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What is a Notional Estate in NSW and how does it apply to clients with super

Introduction

A notional estate is a concept specific to New South Wales (NSW) Family Provision claims in Australia. It refers to property or assets that are not directly included in the deceased's actual estate but may be considered by the court when deciding whether to make a family provision order. The notional estate provisions allow the court to make orders redistributing property or assets that the deceased may have disposed of, either during their lifetime or through a testamentary substitute, to prevent them from being used to provide for eligible persons. This concept is outlined in the Succession Act 2006 (NSW), particularly in Part 3.3.


Superannuation

An example of how a notional estate can be used for a claim against superannuation is as follows:

Suppose a deceased person had a significant superannuation fund and nominated a non-family member as the beneficiary of the death benefit. In this situation, the superannuation fund would not form part of the deceased's actual estate. However, if an eligible family member makes a Family Provision claim and the court determines that it is just and equitable to make a provision order, the court may declare the superannuation fund as part of the deceased's notional estate. This would allow the court to redistribute the superannuation death benefit among the eligible family members.


Application - Case Law


In Benz v Armstrong [2022] NSWSC 534, the court addressed a notional estate claim involving a deceased surgeon's estate. The surgeon left most of his assets to his second wife and the residue to his six children from his first marriage. His $12 million superannuation benefits were designated to his wife through a binding death benefit nomination. After accounting for liabilities and legal expenses, the actual estate's net value was around $2 million, with the remaining $200,000 in assets not covering the intended inheritance for the children.


Three of the deceased's children brought a Family Provision Claim against the estate, arguing that the deceased's failure to change the superannuation nomination resulted in property being held by his wife rather than the estate. The court concluded that the superannuation benefits should be designated as notional estate and that inadequate provision was made for the children who brought the claims. Despite the binding death benefit nomination being valid under superannuation law, the Succession Act allowed the court to disrupt the nomination under the notional estate provisions.

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