Is Notional Estate a Good Thing? Understanding its Role in NSW Succession Law

When someone passes away, their will (if they have one) and the laws of succession typically determine how their assets are distributed. But what happens when a person deliberately removes assets from their estate before death, potentially leaving their dependents or loved ones with little or nothing? This is where the concept of 'notional estate' comes in, a unique legal mechanism in New South Wales designed to address this issue under the Succession Act 2006 (NSW).

What is Notional Estate?

A notional estate refers to certain assets that are not technically part of the deceased’s estate at the time of death but can be treated as though they are for the purpose of making Family Provision Orders. In simple terms, if someone gave away or transferred assets before they died, possibly to avoid those assets forming part of their estate, the court has the power to bring those assets back into consideration.

The main aim here is fairness. The law recognises that some people may try to sidestep their moral obligations to family or dependents by giving away property or restructuring ownership before they die. The notional estate rules allow the Supreme Court of NSW to ensure that eligible claimants are not left with nothing simply because there are no assets left in the legal estate.

What Types of Property Can Be Included?

Notional estate can include a broad range of assets and they're not limited to New South Wales or even Australia. Some examples of assets that can form part of a notional estate include:- Property held as joint tenants, where ownership automatically passes to the survivor upon death.- Superannuation death benefits or insurance policies, particularly where the deceased had control over the nomination.- Interests in a family trust, where the deceased could have distributed assets to themselves before death.- Property that was gifted or transferred for less than market value within three years before the person died.

Why Does Notional Estate Exist?

The concept serves an important social purpose. It ensures that people who may have a legitimate claim, such as children, spouses, or dependents, aren’t left empty-handed just because assets were moved around before the person passed away. It doesn't create a new ownership right or reverse transactions automatically. Instead, it gives the court a tool to rectify an estate where it believes the outcome would otherwise be unjust.

It's also important to remember that notional estate only applies in the context of Family Provision claims. The court must first determine that a person is eligible and has not been adequately provided for before it can consider pulling assets back into the estate.

Where Else Does This Apply?

Interestingly, New South Wales is the only Australian state with this specific legal concept. Law reform bodies in other states, such as Victoria and Tasmania, have considered it but ultimately decided against implementing similar laws. Their reasons include concerns about consistency in national succession law and the complexity it might introduce.

How Often Is It Used?

There are no detailed statistics on how many Family Provision cases rely on notional estate, but it's fair to say that the concept comes up regularly. Of the roughly 1,500 succession and probate cases filed each year in NSW, around two-thirds involve Family Provision claims. That means notional estate is a key consideration in a significant number of disputes.

Case Study: Boyd v Roberts [2024] NSWSC 1310

A helpful example of notional estate in action is the recent case of Boyd v Roberts. In this matter, Peter Roberts died without a will, leaving behind his second wife Kerrie and an adult daughter from a previous marriage, Eliza. Most of Peter’s wealth was held in joint bank accounts or superannuation, with very little in his sole name.

While there was some evidence Peter wanted to leave something to Eliza, nothing was formally documented. Kerrie inherited the joint bank account by right of survivorship, and the superannuation was outside the estate entirely.

The court considered Eliza’s needs and found that although the superannuation should not be touched (so Kerrie could maintain an income stream), it would be fair for Eliza to receive $450,000 from the joint bank account, even though it technically wasn't in the estate. The court used the notional estate provisions to order staggered payments to Eliza, balancing both women's interests.

Final Thoughts

Notional estate is not a magic fix, and it certainly shouldn't be relied upon as a fallback in estate planning. It's a discretionary remedy that requires court involvement. However, it plays a vital role in preventing injustice where someone tries to bypass their obligations to dependents or loved ones.

For anyone with a complex family situation or significant non-estate assets, such as superannuation, trusts, or joint property, it's essential to get good legal advice and to plan clearly. A well-structured estate plan can help avoid court disputes and ensure your wishes are carried out.

For assistance tailored to your circumstances, please contact our team.

This article is not legal advice, and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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