Coping with the loss of a loved one is challenging enough without the added complexities of Victorian probate and estate law. Many families find themselves in a daunting legal landscape, uncertain of their rights and obligations. This is especially true when considering a challenge to a will or trying to understand the role of family trusts.
At Hayton Kosky, we are committed to empowering our clients with clear, authoritative advice. This article will demystify two of the most common areas of confusion in Victorian estate law: Part IV claims and the treatment of assets held in discretionary family trusts.
What is a Part IV Claim?
In Victoria, a Part IV claim, also known as a family provision or Testator’s Family Maintenance (TFM) claim, allows an eligible person to contest a will if they believe they have not been adequately provided for. The Administration and Probate Act 1958 (Vic) outlines who is eligible to make such a claim. This includes:
- Spouses and domestic partners (including former spouses and partners in some circumstances).
- Children (including stepchildren and adopted children).
- Registered caring partners.
- Grandchildren.
- A member of the deceased’s household.
A Part IV claim does not argue that the will is invalid. Instead, it asserts that the deceased had a moral duty to provide for the claimant’s proper maintenance and support, and the will has failed to fulfil that duty. When considering a claim, the Court will assess various factors, including the claimant’s financial situation, their relationship with the deceased, the size of the estate, and the needs of other beneficiaries.
It is vital to act quickly, as strict time limits apply. A Part IV claim must generally be commenced within six months of the date the Grant of Probate is issued.
Inter Vivos Trusts and Part IV Claims: The Victorian Position
A frequent question is whether assets held in an inter vivos trust (a trust established during the deceased’s lifetime) can be accessed in a Part IV claim.
The answer in Victoria is, generally, no.
Unlike in New South Wales, Victoria does not have “notional estate” laws. This means a Part IV claim can typically only be made against assets that were legally and beneficially owned by the deceased at the time of their death. Assets correctly transferred into a trust before death are no longer part of the deceased’s personal estate and, therefore, are protected from a Part IV claim.
Discretionary Family Trusts: What Happens on Death?
Discretionary family trusts are a common structure for asset protection and tax planning. The trustee holds the power (discretion) to decide which beneficiaries receive income or capital from the trust.
When a person who was the Appointor of the trust (the individual with the power to appoint and remove the trustee) passes away, their will typically nominates the next Appointor. This new Appointor steps into the role and assumes control over the trust.
While the assets within a discretionary trust are generally shielded from a Part IV claim, this is not the end of the matter for beneficiaries.
Can a Trustee’s Discretion Be Challenged?
Recent Victorian case law has reinforced that trustees of discretionary trusts cannot simply “do as they please”. The Victorian Supreme Court of Appeal, in the landmark case of Owies v JJE Nominees Pty Ltd [2022] VSCA 142, sent a firm message: trustees must give “real and genuine consideration” to all potential beneficiaries when deciding on trust distributions.
If a trustee fails to act in good faith, acts with an improper motive, or fails to genuinely consider the circumstances of the beneficiaries, their decisions can be challenged in court. A successful challenge could result in the trustee’s decisions being set aside and, in some instances, the removal and replacement of the trustee.
Key Takeaways for Victorians
- Part IV Claims: If you are an eligible person who has been unfairly left out of a will or inadequately provided for, you may have a right to make a family provision claim. Strict time limits apply.
- Inter Vivos Trusts: In Victoria, assets held in a valid trust created during the deceased’s lifetime are generally not considered part of the estate for the purposes of a Part IV claim.
- Discretionary Trusts: While the assets themselves are protected, the trustee’s actions are not absolute. Trustees have a legal duty to act in good faith and give real consideration to all beneficiaries.
Navigating the intricacies of Victorian probate and estate law requires specialist legal guidance. If you have questions about a will, a trust, or a potential Part IV claim, the experienced team at Hayton Kosky is here to help. Contact us today for a confidential discussion about your situation.