Friend to politicians and Melbourne society figurehead, Richard Pratt, knew a thing or two about how to plan for succession and safeguard his hard-earned assets for his family’s future. But, as this case demonstrates, even the most comprehensive estate plan can be challenged, writes Attwood Marshall Lawyers Special Counsel in Estate Litigation, April Kennedy.
Making news recently was a dispute over Visy packaging billionaire, Richard Pratt’s, family trust.
Pratt, the fourth-richest person in Australia before his death, passed away in 2009 after battling prostate cancer.
He not only left a lasting impression on the business world, but also took necessary measures to protect his legacy and secure his family’s future. He was survived by his wife, Jeanne, and their three children Anthony, Heloise and Fiona, as well as his long-time mistress Shari-Lea Hitchcock and their love child, Paula Hitchcock.
In 1983, Pratt established a family trust which controlled assets worth roughly $13 billion. The trust included packaging monolith, Visy Australia, and a luxury property portfolio. It was controlled by Richard and Jeanne until Pratt passed away.
In the latest family drama, Paula Hitchcock claims she was unfairly excluded from her rightful inheritance. She argues that she was just as much a part of the Pratt family as the three children Pratt had with his wife, Jeanne.
The dispute, centred around Pratt’s family trust, traces back to early 2009 when Pratt was gravely ill. According to the Sydney Morning Herald, Pratt reportedly identified Paula Hitchcock as his child on his death certificate, a detail now central to Paula’s new statement in a claim filed in the Supreme Court of NSW.
Paula contends that, as a member of the Pratt family, she should have been included in the trust, alongside her half-siblings. She asserts that a trust deed, allegedly drawn up when she was just three years old, unfairly excluded her from the family trust.
To support her claim, Paula explained that;
- she joined the family on holidays and at gatherings such as the weekly Shabbat dinner,
- Pratt paid for her living expenses, provided bedrooms for her at Raheen and his Sydney apartment, and
- Pratt openly spoke to her and acknowledged her as his daughter.
Paula also alleged Pratt’s wife Jeanne treated her as her own, providing “care and support”, ensuring she had food and clothing, and inviting her to the family home.
She argues that Richard and Jeanne’s children witnessed the “bonds of love and affection” between her and Richard first-hand and this provides standing to her being on an equal footing with the Pratt children.
These legal proceedings have been ongoing in court for two years, underscoring the strength of Paula’s claim. Although the Pratt siblings have sought to have the case dismissed, the court has not granted their request. This type of ‘trust busting’ litigation is becoming more common place as the stakes are higher for those excluded from the family wealth.
Family trusts and the protection they offer
In many cases, a simple Will is insufficient to address the complex assets and family dynamics that must be considered when deciding how to distribute one’s hard-earned assets after death.
This is where strategies such as establishing a trust structure, or holding assets in superannuation or as a company or partnership can be advantageous.
Identifying the best strategy for your unique circumstances is part of the estate planning process and where an experienced estate planning lawyer can help to ensure asset protection and succession goals can be achieved.
The term family trust refers to a discretionary trust, which is set up to hold a family’s assets or to conduct a family business.
Assets held in a family trust do not necessarily belong to the beneficiaries. Instead, they are held on trust by the trustees for the benefit of the beneficiaries. The trustees control the trust and have access to the assets and income of the trust, and it is at the trustee’s discretion how the beneficiaries will benefit from these assets.
A trust deed sets out important parameters concerning the trust, including:
- How the trust is to be managed,
- Who will control the trust,
- Who will the beneficiaries of the trust be, and
- How the control of the trust can be passed on, and in what circumstances.
Assets held in a family trust fall outside of your estate. This means that you cannot deal with these assets in your Will. Instead, the focus needs to be on who you pass the control of the trust to so that the trustee can ensure the beneficiaries continue to benefit from the trust as anticipated.
Family trusts are a common ‘succession planning’ strategy used by high-net-worth individuals.
Read more: Family trusts – what are they and what happens to a family trust if you die
Challenging a family trust can be complex. Whether the challenge is successful depends on many factors including the specific terms of the trust and the grounds for the challenge.
For instance, in the current Pratt case, the success of Paula’s challenge to the family trust and her entitlement to a share of the Pratt family fortune depends on several matters including the wording of the trust terms, how those terms are interpreted, and whether the court accepts nullifies a deed that excluded Paula as a beneficiary of his fortune prepared by Pratt in 2001, when Paula was just a child.
Interestingly, Paula received an inheritance from Pratt’s estate in 2010. In that case, Paula was named as a beneficiary in Pratt’s will. This case is different because Paula is excluded and the definition of a child in the Pratt family trust deed is more specific. Beneficiaries of the trust are defined as being the children of Pratt and his wife, Jeanne. In support of her claim, Paula is arguing that she was, for all intents and purposes, treated as child of Pratt and Jeanne.
Attwood Marshall Lawyers – experts in estate litigation
As one of the country’s leading law firms with the largest and most experienced Wills and Estates Departments, we have dedicated teams who practice exclusively in estate litigation, estate planning, and estate administration.
When disputes arise over an estate after someone passes away, you need an experienced lawyer on your side to ensure the matter is resolved in the most efficient way possible, reducing costs, family conflict, and the stress associated with litigation.
Whether you believe you should be entitled to a larger share of an estate and want to contest a Will or bring a claim against the estate, or if you are a trustee or an executor of an estate and need to defend a claim, our experienced legal team can provide immediate advice to help you understand your rights.
To discuss your unique circumstances, please get in touch with our Estate Litigation Department Manager Chloe Smith , on direct line 07 5536 9777, email csmith@attwoodmarshall.com.au or call 1800 621 071 any time.
The best way to avoid costly litigation between family members after you pass away is to ensure you put a comprehensive estate plan in place to preserve your wishes. Whether you need to draft a Will or want to establish a more comprehensive strategy such as setting up a family trust, we can help you achieve your estate planning goals.
To discuss your estate planning needs, please contact our Wills and Estates Department Manager Donna Tolley, on direct line 07 5506 8241, email dtolley@attwoodmarshall.com.au or free call 1800 621 071 anytime.
Our team are available for appointments at any of our conveniently located offices at Robina Town Centre, Coolangatta, Southport, Kingscliff, Brisbane, Sydney, and Melbourne.
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