BlogDavid TaylorSuccesssion ActWills & Estates

Notional Estate explained

The use of “Notional Estate” by the Courts makes it more difficult for a person preparing a will to avoid a meritorious Family Provision claim on their estate once they have died.

New South Wales is unique in recognising not only the actual estate of a deceased person (property held solely in the deceased’ name such as bank accounts, shares or real estate in the deceased’s sole name or as tenants in common) but also, in certain circumstances, the notional estate of a deceased person. As a result it is now harder for a will maker in NSW to defeat a potential family provision claim by transferring assets out of his or her estate.

The Sucession Act 2006 (NSW) allows the New South Wales Supreme Court to make a family provision order in relation to a deceased’s estate if it is satisfied that the deceased did not make adequate provision for an eligible person’s proper maintenance, education or advancement of life. Where the actual estate is not sufficient to meet the family provision order, the court, pursuant to Part 3.3 of the Succession Act, will consider whether the deceased has a notional estate. A notional estate is comprised of assets that did not belong directly to the deceased at the time of death which, as a result of a relevant property transaction (an act or omission), were transferred to another person or a trust without full valuable consideration being given to the deceased. The act or omission must take place within 3 years prior to the deceased death, on the date of death or after the date of death.

Examples of a notional estate include a property held as joint tenants and a superannuation policy. In relation to the property held as joint tenants, after death the property will be transferred to the surviving tenant. Section 76(2)(b) of the Succession Act 2006 (NSW) provides that, where a person holds an interest in property as a joint tenant, failing to sever the joint tenancy is sufficient to establish a relevant property transaction allowing the deceased’s share of the property to form part of the notional estate. Superannuation is held by a trustee and does not form part of a deceased’s actual estate. A relevant omission would include failing to nominate the executor of the estate as the nominated beneficiary of a superannuation policy allowing the superannuation monies to form part of the notional estate. Assets transferred to beneficiaries as part of the administration of an estate also form part of a notional estate.

Once a court considers property to be part of a notional estate it will be treated as if it was part of the actual estate and any rights of the now property owner will be extinguished.

The court can only make a notional estate order where the court considers a family provisions order should be made and the actual estate is not sufficient to meet the family provisions order. Further the court must consider when making a notional estate order the importance of not interfering with the reasonable expectations of the beneficiaries in relation to property, and the substantial justice and merits involved in making an order.

It is important to obtain legal advice in relation to an estate as although the estate may at first glance be considered small it may include a large notional estate available to pay a family provision order. Segelov Taylor acts on a no win no fee basis in family provision claims. Please contact us by phone or email for advice as to the merits of a claim. Please note time limits apply and a family provision claim must be started within 12 months of death although an application can be made to extend time in certain circumstances.

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