Estate planning risks for families with financially dependent adult children

Words of Advice: Family estate planning risks

Agribusiness
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Grief can heighten dysfunctional conduct so appropriate planning is essential for financial security to be provided for family members in the manner intended.

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Kylie Wilson

Kylie Wilson

The recent case of Joss v Joss [2020] VSC 424 is a timely reminder of the risk of a claim by a child of the deceased even when there is a surviving spouse and parent of the child.

The deceased, Peter Joss, died on 22 March 2017, aged 93. He was survived by his wife Judith (the defendant in this case) and their two adult children Ronald Joss and Jessica Joss (his daughter and the applicant in this case).

The deceased's will appointed Judith as the executor and trustee and left his $12.4 million estate solely to Judith. Jessica commenced proceedings against her father's estate seeking provision for her proper maintenance and support.

Both children would have inherited the estate, although not in equal shares, if Judith had not survived Peter.

Throughout her adult life, Jessica had relied heavily on her family's money. Jessica had such a sense of entitlement she refused to work for the 20 years before Peter's death and relied entirely on a weekly allowance she received from her father to fund her accommodation and lifestyle.

After Peter's death, Judith continued to pay Jessica her weekly allowance. Needless to say, Jessica and Peter had a highly dysfunctional relationship that involved lengthy periods of estrangement.

It was clearly a complex dynamic and much of Jessica's conduct would be considered dis-entitling conduct, however, the court found that financial dependency creates a moral duty. Where this dependency is immense, it can act to diminish the impact of conduct which may otherwise prevent a family provision claim.

There are endless examples of siblings fighting over the estate of mum and dad once both have passed away. What is interesting about this case is that Jessica didn't wait for her mum (Judith) to pass away before making her claim and, despite her conduct, she was awarded $3.225 million from the estate.

This case demonstrates the importance of well thought out and structured estate planning. While it's too late for Peter and Judith, there will be many other families who are providing financial assistance to their children and who could find themselves in a similar situation.

Laura Hanrahan

Laura Hanrahan

It is important that the financial assistance is documented properly and is consistent with the estate planning, rather than inadvertently giving that child a greater claim on the estate.

Another important estate planning tip to take away from this case is understanding ownership of assets and whether those assets will be assets of the estate.

In this case, Peter owned their home entirely in his sole name, which meant it formed part of Peter's estate. If Peter and Judith owned their home as joint tenants, Judith would have taken the home by survivorship and it would not have formed part of Peter's estate, substantially reducing the value of the estate.

The risks are real and many families are a little dysfunctional. Grief can heighten dysfunctional conduct so appropriate planning is essential for financial security to be provided for family members in the manner intended.

- Holding Redlich partner Kylie Wilson and special counsel Laura Hanrahan

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