The law is a reflection of our society’s need to have rules and means of dealing with the various situations that result from complex human social interactions. Various types of laws have been developed that deal with all sorts of matters including guardianship of vulnerable people, marriage, property and the administration of property after someone’s death. Sometimes, these laws intersect and the Court is required to apply the law to the fact circumstances presented.
A recent decision of the Supreme Court of NSW concerned the interaction between family law and succession law. Dark v Dark [2016] NSWSC 1223 involved a deceased’s estate, a separated but still legally married wife, minor children, a family provision claim and a binding financial agreement made pursuant to Australian family law legislation.
By way of brief background, the deceased and his wife married, had children and later separated. After they separated, they remained married but entered into a binding financial agreement (‘BFA’) in an effort to divide their property. The BFA made pursuant to section 90C of the Family Law Act (Cth) 1975 contained a clause that provided that if either should die, they would join an application to have their rights to make a family provision claim against the other’s deceased estate released. The intention of this clause is to prevent either party making a family provision claim for adequate provision against each other’s estate in the future. The clause read:
“8. Claims for provision out of the estate of a deceased party
This clause is severable from the rest of this agreement:
- Subject to the approval of the Supreme Court of New South Wales pursuant to the legislation relating to the release of rights to apply for a provision order, the husband and the wife each releases his or her rights to make an application in relation to the estate of the other pursuant to such legislation;
- The husband and the wife each gives that release in consideration of the other terms of this agreement;
- The husband and the wife acknowledge that it is to his and her advantage in the light of the terms of this agreement to grant the release;
- The husband and the wife acknowledge the terms of this agreement and that they have taken into account the position of the other in the event of the death of the other;
- The husband and the wife accept that for the purposes of the Act the provisions of this agreement including this release are fair and reasonable;
- At any time after the execution of this agreement the husband or the wife or their legal representative may request the other party or their legal representative to join in an application to the Supreme Court, at the cost of the one requesting, for the approval of this agreement to relinquish all claims under the Act. If such a request is made, the other covenants to comply with such request and to do all things reasonably necessary to obtain the approval.”
The release of rights to make a family provision claim only has legal effect if it is approved by the Court. The relevant parts of section 95 of the Succession Act (NSW) 2006 are:
“95 Release of rights under Chapter
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- A release by a person of the person’s rights to apply for a family provision order has effect only if it has been approved by the Court and to the extent that the approval has not been revoked by the Court.
- Proceedings for the approval by the Court of a release of a person’s rights to apply for a family provision order may be commenced before or after the date of the death of the person whose estate may be the subject of the order.
- In determining an application for approval of a release, the Court is to take into account all the circumstances of the case, including whether:
- it is or was, at the time any agreement to make the release was made, to the advantage, financially or otherwise, of the releasing party to make the release, and
- it is or was, at that time, prudent for the releasing party to make the release, and
- the provisions of any agreement to make the release are or were, at that time, fair and reasonable, and
- the releasing party has taken independent advice in relation to the release and, if so, has given due consideration to that advice.”
The whole of the estate was left under the deceased’s will to his children and no provision was made for his wife. The wife, as she was still married to the deceased, was an eligible person to make a family provision claim. She was also still caring for the children she had with the deceased. Even though the deceased and his wife were separated and had signed legal family law documents to seek to divide their property, they maintained an ‘on and off again’ relationship together.
Despite the BFA containing a clause that could have limited the wife’s ability to make a family provision claim against the estate, the Court did not approve the release of her rights. This meant she was not prevented from making a family provision claim.
Having found that the wife was not prevented from making a family provision claim, the Court considered whether, in the circumstances, the wife had been left with adequate provision or less than adequate provision for her maintenance, education or advancement in life. This included an evaluation of the interests of the minor children of the wife whom she was effectively making a claim for provision against. The judge commented:
“In my view the deceased’s moral obligation relevant to his testamentary disposition extended not only to his children, but to his wife, and that was so even though they had separated and intended to divorce. To the extent he had assets to do so, and subject to his obligation to provide for his son …, that obligation included that he attempt to ensure that his younger children so far as possible should have a stable financial environment in which to grow up. In this respect his younger children’s interests coincide with those of their mother. This was not provided for by the deceased’s will under which his children would inherit only if and when they attain the age of 25. Their need and their mother’s need is for money, both capital and income, for at least the medium term.”
The final decision of the Court allowed various items of property to the wife together with a significant lump sum cash gift from the estate.
The decision of the Court in this matter is important to consider when reviewing your estate planning. The deceased had testamentary freedom to make his will as he wished, although the costs of the litigation that followed may have been able to be avoided if adequate provision had been made for the wife, particularly as she was the guardian of his infant children.
Any form of ongoing dependence or relationship between spouses may give rise to a family provision claim being successful against an estate even if other legal steps have been taken to try and prevent a claim being made. Estate planning advice from an experienced legal practitioner should be sought if you think you may be in a similar position.
Similarly, a successful family provision claim may still be an option to consider even if you have signed a BFA or finalised a family law property settlement.