bench of the Supreme Court of NSW unanimously set aside the lower court’s order, noting adequate provision had not been made for Gayle. In considering the particular circumstances of the case, the Court accounted for ‘the size of the estate, any competing claims, the applicant’s conduct and the applicant’s relationship with the deceased’ including Gayle’s role as Geoffrey’s primary carer over many years, the size of the estate which was large enough to meet all competing claims, as well as Gayle’s desire to relocate for better medical treatment for her own health care.

The Court ordered that a provision of $1,750,000 be set aside for Gayle in lieu of the Annuity (annuity payments made up until the appeal regarded as interim maintenance) finding, that she was capable of managing her own affairs, and therefore it was not appropriate for her to be reliant on quarterly payments made by Geoffrey’s children in their role as Executors & Trustees of Geoffrey’s estate. Importantly the ‘historical..tensions’ between Gayle and at least one of Geoffrey’s children could be exacerbated if she were obliged to have an ongoing relationship with them due to their responsibility for payment of the Annuity.