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What do you need to know about Notional Estates?

A Notional estate allows a family provisions claim to include assets that have recently been distributed or not directly owned by the deceased before they passed away. The Court has the authority to issue a notional estate order for designated property if it is satisfied that the deceased engaged in a transaction under any of the following circumstances:

  • The transaction occurred within three (3) years of the deceased’s death and was intended to prevent or limit provision from being made of the estate for an eligible individual who can apply for a family provision order.
  • The transaction took place within one (1) year of the deceased’s death, during a time when the deceased had a moral obligation to adequately provide for someone’s maintenance and advancement in life. This obligation must have been substantially greater than any obligation to enter the transaction.
  • The transaction is set to take effect after the deceased’s death.

To qualify for a notional estate claim, the deceased must have owned the property within the last three (3) years. This includes various asset types, such as real estate, life insurance benefits, and superannuation.

A notional estate claim can only be made if a Family Provision Order has already been issued. The Court will consider a notional estate claim if the actual estate has insufficient assets or if there are other eligible claimants for a family provision order from the actual estate. In special circumstances, the Court may also allow notional estate claims if:

  • The transfer in question was not made with full valuable consideration.
  • There are assets held in structures that are not eligible for inclusion in the estate but were effectively controlled by the deceased may also be classified as notional. These assets were not included in the actual estate due to the deceased’s omission or failure to act. Examples include jointly held property, superannuation death benefits with binding nominations, and assets held in family trusts.
  • A notional estate claim cannot be granted solely based on the deceased’s financial arrangements. There must be evidence that the transfer directly or indirectly disadvantaged the claimant, the deceased, or another principal party to the transaction. This requirement also applies if someone’s actions or inactions prevented the claimant, deceased, or another principal party from benefiting.
  • The Court evaluates the merits of the specific case and considers whether the reasons for granting the order outweigh the general imperative to not interfere with the existing provisions of the estate.
  • A notional estate order is made under Section 80 of the Succession Act 2006 (NSW), the assets that were gifted or transferred by the deceased before their death will be included in the deceased estate.

In cases where no further challenges are made to the Will, the deceased estate will be distributed according to the terms of the Will or the laws of intestacy, if applicable. If the deceased left a Will that does not specifically address the transferred assets, those properties will be treated as part of the remaining estate.

However, if the Will is challenged through a Family Provision Claim, the Court will determine how the estate should be distributed. In such instances, the gifted or transferred property by the deceased before their death will be included in the estate subject to division.

If there is currently a family provisions claim against a deceased estate, or you are planning on making an application for a family provision claim, which includes notional states, please contact us to arrange for an initial conference to discuss your circumstances.