Testamentary trust troubles lead to inheritance dispute

Published 15 Nov 2017

Author: Gerard Malouf

Testamentary trusts are fairly complex legal structures that enable individuals to provide for their loved ones without giving the beneficiaries direct access to the estate’s assets.

Trusts can be an excellent way of distributing money to dependents while still maintaining a central source of wealth for the future. However, placing assets in a trust does not necessarily protect them from inheritance disputes.

Earlier this month, a case that went before the NSW Supreme Court showed how the terms of a trust led to a family provision claim from a disgruntled relative.

Father battles daughter over trust instructions

The dispute arose between a father and his daughter after the man’s wife established a trust prior to her death in 2005. A memorandum of wishes set out the instructions for the running of the trust, of which the deceased’s daughter was the trustee.

The mother was a joint owner – along with her husband – of two adjacent NSW properties with a combined value of approximately $1.7 million. She lived in one of the homes with her husband, the plaintiff, until her death and he continues to reside there.

According to the terms of the trust, the daughter’s primary role as trustee was to distribute money from the estate to her father where necessary. The mother wanted to provide for her husband but was worried his gambling habit would squander the estate, leaving nothing for future generations.

The daughter followed these instructions faithfully until 2013, when she discovered that her father had remarried a Chinese national and moved her into the property in which he was living. His daughter then halted payments from the estate.

Did the father win his inheritance dispute?

The father launched a family provision claim, despite raising his dispute several years after the time limit had expired.

His daughter sought to cut her father off from the estate, claiming that he was not in need of further provisions since he had now remarried and had adequate shared assets to maintain himself. She also argued that her father was regularly violent with his late wife and their children, while having various affairs during their marriage.

Justice Robb ruled in favour of the father, noting that despite the man’s conduct, his wife had still sought to ensure her husband was well maintained following her death.

The judge did not feel that the man’s second marriage should affect his legacy from the trust, adding that a Crisp order should be made to guarantee his future maintenance.

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