Recently, Olivia Mead (19) the daughter of mining billionaire, Michael John Maynard Wright, launched a successful challenge to her deceased father’s Will.[1]
Ms Mead claimed that as his dependent, she was not left with adequate provision from her late father’s estate.
Under “family provision” legislation in each state, a person who is a “dependent”, may make a claim if adequate provision has not been made for their proper maintenance, support, education and advancement in life. The court has the discretion to make provision out of the estate, as it thinks fit.
In Western Australia, the relevant Act is the Family Provision Act 1972 (WA).
Under her father’s Will, Ms. Mead was granted a trust fund valued at $3 million dollars.
Dependents can make a claim under the Family Provision legislation if they have not been adequately provided for in a Will.
On the face of it, this amount seems quite generous and it would seem as though Olivia was adequately provided for. However, on looking deeper at the terms of the Will and the Trust, as well as the size of the estate, the Court reached the conclusion that it did not provide adequately for Ms Mead.
The Court used a two-step approach [2]:-
- Firstly, asking whether the Will made “adequate provision” for Ms Mead’s proper maintenance, support, education and advancement in life; and
- Secondly, were adequate provision not made, exercising the Court’s discretion to make the provision it thinks fit, taking into account the relevant facts as they existed at the time of making the order.
The court considered the following facts in support of Ms. Mead’s case:-
- “Adequate provision” depends on the circumstances of each case – this includes a consideration of the size of the estate, the nature of the relationship between the claimant and the deceased, the claimant’s present circumstances, and other legitimate claims;
- That due to the “colossal” size of the estate (estimated at over $1 billion dollars), any award made to Olivia would not affect the entitlements of any of the other beneficiaries under the Will. In other words, it would not lessen the amounts to be received by other beneficiaries in any significant way, with $3 million merely a “rounding figure” in light of the total estate funds;
- Under the terms of the Will and the Trust, Ms. Mead could not get access to the money except under restrictive and onerous conditions and at the absolute discretion of the trustee until she reached an age of 30 years. She was permitted allowance for educational purposes until she reached 23 years of age, however, any such request was subject to the approval of the trustee.
- Ultimately, the trustee could withhold all funds until Olivia turned 30 and the court describing her as being “at the mercy of the trustee”.
- However, even on reaching 30, there was a very real possibility Ms Mead would have lost any entitlement to the trust funds altogether.Under very strict terms of the trust Ms. Mead would have been excluded if, for example, she was convicted of a drink driving offence, possession of marijuana (or arguably, even suspected to be involved with someone who used an illicit substance), or joined a religion outside of the Christian traditional faiths, for example, if she became a Buddhist or Muslim.The court considered it to be an extraordinary proposition that she would be required to give up her basic human right to freedom of religion to remain eligible for her inheritance when she turned 30.
- Ms Mead’s half-sisters had no such conditions placed over their inheritance, and received in the vicinity of $400 million each.
Considering the vast size of the estate, the Court concluded that the sum of $3 million, tied up in a Trust and outside of the control of Ms Mead was inadequate. The Court did not consider that it was appropriate for Ms. Mead’s fate rest in the hands of a man she had never met, who had total control over the Trust and the possibility that, due to the restrictive nature of the conditions of the Trust, she may be left with nothing.
The Court awarded a cash payment of $25 million to be paid within 60 days.
What can we learn?
Whilst having an estate worth billions or even millions of dollars is out of the realm of possibility for most people, this judgement still highlights some interesting issues we should consider when making arrangements for how our estate will be administered following death. In particular:-
- Fight the urge to rule over your children from the grave, by putting in place unreasonable restraints and controls – particularly, those which impinge on basic freedoms, such as the freedom of religion. This will not be looked on favourably by a Court.
- Although you have the right to distribute your assets any way you wish, you also have a statutory duty to provide for your dependents. Your right to decide how you distribute your assets must be balanced with your duty not to leave any dependents without proper maintenance and support.Make sure you consider all dependents and make adequate provision for them in your Will.It does not have to be fair (otherwise Olivia would have been entitled to an amount equal to her half-sisters), but it should be reasonable considering the size of your estate and allow for their proper maintenance, support, education and advancement in life.Even if you may not be on the best of terms with one or more of your “dependents”, you should still adequately provide for them in your Will or risk your Will being challenged after your death.Note that a dependent can be a partner, ex-partner, child, grandchild, stepchild or parent.
- Your dependents need to be able to access the funds provided for their maintenance, support, education or advancement in life. Don’t leave your dependents in a situation where you have provided for them, but the funds are not accessible, such as in this case where the funds were tied up under controlling mechanisms and at the total discretion of a third party unknown to the beneficiary.
To see the case here.
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References
[1] Mead v Lemon [2015] WASC 71
[2] In using this approach the Court cited the case of Bondelmonte v Blanckensee [1989] WAR 305