What can a widow expect from husband's estate?
What can a widow expect from her husband’s estate? The NSW Court of Appeal recently gave us their guidelines.
Several months ago we discussed the decision in Steinmetz v Shannon [2019] from the viewpoint of the disagreement among the judges relating to ‘testamentary freedom’ (the ability to draft your will as you wish) and what if any are the limitations on that freedom.
Today, we examine what the court had to say about what a widow in NSW could normally expect to receive from her late husband and how that amount might be calculated.
In summary the judges of the NSW Court of Appeal found that the deceased, Geoffrey Steinmetz, “allowed [the] wish to preserve his estate intact to so dominate his decision-making as to fail to have sufficient regard to his obligations to his dutiful wife of 28 years.” The dutiful wife, in question, was Mr Steinmetz’s second, Gayle Maria Warr Steinmetz, who was 65 at the time.
Mr Steinmetz’s will provided a $52,000 indexed annuity for Mrs Steinmetz for the rest of her life. The distributable estate totalled $6.65 million. This arrangement was deemed inappropriate by the appeals court, who awarded Mrs Steinmetz a lump sum of $1.75 million less the annuity already received. This would allow Mrs Steinmetz to maintain a standard of living she enjoyed with the deceased at their home.
The Court said that Australians have freedom to leave their property by their will as they wish, with one exception. That exception is that a person must fulfil any moral duty to make proper and adequate provision for those for whom the community would expect such provision to be made. It is not a question of fairness or equality. It is a moral duty to provide for their relative.
Each case is based on its own facts and Chapter 3 of the NSW Succession Act must be applied against the detail of each separate case.
The Court said that, “in the absence of special circumstances, following a long and harmonious marriage” a husband has the duty to his widow at a minimum:
first, to provide security in her home for the rest of her life, and the capacity to change it if she wishes for whatever reason (a mere right of residence will usually be an unsatisfactory method of providing for a spouse’s accommodation to fulfil the husband’s duty);
second, to provide an income sufficient for her to live in a reasonable degree of comfort free from financial worries; and
third, to provide a fund for modest luxuries and as a hedge against unforeseen contingencies.
No such thing as a standard widow
There is no such thing as a “standard widow”. Every case must be determined on its own particular circumstances. Note that Courts give more attention to the needs of a widow than they do to the needs of the children, especially if the children are adult and well able to support themselves.
The court must assess whether the provision made in the will was inadequate for what in all the circumstances was the proper level of maintenance appropriate for the applicant having regard amongst other things to the applicant’s financial position, the size and nature of the deceased’s estate, the totality of the relationship between the applicant and the deceased and the relationship between the deceased and other persons who have been provided for in the will or might have a claim.
“Proper maintenance” is not limited to the bare sustenance of a claimant but requires consideration of the totality of the claimant’s position in life including age, status, relationship with the deceased, financial circumstances, the environs to which he or she is accustomed and mobility.
The trial judge, Justice Pemberton, believed that although the annuity would not allow Mrs Steinmetz to live extravagantly; she had not done so to date, and was not entitled to expect to commence a lifestyle of that description upon the passing of her husband.
Justices Brereton and White in the Court of Appeal found that proper provision for Mrs Steinmetz required the sum of $1 million for accommodation. This figure seems to be a rounded approximation of the annuity ($52,000 per year) multiplied by Mrs Steinmetz’s approximate years remaining (20).
The Justices then concluded that, when taking into account the size of the estate, Mrs Steinmetz was entitled to an additional $1.5 million. From this, they deducted Mrs Steinmetz’s existing assets, totalling $740,000 approximately. There seems to have been a slight disagreement between the appeals judges on this precise value, so a compromise was reached to award $750,000.
This is how Mrs Steinmetz came to be awarded a lump sum of $1.75 million from the estate.
Justice White summarised the situation like this:
“While by his will the deceased provided for the appellant’s income needs, he did so in a form – an annuity – which was not proper in the circumstances; and he failed to provide adequately for her accommodation. Accordingly, the deceased failed to make adequate provision for the proper maintenance and advancement in life of the appellant.”
The message for husbands would seem to be that they need to provide for their spouse, or the courts will do it for them. Just how this might inter-play with the need to provide for their children at the same time, children who may not be the issue of their spouse, is a matter for another day.