Notional Estate in NSW: Clawing Back Transfers

How Notional Estate Works

A notional estate order brings specified property within reach of a family provision order under Part 3.3 of the Succession Act 2006 (NSW). The property does not automatically become estate property because a beneficiary received it. The court must make the designation order.

This is a NSW statutory regime. It lets the court address arrangements that leave property outside the deceased’s actual estate, including transactions that take effect at death. Designation can also fund certain costs orders. It is part of the underlying family provision claim, whose eligibility and provision questions require their own assessment.

For an estate litigator, the task is to connect an identified transaction to property available for an order. Establish what the deceased did or failed to do, who received the benefit and which statutory condition applies. Then explain the disadvantage and why the proposed designation is justified.

Relevant Property Transactions Under Section 75

Section 75 covers an act or omission that results in another person holding property, or property becoming subject to a trust, without full valuable consideration. Payment of full value therefore changes the analysis. A description such as “family transfer” does not establish whether the deceased received value.

Common candidate arrangements include the following:

• A gift of money or property during the deceased’s lifetime.
• A joint bank account whose beneficial interest passes to the survivor at death.
• A superannuation death benefit paid outside the estate, including arrangements involving a nomination or an unexercised power.
• A failure to exercise a right to appoint or dispose of property outside the estate.

Section 76 gives examples of relevant acts and omissions. For joint tenancy, it addresses a failure to sever an interest before death where property then passes by survivorship. Section 77 treats that transaction as entered into immediately before death and taking effect at death. The earlier deposit into the account and the later survivorship event therefore need separate attention.

Obtain the joint account’s opening documents and terms as well as its statements. Establish the beneficial interests and what passed to the survivor. The account label alone does not prove that every dollar in it was the deceased’s property.

In Kelly v Deluchi [2012] NSWSC 841, the court considered property held in a superannuation fund alongside an insufficient actual estate. Its reasons directed that fund property be designated to meet part of the provision and costs. The decision illustrates why the investigation must extend beyond the probate inventory.

Time Limits and Designation Rules

Section 80 separates transactions taking effect within three years before death, within one year before death and on or after death. Each route has its own condition. The three-year window is not an automatic right to recover every gift.

For a transaction taking effect within three years before death, the deceased must have intended, wholly or partly, to deny or limit provision. That intention concerns someone entitled to apply for a family provision order.

Within one year before death, the court compares the deceased’s moral obligations. The obligation to make adequate provision must have been substantially greater than the obligation to enter the transaction.

A separate route applies when a relevant transaction takes effect, or is to take effect, on or after death. Relevant survivorship arrangements can fall within this route.

Use the statutory effective date under section 77. For a lifetime gift, the payment record often helps establish when the recipient obtained the money. For an omission involving survivorship, the effective event can be death even though the account existed much earlier.

Section 83 requires the relevant disadvantage before an order can be made. Sections 87 to 89 then govern the exercise of the power and the property selected. The court considers reasonable property expectations and the justice of making or refusing the order. Under section 88, the court must find that the deceased left no estate or that it cannot fund the proposed provision or costs order. Alternatively, provision must need funding beyond the actual estate because of other eligible applicants or special circumstances.

A claimant’s need does not erase the recipient’s interests. Evidence about the recipient’s circumstances and reliance belongs beside the evidence supporting designation. The Succession Act’s notional estate provisions supply the conditions for that assessment.

Sections 79, 81 and 82 also address distributed estate property and subsequent transactions or a deceased recipient’s estate. If the first recipient has transferred the benefit onwards, record the later movement and current holder. The original outgoing payment is the beginning of that enquiry.

Finding Transfers in Bank Records of the Deceased

Start with complete statements for the deceased’s sole and joint accounts covering at least the three years before death. Include savings accounts and term deposits, together with records of closed accounts. Obtain statements through death and subsequent payment records where survivorship or a death benefit is relevant.

Three years is an investigation starting point tied to section 80, not a universal cut-off for records. Extend backwards to establish ownership, account funding or an earlier arrangement that took effect at death. Extend forwards to follow the money into the recipient’s accounts or a replacement asset. The guide to obtaining deceased-estate bank records explains the collection stage.

Build a ledger of every outgoing transfer to family members and associates across the supplied accounts. Keep the transaction date and amount beside the source account, recipient description and statement reference. Add the destination account where supported, any repayment and the evidence of consideration. Mark missing periods so an apparent absence of transfers is not mistaken for a complete record.

Match movements between the deceased’s own accounts before totalling transfers to recipients. Counting both sides of an internal transfer as separate gifts inflates the candidate amount. A transfer description is a lead: correspondence, agreements and recipient records can establish whether it was a gift, repayment or payment for value.

In a hypothetical matter, the deceased moves A$200,000 from a sole account to an account held jointly with one child eighteen months before death. The debit and matching credit establish the movement. Account documents then establish the interests created and the effect of survivorship. The lifetime transfer needs analysis under the three-year route, while an unsevered joint interest may engage the death-related route.

Attach each candidate to its source records and identify the evidence still needed to prove the statutory condition. Intent evidence can include instructions and correspondence about the transfer. Records of consideration can include a contract and the matching payment. Use asset tracing to follow money moved into later accounts or assets.

FinTrace saves hours of statement review by consolidating supplied PDFs into a searchable Excel ledger and a readable findings report. Transfers and suspicious transactions are identified with direct references to the source PDF and page. Estate lawyers and forensic accountants can use those outputs to focus their analysis on the transactions relevant to designation.

Protecting Third Parties

The court must consider reasonable expectations about property before making a notional estate order under section 87. A recipient who paid value, spent money on the property or acted on a promise can have evidence relevant to that assessment. Kelly v Deluchi discusses those expectations in its treatment of the statutory discretion.

Full valuable consideration can prevent an arrangement qualifying under section 75. Where the recipient gave some value, document what was given and how it compares with the benefit received. Keep reliance expenditure separate from the original consideration so each issue can be assessed on its own facts.

Prepare the recipient evidence with the transfer schedule. Include contracts and proof of payment, then documents showing later expenditure or commitments made in reliance on the benefit. Identify the property proposed for designation and the effect the order would have on each affected person. That gives the court the transaction evidence and the competing interests it must decide.