NOTIONAL ESTATE OR EMOTIONAL STATE - June 2011

Author: Richele Nelson

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THE CONSIDERABLE DIFFERENCE BETWEEN THE SUCCESSION LAWS OF New South Wales AND OTHER AUSTRALIAN STATES

Under the existing Australian Succession Legislation an eligible person may make an application for further provision from the estate of a deceased person in the form of a family provision order.  A provision may usually be ordered only from the property which forms part of the estate, that being the property owned by the deceased at their time of death.  Accordingly property disposed of prior to their death can not usually form part of the deceased’s estate and would therefore not be subject to a family provision order.  Further, in the event that an application for family provision is made out of time property that has been distributed from the estate cannot then form part of a family provision order.

In New South Wales however different principles apply under the Succession Act 2006 (NSW).  Under this Act the Courts are given the power to designate certain property as notional estate of the deceased person.  Under Section 23 of the Act the Courts are able to designate property as notional estate where;

1. A transaction took place within the period of three years before the deceased’s person death if entered into with the intention of depriving an eligible person of his or her rights under the Act; or
2. The transaction took effect within a period of one year before the deceased person’s death and was entered into at a time when the deceased person’s moral obligation to make provision for an eligible person was greater than any moral obligation to enter into the transaction; or
3. The transaction took effect on or after the death of the deceased person.

The leading purpose behind the principle of notional estate provisions in the New South Wales legislation is to deter people from avoiding their family obligations by divesting themselves of property during their life time or failing to take steps that would have caused property to accrue to their estates.  

The concept of notional estate is unique to New South Wales family provision legislation and not found in any other Australian jurisdiction.  Despite attempts for a uniform national succession legislation, other states have not warmed to the concept of notional estate. The attitude in Victoria, towards adopting a principal of notional estate, do not seem favourable.  It appears the main reason behind this attitude is that the concept of notional estate calls into question a persons right to deal with their property as they wish throughout their life time. This attitude is much the same in Queensland and other Australian States.

The National Committee for uniform succession laws have released a number of reports in relation to creating uniform succession laws in family provision across Australia.  In their most recent publication, released in 2004, the National Committee published suggestion that the concept of notional estate be accepted in other Australian jurisdictions, subject to certain amendments being made to the New South Wales legislation. These changes include clearing up ambiguities in the legislation and using express terms rather than relying on implication.

Whilst legislation between the states remain in conflict, the growing issues is the inconsistency in the results being achieved in the different Australian jurisdictions.  Some such inconsistency involve inequality and injustice, so these growing concerns call for a uniform legislative structure.

The issue lying central to the lack of uniformity in this legislation is the argument as to what concept holds higher importance: the right to call in and dispose of assets throughout one’s lifetime as they please, or the obligation to consider the position of potential eligible persons before entering any transactions.

As it stands, the answer to this question is dependant upon one determining factor: the state in which one resides and dies.

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