Notional Estate

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Notional Estate

  • Notional Estate refers to property designated by a notional estate order as notional estate of the deceased person (section 3 Succession Act 2006 (NSW).
  • In simple terms a notional estate is:
    • The Court may look beyond the property and assets of the deceased person at the time of their death. The Court may deem certain property not in the will of the deceased to be a relevant property transaction and subsequently be subject to a family provision order to satisfy the will dispute.
  • The following provisions are relevant in notional estates in Family Provision Claims:

 

78 Notional estate order may be made only if family provision order or certain costs orders to be made[1]

(1) The Court may make an order designating property as notional estate only:

(a) for the purposes of a family provision order to be made under Part 3.2, or

(b) for the purposes of an order that the whole or part of the costs of proceedings in relation to the estate or notional estate of a deceased person be paid from the notional estate of the deceased person.

Section 63 (5) enables a family provision order to be made in relation to property designated as notional estate of a deceased person. Section 99 enables the Court to order that costs be paid out of the notional estate of a deceased person.

(2) The Court must not make an order under subsection (1) (b) for the purposes of an order that the whole or part of an applicant’s costs be paid from the notional estate of the deceased person unless the Court makes or has made a family provision order in favour of the applicant.

 

80 Notional estate order may be made where estate affected by relevant property transaction[2]

(1) The Court may, on application by an applicant for a family provision order or on its own motion, make a notional estate order designating property specified in the order as notional estate of a deceased person if the Court is satisfied that the deceased person entered into a relevant property transaction before his or her death and that the transaction is a transaction to which this section applies. The kinds of transactions that constitute relevant property transactions are set out in sections 75 and 76.

(2) This section applies to the following relevant property transactions:

(a) a transaction that took effect within 3 years before the date of the death of the deceased person and was entered into with the intention, wholly or partly, of denying or limiting provision being made out of the estate of the deceased person for the maintenance, education or advancement in life of any person who is entitled to apply for a family provision order,

(b) a transaction that took effect within one year before the date of the death of the deceased person and was entered into when the deceased person had a moral obligation to make adequate provision, by will or otherwise, for the proper maintenance, education or advancement in life of any person who is entitled to apply for a family provision order which was substantially greater than any moral obligation of the deceased person to enter into the transaction,

(c) a transaction that took effect or is to take effect on or after the deceased person’s death.

(3) Property may be designated as notional estate by a notional estate order under this section if it is property that is held by, or on trust for:

(a) a person by whom property became held (whether or not as trustee) as the result of a relevant property transaction, or

(b) the object of a trust for which property became held on trust as the result of a relevant property transaction, whether or not the property was the subject of the relevant property transaction.

  • Some relevant cases regarding Notional Estate:
    • Phillip v James [2012] NSWSC 688
      • Notional Estate = $1.4m
      • Three children approximately as follows; Gary $702,000; Gaye $695,000 and the Plaintiff $164,603.
      • Held: The Plaintiff had not specifically identified property against which notional estate was sought the Court had no jurisdiction.
    • Davidson v Samson [2012] NSWSC 481
      • Estate = $2.4m
      • Plaintiff = 13-year-old son of previous husband
      • Estate to be held by trustees – $150,000 immediately; balance payable within 6 months of the Plaintiff turning 21 or the Defendant ceasing to reside in the matrimonial home.
    • The property that may be subject to a family provision order is property that on a grant of probate or letters of administration vests in the executor or administrator.[3]
    • Importantly, an “omission” is sufficient to trigger a “Relevant Transaction” – this means that simply by not doing something (e.g. not making an election), the Testator may be taken to have entered into a Relevant Transaction.
    • The notional estate provisions are set out in Part 3.3 of the Act.[4]
    • The provisions empower the court in limited circumstances to designate property “notional estate” from which a family provision order or costs order may be made.[5]
    • The court must first be satisfied that the estate, if any, is insufficient for the making of the family provision order, or any order as to costs, that the Court is of the opinion should be made, or provision should not be made wholly out of the deceased person’s estate because there are other persons entitled to apply for family provision orders or because there are special circumstances.[6]
    • An order may designate as notional estate property only to the extent that is necessary for provision to be made or costs paid or both.[7]
    • Two examples of property that may in limited circumstances be designated as part of the notional estate are:
      • Property of which the deceased was a joint tenant at the time of his/her death. Property held in joint tenancy (as opposed to tenancy in common) passes automatically to the surviving tenant when a tenant dies. Thus joint tenancy property does not form part of the estate. There is authority that joint tenancy property may be designated as notional estate where full valuable consideration was not given for not severing the joint tenancy.[8]
      • Superannuation, although there is some tension where a binding death benefit has been made under Commonwealth legislation.[9]
    • At State Lawyers we are specialised and committed firm that is focused on the client’s needs. We provide personalised services rather than large corporate bodies who may see your claim as just another number. We seek to provide the best possible service throughout the whole case with updates on your matters which ensures that you are understand how your case is managed.

[1] Succession Act 2006 (NSW) s 78.

[2] Succession Act 2006 (NSW) s 80.

[3] Succession Act 2006 (NSW) s 63.

[4] Ibid s 74-90.

[5] Ibid s 78.

[6] Ibid s 88.

[7] Ibid s 89(2).

[8] Succession Act 2006 (NSW) s 76(2)(b) and (4); Cetojevic v Cetojevic [2007] NSWCA 33.

[9] Cabban v Cabban [2010] NSWSC 1433 at [41]; Kelly v Deluchi [2012] NSWSC 841; Westwood v Quilty & Ors [2013] NSWSC 109 at [82].