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If a deceased person’s estate is challenged in New South Wales, the court can have access to assets that do not ordinarily form part of a deceased estate to make an award to the person challenging the estate.
This is known as the ‘notional estate’ principle, which operates to include (among other things) any property belonging to the deceased that changed ownership in the three years before their death. It was specifically developed in New South Wales to prevent people hindering estate challenges by transferring property to other people or entities before they die.
The New South Wales Supreme Court decision of Davidson v Sampson provides an example of an estate that fell subject to this principle.
The case concerned the estate of Ms Boorne. Shortly before she died, Ms Boorne purchased a $2 million property with her second husband. She contributed 75% of the purchase price for the property and her second husband contributed the other 25%. However, they registered the property solely in the name of the second husband, because Ms Boorne was concerned that her former husband and their son might make a claim against her estate, and she wanted to ensure that her second husband was able to keep the property after she died.
After Ms Boorne died, her son did make a claim against her estate. The court held that 75% of the value of the property formed part of Ms Boorne’s ‘notional estate’ and was available to make provision for her son. The court made orders that the property be sold and 60% of the sales proceeds be paid to Ms Boorne’s son.
In this instance, Ms Boorne’s attempt to protect the property for her second husband unfortunately failed because of the ‘notional estate’ principles.
If you are resident in New South Wales or have property in New South Wales and would like to discuss your estate planning arrangements, please contact Hannah Kulaga on (07) 3231 2509 or Kate McQueeney on (07) 3231 2945.
Written by Hannah Kulaga, Lawyer
This publication is for information only and is not legal advice. You should obtain advice that is specific to your circumstances and not rely on this publication as legal advice. If there are any issues you would like us to advise you on arising from this publication, please let us know.
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