Rural interests in a disputed Will

All jurisdictions in Australia provide statutory rights for eligible persons to contest a Will on the basis that they have not been given adequate provision by the testator for their proper maintenance, education and advancement in life. These are commonly known as family provision claims.

An eligible person generally includes the spouse or de facto partner of the deceased, a child of the deceased, or certain persons who were dependant on the deceased.

If a family provision claim is successful, the Court has the power to determine the appropriate provision for the claimant and to order an adjustment from the deceased’s estate. The result is that one or more beneficiary’s interests under the Will are reduced to satisfy the claim.

Will disputes and rural properties

Family provision claims where the main assets of an estate are tied up in rural interests such as a family farm can be complex. Often there are insufficient ‘non-farming’ assets to satisfy a successful claim and a major beneficiary may need to raise sufficient funds to pay out the claimant, or be forced to sell all or part of the farming enterprise.

Whilst a provision ordered for a worthy claimant may be morally justified, the disposal of one or more properties used in the farming enterprise can have a significant impact on its viability and on the main beneficiary’s financial future.

A claim may arise where a testator provides equally for his or her children despite only one of those children having worked continuously on the farm for many years. This child may have undertaken study or training specific to the management of the farm whilst the other children pursued other careers. The likely claim could be framed on grounds that there was an expectation by that child that he or she would inherit the family farm or a greater share than the other children.

Alternatively, the claim may be the result of a testator leaving the family farm to the child (or children) who worked the farm whilst other children left. The testator may wish to reward the child who, through his or her labour (and often with little remuneration) contributed substantially to the farm’s continuance. The farm usually constitutes the bulk of the estate and when left to only one child, results in an unequal division between the children.

Such was the case in Salmon v Osmond [2015] NSWCA 42 which involved an appeal from the original Court’s decision to award one of two family provision claimants (daughters of the deceased) further provision from the estate.

The estate comprised mainly grazing properties, the subject of a farming enterprise. Survived by his wife and seven children, the deceased left the bulk of his estate to his widow and one son (aged 48).

The successful claimant (in the original decision) was left $10,000 under the Will which was increased by further provision of $200,000. The payment was to come out of the son’s share which may have required that he sell one or more of the grazing properties forming part of the farming enterprise. The decision was appealed.

The testator’s Will included an explanation regarding any perceived preference shown towards the son. It indicated that the son had assisted in the farm’s operations for many years and for little reward and that such assistance had allowed the testator to amass the assets acquired over his lifetime. Further, the testator stated that the other children had been assisted over the years and had ‘benefited as close to equal as possible in monetary value’ in the distribution of his assets.

The original decision was overturned by reducing the claimant’s award of $200,000 to $50,000. The claimant was also required to pay her own costs in the proceedings.

Factors in considering a contested Will – the rural issues

In deciding a family provision claim, the Court considers a range of factors including the financial position of the claimant, the circumstances, the financial position and needs of other beneficiaries, the size of the estate and the relationship between the deceased person and the claimant.

Where a dispute concerns rural assets, consideration of these factors might encompass:

• The statements made in a Will, which will be admissible and relevant in explaining how a testator came to a decision on the disposition of assets, however are not determinative if it is found that a claimant was not left with adequate provision.

• The Court’s reluctance to re-write a Will and to make orders that do not uphold the wishes of the testator.

• The lifelong efforts and contributions made to a farming enterprise which will be given considerable weight – in this case the son was the only one of seven children who remained on the farm and continued working on it for little remuneration. His efforts over several years contributed significantly to the testator’s ability to continue running the farm and acquire assets.

• The competing financial interests of the claimant and the beneficiaries. In this case, although the claimant was in a very modest financial position the son’s financial future was likely dependent upon the profitability of the farming enterprise. The Court will acknowledge a moral right to inherit the farm, emanating from several years’ contribution to its viability at the cost of pursuing other paths.

If a family provision claim is successful, the Court will try to avoid disturbing a farming enterprise by making provision from other estate assets. However, if a claimant’s needs outweigh those of the beneficiaries inheriting the farm, and other provision is not possible, there is no rule or principle to prevent the sale of the family farm to satisfy that provision.

Conclusion

The legal costs in Salmon v Osmond exceeded $160,000; a significant proportion of the estate’s overall assets.

Despite attempts to negotiate and settle the claim the matter proceeded to Court incurring additional legal costs. These costs could have gone a long way towards satisfying the further provision of $50,000 finally awarded to the claimant.

The testator’s explanation in his Will, although not determinative, was helpful in upholding his wishes to ‘favour’ the one son that assisted on the farm throughout his life.

Rural interests in a deceased estate can be particularly complex. When drafting a Will, careful consideration is necessary to safeguard the continuance of a farming enterprise and to reduce the potential of a family provision claim.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.