When inheriting from friends not family

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It’s not often that a person gets the chance to inherit the estate of someone who is not a member of their family.  But it does happen and has its own particular issues.

Megan is a wealthy widow whose only family is a brother (Andy) she is not particularly close to.  Her closest friend is Jonathan, though they are not romantically involved and do not live together.

Megan and Andy own a property together and split the income it’s generating 50/50 however Megan has also been giving Andy $1,000 a month for the last five years in addition to this income.

Megan told Jonathan she has had a Will prepared by an estate planning lawyer, nominating him as her executor and leaving him most of her substantial estate. She added she made a small bequest to her brother of $50,000.

While grateful for the substantial gift, Jonathan is concerned about Andy’s entitlement to challenge Megan’s Will, which may reduce his inheritance from the estate.

On what grounds could Megan’s Will be challenged?

Andy could challenge Megan’s Will in two separate ways:

Firstly, he could challenge it under the Family Provisions law enacted in the State or Territory where the estate is located.

He would argue that he is eligible to receive a larger sum of money from her estate as she has not adequately looked after him in her Will.

If the Court found that Andy was not adequately provided for under Megan’s Will, the Court could increase the amount Andy is to receive from the estate, thereby reducing Jonathan’s entitlement.

Secondly, Andy could challenge the validity of the Will saying that, because of their very close relationship, the Will was created as a result of the undue influence Jonathan exercised over Megan.

If Andy was successful with the latter claim and the Will held to be invalid, Megan would have died intestate and the intestacy provisions of the local legislation could likely make her brother her effective next-of-kin for the purposes of receiving her estate.

Ground 1 – Family Provisions Claim

Only eligible persons can make a family provision claim under the legislation. Generally the list of eligible persons is very similar in all States but there are differences at the margin so you need to check your local State law.

Eligible persons generally include the expected categories of ‘spouse’ (including current, former and de facto) and ‘child’ but also, among others, ‘a person wholly or partly dependent on the deceased’ and /or who lived as part of the same household at the time of death or at any other time.

Siblings are often not automatically considered eligible to make a claim under the legislation but could Andy claim he fit into the definition of ‘dependant’ given the regular payments he has been receiving from his sister?

The question of whether he was ‘wholly or partly dependent’ on Megan is one of fact and degree, and the answer can only be determined on a case by case basis.

Would the fact that the $50,000 gift amounts to only 4 years’ worth of the money Megan had been regularly giving her brother be sufficient to demonstrate he was not adequately provided for under the Will?

What if Andy had only been receiving $1,000 a year (as opposed to a month) and therefore the gift amounted to 50 years’ worth of such payment? Would that be seen as a more ‘adequate’ provision in respect of the brother?

What can Jonathan do in these circumstances?

Short of Megan completely stopping her regular payments to her brother, Jonathan’s options may be limited.
Jonathan may suggest that Megan and her estate planning lawyer review the Will in light of Andy’s circumstances to determine whether she has made an adequate and reasonable provision to him and if not, amend the Will accordingly.

If Megan and Andy’s plan was to eventually sell the property they co-own, it may be possible for Megan to make it clear that her regular payments to Andy were in fact only an advance to him from his 50% share of the sale proceeds of the property and therefore were technically not gifts, but rather loans.  Documentation could be drawn up now, depending on how conciliatory Andy is willing to be, to confirm or formalise that arrangement, which may have the effect of undermining his ability to make a family provision claim.

Ground 2 – Undue influence

Undue influence is more than mere pressure or persuasion; instead it occurs when a Will does not reflect the testator’s true intentions because someone influenced or coerced the testator into favouring them in their Will to the detriment of others.

It can be extremely difficult to establish as, for example in this scenario, it would fall on Andy to prove undue influence in circumstances where Megan would no longer be available to testify in court about her reasoning and motivations behind her bequests.

Other witnesses (such as her doctors, healthcare providers, family members, lawyers, etc.) would need to testify about their knowledge of the relationship between Megan and Jonathan to help the Court determine whether Megan was the victim of undue influence on Jonathan’s part.

Megan’s estate planning solicitor would most likely be a compelling witness if their evidence were that Megan appeared to understand the terms of the Will when they were explained to her (without Jonathan being present) and that lawyer did not sense any sign or any evidence of undue influence on Jonathan’s part.

By Julie Hartley, Solicitor

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