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NSW vs. QLD

Notional Estate Legislation

The State of Origin rugby league title is not the only triumph New South Wales currently has over Queensland.

In fact, when it comes to challenging a Will in Australia, New South Wales is the presently the only state where notional estate provisions exist.

Most couples own property as joint tenants and have joint bank accounts. Usually, the surviving joint owner ‘inherits’ the jointly owned asset without reference to the will or the estate. Similarly, binding death benefits to your partner or spouse for life assurance policies or Super are normally outside the estate and cannot be challenged. Not so in New South Wales under the notional estate provisions!

Clients are baffled by the concept of notional estate. What do you mean my joint tenancy property can be challenged in a claim against my estate? But I have a Binding Death Benefit Nomination in favour of my wife/husband, how can that be challenged? Isn’t it binding?

The notional estate provisions in New South Wales allow the Court to claw back into the estate, property disposed of for less than it’s worth by the deceased prior to his/her death with the intent of defeating or limiting the ability to claim on an estate.
The Court has the power to designate certain property that is no longer held by the deceased person after their death to be the notional estate of a deceased person to satisfy a claim made on an estate.

What’s at stake? The most common assets which catch the notional estate provisions are assets of discretionary trusts, property held as joint tenants and superannuation/life insurance. There are many cases of parents transferring property to children or partners before they die to defeat possible claims or transferring properties into joint tenancies.
Often considered to be completely separate and distinct from an estate, joint tenancy properties (and jointly held bank accounts) are able to be brought back into an estate to satisfy a claim. In failing to sever the joint tenancy before his/her death, the deceased person is deemed to have omitted to do an act that has resulted in property being held by another person and not their estate.

You have a valid Binding Death Benefit Nomination in place and you think you’re safe? Think again. Death benefits and accumulated superannuation entitlements are often the largest asset to be dealt with after the death of a loved one. Often a Binding Death Benefit Nomination is considered to provide certainty as to how a member’s benefit is to be distributed upon death. However, making a Binding Death Benefit Nomination (or failing to do so) may also trigger the notional estate provisions. Even though superannuation is handled separate to the assets of your actual estate, the Court still has the ability to claw-back superannuation or death benefits to satisfy a claim on an estate.

Which state applies? It’s not as clear-cut as it may seem. The notional estate provisions have a potentially broad reach. Even if you live in Queensland, and most of your assets are in Queensland, a sufficient nexus to New South Wales may invoke the notional estate provisions.
The New South Wales Court may have power to designate notional estate even if the deceased person lived outside of New South Wales and the only assets in New South Wales are themselves potential notional estate assets. Many people may not be aware that they may have used New South Wales advisors to establish a family trust; or that that their superannuation fund is located in New South Wales.
Sound legal and financial advice is more important than ever if your wishes are to be respected and upheld in your estate planning. Likewise, if you are a potential beneficiary who has missed out on an inheritance due to some creative restructuring, you may have a claim against the estate.

To find out more about your rights please take advantage of our obligation free appointment to discuss with one of our experienced Wills and Estate Lawyers. This free appointment will entitle you to a 30 minute free consultation with one of our specialist lawyers. Alternatively, we can advise you in a telephone consultation.
Please ring our department manager Donna Tolley on direct telephone 07 5506 8241 or freecall 1800 621 071 to take advantage of this offer or email Donna on dtolley@attwoodmarshall.com.au.

Please feel free to pass on our newsletter to any of your family, friends or colleagues who may wish to take advantage of this opportunity.

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Lucy McPherson

Lucy McPherson

  • Senior Associate
  • Estate Litigation
  • Direct line: 07 5506 8255
  • Mobile: 0400 230 522