When a person who is close to us has passed away, it’s understandably a difficult time for relatives and friends. It’s already hard enough to mourn for a loved one, but when problems arise in relation to a net estate, the difficulties may be compounded – especially if a relative feels compelled to utilise family provision legislation in regards to the net estate. Further complications can also arise if the deceased was beholden to contractual obligations or liabilities before they passed away, which also have an impact on the net estate. When the courts are determining whether or not to issue a provision to a person, there are many things that must be considered before a decision can be made, for or against the applicant.
What is a net estate?
When reference is made to an ‘estate’ within family provision legislation, it usually refers to a ‘net estate’ – which is an indication of what is still available after liabilities.
Depending on the State, when considering the liabilities of an estate, and determining whether or not to make a provision for an applicant, legislation will give guidance on the matters to be considered. For example, looking towards s 7(a) of the Testator’s Family Maintenance Act of Tasmania, the section states, that when considering the net estate and means of a spouse and a child, the court shall have regard to “the net value only of the estate of the deceased person, as ascertained by deducting from the gross value thereof all debts, testamentary and funeral expenses, and all other lawful liabilities to which the said estate is subject”. Section 91(4)(g) of the Administration and Probate Act of Victoria, also requires consideration of the liabilities to be made when deciding on the question of whether or not a provision should be made.
Meanwhile in New South Wales, s 60(2)(c) of the Succession Act, permits a consideration to be made of the liabilities, when making a determination on whether a provision should be made to the applicant.
What happens to the net estate if the deceased entered into a binding contractual obligation?
In circumstances where a deceased has entered into a binding contract – which may include the selling of real property for example – and the contract had remained on foot during the time of death, then the estate may be bound by the terms of the contract, and the net assets will be varied accordingly. However, except for New South Wales, where a notional estate order has been made, property disposed of before a person has passed away, is not included in the estate.
What other assets can a net estate include?
Income or increases of assets derived from the time of death can also be included in a net estate, and can entail the following:
• superannuation payments
• insurance benefits
• capital growth.
Readers should note, that in the absence of a net estate, an order to make a family provision will not be possible. Alternatively, if the issue is in regards to the difficulty of determining the net value of an estate, then it is up to the courts to find a way to give effect to a justified claim.
Matters relating to net estates and family provision legislation are complex. If you have any questions or concerns in regards to a net estate, you should consult a legal practitioner who will be able to assist with your matter.