Family trusts fail to prevent family provision claims

Published 20 May 2014

A recent case seen by the Supreme Court of New South Wales has shown that even the creation of family trusts cannot prevent children from choosing to lodge family provision claims.

Generally, when parents decide to place their estate in trusts for their children, this ensures that their family are taken care of financially, even after death. However, if the beneficiaries of the trust believe they will struggle to maintain their lifestyle through the provisions given to them, they may decide to make a family provision claim.

Earlier this month, the Supreme Court ruled in favour of an adult child who claimed the trust set up in her father’s name would not provide adequately for her and her own children.

When her father passed in 2010, he left behind a large fortune – worth approximately $54 million. However, large portions of this estate were tied into family trusts, which had been created years before to ensure the deceased’s family were provided for.

With only $1.2 million left to be shared outside the trust, the deceased requested that gifts be made to his ex-spouse, widow and one of his four children.

Aside from the continued financial support expected from the trusts, the deceased made no provisions for his children, apart from a legacy in the name of his youngest daughter.

When the plaintiff decided to contest the will, she claimed that her current financial situation, past financial struggles and strong relationship with her father should be taken into account. The Supreme Court agreed with her claims, making in depth judgements on her ability to financially care for herself and her children solely on the trust payments.

The Court outlined the plaintiff’s rocky history with money, as she had often borrowed money from her father in order to pay debts and buy property. Through various life events, the plaintiff had lost the property she owned, leaving her renting a home with two of her children.

“In my view […] the will of [the deceased] does not make adequate provision for the proper maintenance, education, or advancement in life of the plaintiff. The plaintiff’s current financial position […] can only be described as weak or tenuous for a single woman aged 62,” the Judge explained in the official Court orders.

Based on her financial history and current standings, the Court decided the plaintiff would indeed struggle to support herself solely on the payments made through the trusts. The decision was therefore made to pay the plaintiff $175,000 plus any court expense from the deceased’s estate.

If you feel you have not been adequately provided for by a will or trust, contact a contesting wills lawyer today.

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