What is a notional estate?A family provision claimant usually makes a claim for provision out of property owned by the deceased at the time of his or her death. This is called the actual estate of the deceased and it includes all property held solely in the name of the deceased when they died. In special circumstances it is also possible to claim provision out of property which is not directly owned by the deceased at the time of their death or has been distributed – this is the notional estate of the deceased. A notional estate order will only be made if a family provision order would already have been made and the deceased person left no actual estate, the actual estate was insufficient, there are other persons entitled to apply for family provision orders out of the actual estate, or there are special circumstances. Once property is designated as part of a notional estate, the property is dealt with for practical purposes as if it were property in the actual estate. A notional estate order extinguishes (to the extent of the order) the property rights of the person who held the property before the order was made.
Transfer RequirementSection 75 of the Succession Act 2006 (NSW) sets out that a notional estate order may only be made if the manner in which the deceased transferred property takes place in a particular way. The deceased must have transferred property through direct or indirect action or inaction:
- To another person or to a trust; and
- Without full valuable consideration in exchange for the transfer.
Disadvantage RequirementThe Court will not make a notional estate order merely because a property transaction as described above has taken place. The Court must be satisfied that the transfer of the property or the holding of the property resulting from the transfer:
- Directly or indirectly disadvantaged the person applying for a family provision order, the deceased person or the principal party to the transaction; or
- Involved the exercise or the omission to exercise by a person of a right, a discretion or a power of appointment, disposition, nomination or direction that, if not exercised or if not omitted, could have resulted in a benefit to the person applying for a family provision order, the deceased or the estate of the principal party to the transaction.
Time LimitsSection 80 of the Act imposes strict time requirements for a transfer of property to be relevant. A transfer of property may be subject to a notional estate order if:
- The transaction took effect or is to take effect on or after the deceased’s death; or
- The transaction took effect within one year before the deceased’s date of death and was entered into when the deceased had a moral obligation to make adequate provision for proper maintenance, education or advancement in life of any person who is entitled to apply for a family provision order which was substantially greater than any moral obligation of the deceased to enter into the transaction; or
- If the transfer was intended to deny or limit provision being made out of the estate of the deceased for the proper maintenance, education or advancement in life of any person who is entitled to apply for a family provision order, then three years before the deceased’s date of death.