Whilst there is no fail safe way to protect an inheritance for children from a previous marriage, there are steps you can take that will assist in safeguarding a legacy for your children and grandchildren.
The 2008 Queensland Court of Appeal decision of Hills v Chalk reinforces the importance of a having a properly drafted Binding Financial Agreement (BFA) and estate planning documents, with consistent terms, when seeking to protect or isolate assets for the benefit of children from previous marriages.
In Hills v Chalk, Mr Hills and Mrs Chalk married late in life, both having adult children from previous marriages. Prior to the marriage, Mr Hills and Mrs Chalk entered into a ‘pre-nuptial agreement’ (such agreement being made prior to the current provisions in the Family Law Act for Binding Financial Agreements). The parties then subsequently made Wills, the content of which was consistent with the terms of the pre-nuptial agreement. Mrs Chalk, the financially superior party, also signed a Statutory Declaration declaring her intent and wishes. In 2003, Mrs Chalk made a Codicil which left a small financial legacy to Mr Hills. Essentially, the terms of all the documents entered into by the parties, including the pre-nuptial agreement and the Will, documented an intention for the parties to remain financially separate, to share joint expenses and for their respective estates to pass to their adult children and grandchildren upon their death.
Mrs Chalk died in February 2003. The bulk of her estate passed to her adult children pursuant to the terms of her Will. 3 years and 9 months after Mrs Chalk’s death, out of time, Mr Hills made a family provisions claim under Part IV of the Succession Act. At first instance, leave was granted for Mr Hills claim to be determined despite the delay in bringing the application and on the basis that the trial judge considered his claim to have a ‘real prospect of success.’
On appeal, the Court was not satisfied that the primary judge’s decision that Mr Hill’s family provisions claim had a ‘real prospect of success,’ was correct. The Court held that the trial judge erred in failing to take account of the pre-nuptial agreement between the parties such agreement representing a ‘voluntary statement of the parties of their mutual intentions and expectations.’ The Court held that such agreement was specifically relevant in assessing the ‘totality of the relationship,’ the totality of the relationship being one factor to be considered in determining the likely success or otherwise of Mr Hills family provisions claim.
Whilst a party cannot contract out of Queensland Succession law, the case of Hills v Chalk does indicate a willingness on the part of the Court to place considerable weight on the terms of a Binding Financial Agreement when determining estate disputes.
This publication has been carefully prepared, but it has been written in general terms and should be viewed as broad guidance only. It does not purport to be comprehensive or to render advice. No one should rely on the information contained in this publication without first obtaining professional advice relevant to their own specific situation.