An executor is the person appointed to manage the administration of an estate when a Will-maker (testator) dies. Similarly, an administrator will be appointed by the Court if the testator dies intestate (without making a Will).
As the official Legal Personal Representative (LPR), an executor or administrator has an important role in representing the interests of the estate. He or she must oversee the estate’s proper administration and, where the deceased left a Will, ensure its provisions are upheld.
Executors and administrators may deal with estate lawyers, accountants, financial advisors, estate agents, creditors, and beneficiaries.
Occasionally, an LPR may face a contest regarding the fairness of the provisions of a Will or distribution on intestacy. This is known as a family provision claim and generally involves emotion and conflict, additional costs, and inconvenience.
This article explains generally, the processes involved in a family provision claim and the LPR’s obligations in answering such a claim made against the estate. The information is for general purposes only, and it is essential to obtain professional advice relevant to your individual circumstances.
Family provision claims
An eligible person may make a claim against the estate of a deceased person if he or she believes they have been unfairly treated under the Will, or the proposed distribution of an intestate estate is unfair. An eligible person generally includes:
- the spouse or de facto partner of the deceased at the time of his or her death;
- a former spouse of the deceased person;
- a child of the deceased person;
- in some circumstances, a person who was wholly or partly dependant on the deceased and who is the deceased’s grandchild or was a member of the deceased’s household at the time of his or her death;
- in some circumstances, a person who was living in a close personal relationship with the deceased at the time of his or her death.
Generally, the claim must be made with the Court no later than 12 months from the date of the deceased’s death unless extenuating circumstances exist.
Once eligibility is established, it must be shown that the deceased person failed to leave the applicant with adequate provision for his or her proper maintenance, education, and advancement in life. If this can be shown, the Court must then determine what provision, or further provision, if any, should be made for the applicant from the deceased’s estate.
The Court will consider a range of factors including the financial position of the applicant, the circumstances, financial position and needs of other beneficiaries, the size of the estate and the relationship between the deceased person and the applicant.
The role of the Legal Personal Representative
In responding to a family provision claim, the LPR will have a primary duty to uphold the provisions of the Will (or distribution on intestacy) and preserve the estate assets.
In doing so however, the LPR may need to consider resolving a meritorious claim that is likely to succeed in Court proceedings. If this is the case, the LPR may need to negotiate a settlement with the aim of avoiding costly litigation that may deplete estate assets, noting that the legal costs of a successful claim are usually borne by the estate.
Some claims may be morally justified by persons who may not have been adequately provided for, or a Will may not accurately reflect what the testator may have intended had he or she been aware of the full circumstances of the claimant.
A decision regarding the likely success of a claim, based on the LPR’s personal knowledge of the deceased and his or her family should be made with the guidance of a lawyer. A range of possible outcomes can be discussed enabling the LPR to make an informed decision as to whether to negotiate a settlement, pay the claim or defend it in Court.
Defending the claim
If a claim proceeds to Court the LPR must provide all evidence relevant to the claim made. To avoid exposure to personal liability, the LPR should not distribute any part of the estate unless extenuating circumstances apply. In this case, the LPR should obtain urgent legal advice.
The LPR may need to file an affidavit setting out the nature and value of assets and liabilities and the net amount for distribution after allowing for liabilities and estate expenses. Details must also be provided of potential notional property, any person or entity holding property as trustee for the estate, eligible persons or persons beneficially entitled to distribution from the estate, and those who have received notice of the claim.
A claim may be settled at any stage prior to the Court hearing. Mediation is generally ordered by the Court which can assist in resolving the dispute without further legal cost, or at least narrowing the issues in dispute. Most cases are resolved at mediation and terms of settlement can be prepared to document the agreement reached.
Minimising the potential for family provision claims
It is important to be aware of the circumstances that may lead to a family provision claim. Following are some steps that can be taken to help reduce the likelihood of a claim against your estate.
- Ensure your Will is properly drafted, executed, and regularly reviewed to take account of changing personal and financial circumstances.
- Consider those that may be eligible to make a claim on your estate and whether they have been adequately provided for in the Will.
- If you wish to leave an otherwise eligible claimant out of your Will, ensure that your reasons for doing so are documented.
- Discuss your estate plans with an experienced lawyer and seek guidance on how to minimise the risk of a family provision claim.
If you are the executor or administrator of an estate facing a potential family provision claim you should obtain legal advice immediately. Please contact us on (02) 9818 2888 or email [email protected].