Report into Notional Estate Laws for Tasmania

On 4 September 2019, the Tasmania Law Reform Institute (the ‘TLRI’) released its Final Report, ‘Should Tasmania Introduce Notional Estate Laws?’, concluding its review into whether Tasmania should introduce laws to broaden the assets available for claimants under the Testator’s Family Maintenance Act 1912 (Tas) (the ‘TFM Act’).

The State government referred the question of notional estate laws to the TLRI following a constituent raising concerns about her inability to claim certain assets under the TFM Act due to assets having been transferred pre-death, or held in other structures such as trusts.

In all Australian jurisdictions other than New South Wales, assets outside an estate are unable to be pursued via a family provision claim, enabling individuals to structure their affairs to remove assets from risk. In New South Wales, Part 3.3 of the Succession Act 2006 (NSW) enables the Supreme Court to make a notional estate order, designating certain non-estate assets as part of an estate to fund an award for a successful family provision claimant, or the payment of costs.1 Broadly, notional estate orders may be made where a ‘relevant property transfer’2 occurs and a person or entity receives an asset without providing full valuable consideration. Notional estate orders can affect joint tenancy assets, superannuation and trust assets. They also enable the court to claw-back gifts made within three years of death.3 England and Wales have similar laws which enable the court to utilise joint tenancy assets and assets gifted within six years of death with the intention of defeating a family provision claim when making awards for successful applicants.4 Some provinces in Canada also include non-estate assets within the purview of family provision claims.5

TLRI Issues Paper March 2019
The TLRI released its Issues Paper in March 2019, 6 posing a range of questions to ascertain the degree of community support or opposition to the introduction of notional estate laws in Tasmania. Thirty-two formal submissions were received, comprising the views of 67 individuals and two organisations. Diverse views were expressed, from those strongly supportive of notional estate laws, to those strongly opposed to expanding the scope of the TFM Act to a broader range of assets.

TLRI Final Report
The TLRI’s Final Report concludes that notional estate laws should not be introduced in Tasmania in the absence of nationally uniform family provision laws.7 Several respondents raised issues about the effectiveness of the New South Wales scheme given people’s ability to avoid the operation of those laws by holding assets in other jurisdictions. The Report concludes that laws must be effective and that the absence of national consistency presently operates as a barrier to the success of notional estate laws.

Some respondents also indicated a need for caution before adopting the New South Wales scheme on the basis that its effectiveness has not been empirically assessed. Those respondents commented that, to consider the merits of introducing notional estate laws in Tasmania, the effectiveness of the New South Wales model should be further investigated. Some considered that notional estate laws increase estate administration costs, and pointed to the costs, complexity and duration of litigation when expressing their view of a need for caution and further research. Several respondents stated that notional estate laws would have a detrimental impact on many individuals whilst only resolving what was anecdotally considered to be a small percentage of cases where people intentionally remove assets from challenge.

Many respondents, on the other hand, supported introduction of notional estate laws. Their rationale was primarily that notional estate laws operate as anti-avoidance provisions and that the TFM Act is ineffective whilst there remain avenues for individuals to avoid its operation. These respondents pointed to examples where eligible applicants had been unable to pursue claims because assets passed outside an estate. Analogies were made to other anti-avoidance provisions within other legislation including bankruptcy and family law.

The Report therefore recommends that the discussion around nationally uniform family provision laws be reinvigorated and that, as part of this process, a full evaluation be conducted into the effectiveness of the New South Wales scheme.8

Conclusion
Nevertheless, noting the strong views expressed by proponents of reform and that the Government may legitimately conclude that there is a need for legislative reform, the Report makes recommendations about how notional estate laws should be introduced, including the need for a comprehensive public education campaign.9 It also proposes that its scope be limited to acts (such as gifts) and not omissions (for example, failures to sever a joint tenancy).10 The Report also endorses a legislative scheme, similar to that in New South Wales, enabling the court to approve agreements within families so that individuals may transfer assets during life without those assets later being subject to a potential family provision claim. 11

The TLRI thanks all those who made submissions on this reference. Those submissions deeply enriched the project and conclusions reached.

The TLRI’s report has been delivered to the Attorney-General who will consider the recommendations and decide upon any future action.

Kate Hanslow
Research Fellow
Tasmania Law Reform Institute

1. Succession Act 2006 (NSW) (‘NSW Succession Act’) s 78.
2. See NSW Succession Act ss 75, 76.
3. NSW Succession Act s 80.
4. See Tasmania Law Reform Institute, Should Tasmania Introduce Notional Estate Laws?, Final Report No 27 (August 2019) (‘Final Report’) [3.2].
5. See Final Report [3.4].
6. Tasmania Law Reform Institute, Should Tasmania Introduce Notional Estate Laws, Issues Paper No 28 (March 2019).
7. Rec 1.
8. Recs 3, 4.
9. Rec 2.
10. Rec 2.4.
11. Rec 2.5. See NSW Succession Act s 95.