Estate planning is an essential part of securing the financial future of your loved ones, and a testamentary trust can be a valuable tool in achieving this goal. A testamentary trust, created within a last will and testament, comes into effect after the death of the testator (the person creating the trust). This type of trust offers several benefits, including asset protection, tax efficiency, and support for beneficiaries with specific needs. However, as with any legal document, disputes can arise, and a common question is, “Can a testamentary trust be contested in NSW, Australia?” In this blog post, we will explore the grounds and processes for contesting a testamentary trust in New South Wales.
What is a Testamentary Trust?
A testamentary trust is a legal arrangement that enables a testator to transfer assets to a trustee, who then manages and distributes these assets to the named beneficiaries according to the trust’s terms. Unlike a living trust, which is created and becomes effective during the trust creator’s lifetime, a testamentary trust comes into effect after the testator’s death. Testamentary trusts are particularly useful when beneficiaries are minors or have special needs, as they allow for a structured and controlled distribution of assets.
Related: What is a testamentary trust?
Grounds for Contesting a Testamentary Trust in NSW
In New South Wales, Australia, a testamentary trust can be contested, but the person contesting the trust must have legal standing (a valid reason) to do so. Some common grounds for contesting a testamentary trust in NSW include:
- Lack of Capacity: If the testator lacked the mental capacity to understand the nature and consequences of their actions at the time they created the trust, a court may declare the trust invalid.
- Undue Influence: If the testator was coerced, pressured, or manipulated into creating the trust, the court may set aside the trust on the grounds of undue influence.
- Fraud or Forgery: If the trust was created based on fraudulent information or if the testator’s signature was forged, the trust may be invalidated by the court.
- Non-compliance with Formal Requirements: If the trust does not meet the legal requirements for a valid trust, such as being properly signed and witnessed, it may be contested.
Family Provision Claims in NSW
In addition to the above grounds for contesting a testamentary trust, family members and dependents can also make a Family Provision claim under the Succession Act 2006 (NSW). This type of claim is made when an eligible person believes that they have not been adequately provided for in the deceased’s will, which can include the terms of a testamentary trust.
To make a Family Provision claim in NSW, the applicant must be an eligible person, such as a spouse, de facto partner, child, or dependent of the deceased. The court will then consider various factors to determine if the provision made for the applicant is adequate, and if not, may order a variation of the testamentary trust.
Related: What is a Family Provision Claim?
How much does it cost to contest a testamentary trust in NSW?
The cost to contest a testamentary trust in NSW can vary significantly depending on the complexity of the case, the legal representation chosen, and the length of the dispute. However, some law firms will offer a no win no fee arrangement. This means their fees are taken from the estate. In many cases, their clients will have minimal out of pocket expenses.
Legal fees may range from a few thousand to tens of thousands of Australian dollars. Additional costs, such as court fees, expert witness fees, and other related expenses, may also apply. It is advisable to consult with an experienced estate lawyer to get a more accurate estimate of costs tailored to your specific situation.
Our law firm offers “no win, no fee” for contested estates.
Is it worth contesting a testamentary trust?
Whether it’s worth contesting a testamentary trust depends on the individual circumstances of each case. Before proceeding, consider the following factors:
- Valid grounds: Ensure you have legitimate grounds for contesting the trust, such as lack of capacity, undue influence, fraud, or non-compliance with formal requirements.
- Potential benefits: Assess the potential financial and personal benefits of a successful claim, such as securing a more equitable distribution of assets or protecting vulnerable beneficiaries.
- Costs and time: Consider the financial costs, emotional toll, and time commitment involved in contesting a trust, which could be significant.
- Impact on relationships: Be mindful of the potential strain on family relationships that contesting a trust may cause.
- Alternative resolutions: Explore alternative dispute resolution methods, such as mediation or negotiation, which may resolve the issue more efficiently and amicably.
Consulting an experienced estate lawyer can help you evaluate the merits of contesting a testamentary trust and guide you through the decision-making process.
While a testamentary trust can be contested in NSW, Australia, doing so requires legal standing and valid grounds. Additionally, family members and dependents may make a Family Provision claim if they believe they have not been adequately provided for in the deceased’s will. If you are considering contesting a testamentary trust or making a Family Provision claim, it is highly recommended that you consult with an experienced estate lawyer to guide you through the complex legal process and protect your interests.