Wills and Estates | Are Annuities Adequate for Proper Maintenance?

Wills and Estates: An annuity may not be adequate provision for proper maintenance and advancement for a widow

What does it take to make adequate provision for proper maintenance and advancement in a will?

Is it a matter of moral duty or community standards?

The answer to those questions depend upon a range of factors.

In Steinmetz v Shannon [2019] NSWCA 114, the appellant was the second wife of the deceased, who left an estate of approximately $6.8 million. The estate consisted of real estate, a superannuation policy, a real estate business and a liquor outlet business.

By his will, the deceased left the appellant an indexed annuity of $52,000 for the remainder of her lifetime. The remainder of the estate was left to the respondents, who were the independent adult children of the deceased’s first marriage.

The will contained the following provision:

“IT IS MY EXPRESS WISH that my Estate remains a whole for my children and grandchildren. I have drafted my Last Will and Testament in the above manner as I believe that it enables my wife to live comfortably for the rest of her life without having to dispose of the assets that I have worked my whole life for.”

The will was made hurriedly in circumstances where the deceased was about to undergo surgery which he feared he might not survive. Instructions were in fact given to the deceased son in law who was a solicitor.

The trial judge dismissed the appellant’s family provision claim. The widow appealed.

The principal issue on appeal was whether the annuity was adequate provision for the appellant’s proper maintenance and advancement in life.

The members of the Court of Appeal all approached the issues slightly differently, but unanimously held, allowing the appeal:

Adequate provision for a proper annuity is not limited to the provision of financial necessities.

Section 59 of the Succession Act (NSW) is to be applied according to its terms, and not confined by notions of reluctance to interfere with freedom of testation.

Insofar as it is necessary to resort to concepts of “moral duty” or “community standards” as a measure of proper provision, the former is preferable.

To leave a 65 year old widow, who is well capable of managing her own affairs, reliant for the rest of her life on quarterly payments by the children of her deceased husband’s first marriage, with one of whom there have been historical tensions, rather than placing her in control of her own resources, is not an appropriate form of provision.

The appellant widow was awarded an amount of $1.75M in lieu of the annuity provided under the will.

In the context of the relationship and marriage, taking into account the sustained and substantial contributions the appellant had made to the welfare of the deceased; the size of the estate; that there was no-one else responsible for the maintenance of the appellant; the appellant’s reasonable wish to relocate; and the absence of competing claims; the annuity provided to the widow under the will was not adequate provision for the proper maintenance and advancement of the appellant.

In relation to the express provision in the terms of the will, Brereton JA said,

“A wish to preserve “the assets that I have worked my whole life for” for the benefit of his children and grandchildren does not reflect a careful balancing of competing claims. The testator allowed this 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.”

In finding the annuity inadequate, Brereton JA said,

“to leave a 65 year old widow reliant for the rest of her life on quarterly payments by the children of her deceased husband’s first marriage, rather than placing her in control of her own resources, is in this day and age not an appropriate form of provision for a widow who is well and truly capable of managing her own affairs and when there have historically been tensions between her and at least the first respondent. However reliable the respondents might be, this form of provision effectively obliges her to have an ongoing relationship with them, and to trust them to perform the obligation, and does not afford her the independence and self-reliance which, according to today’s community standards, a widow should have. It is not only rigid and paternalistic, but demeaning and controlling.”

The decision highlights the broad approach a court will take in such matters. What may at first glance be adequate and proper provision, may on careful analysis of all of the facts, be quite inadequate and altered.

In ideal circumstances, wills should be made after careful consideration of all of the relevant facts, with sound advice and guidance.

Contact us for any assistance in making a will or in getting advice on whether a will makes proper and adequate provision.

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