As relationships are becoming more complex, so too is estate planning. What is the appropriate balance between a second spouse and the children of your first marriage? Who should take precedence in this instance? Are you entitled to leave the bulk of your estate to your children to preserve the assets you have worked your life to accumulate? These issues were all considered by the Court of Appeal in the recent case of Steinmetz v Shannon  NSWCA 114.
In the recent decision of Steinmetz v Shannon, the NSW Court of Appeal overturned a decision of a single judge where the Judge at first instance had refused to make further provision for the widow of a testator. The deceased had left a distributable estate of approximately $6.8 million and had left the bulk of that estate to his two adult children of his first marriage. He left his 65-year-old widow, with whom he had been in a relationship for 28 years, an annuity of $52,000. The principal issue on appeal was whether the annuity was adequate provision for the widow’s proper maintenance and advancement in life.
The Court held that, not only was the annuity insufficient, but that it was an inappropriate form of provision. The Court mentioned there were certain limited circumstances where an annuity may be an appropriate form of provision, but this was not one of them. For example, an annuity may be appropriate where a beneficiary is not well equipped to manage a large capital funds. However, this was not an appropriate case to leave an annuity to a widow. The evidence showed the widow was “thrifty, prudent and organised”, had her own superannuation fund generating a high return and managed cash reserves in excess of $100,000. In this case the gift was in the form of an annuity “not in the best interests of the widow but because it facilitated preservation of the deceased’s estate for his children and grandchildren”. The annuity effectively forced her to have a continued relationship with the deceased’s children from his first marriage and to trust that they would pay the annuity when it was due. That kind of provision “does afford her the independence and self-reliance which, according to today’s community standards, a widow should have.” The annuity was “not only rigid and paternalistic but demeaning and controlling.”
This is an important decision in this area of law. The Court gave a detailed analysis of the leading cases of widows’ claims. It also considered how the competing imperatives of the deceased’s testamentary freedom should be balanced by the legislative regime requiring provision to be made for eligible persons. The Court held that as his wife, who was partly dependent on him, the testator had a legal and moral obligation to support her. Even though the evidence showed the widow would have had a reasonable standard of living without further provision from the Estate, the Court held that proper maintenance was not limited to the “bare sustenance of a claimant.” The Act refers to not only maintenance but “advancement in life”, “which envisages not merely maintaining a standard or status of an eligible person but in an appropriate case, improving and enhancing it.”
To demonstrate this, the Court quoted Blore v Lang (1960) 104 CLR 124 in which it was stated that, “where the applicant is a married woman with a healthy husband in satisfactory employment who supports her in reasonable comfort, her need is not for the bread and butter of life but for a little of the cheese or jam”. In other words, financial needs should not be construed narrowly by the Court. Needs is not limited to the necessities or essentials of life and the jurisdiction encompasses improvement and enhancement of the claimant’s position. Further provision for the widow in this case allowed her to move to Port Macquarie where she had better access to health care and other support services which was an entirely reasonable assessment of her future requirements.
The Court set aside the original judgment and ordered that the widow receive a legacy of $1,750,000 in lieu of the annuity provided by the will.
We have a large team of Estates Lawyers helping clients throughout the year with all of their Estate Planning needs. We also help families through the difficulties of disputes over a contested will. Give us a call if you need help with any of these things.