• Home
  • /
  • Estate Group update: Duties of professional advisers

Estate Group update: Duties of professional advisers

Jul 29, 2015

Following the recent decision in Calvert v Badenach [2015] TASFC 8, it is imperative for professional advisers to identify the manner in which a client owns property and ensure that the manner of holding is consistent with the client’s estate planning wishes.

Property ownership and death

Co-owners generally hold property as either:

  •  Joint proprietors; or
  • Tenants in common.

If a joint proprietor dies, the property will not form part of the deceased owner’s estate.  Jointly held property “automatically” passes to the surviving co-owner(s), regardless of the deceased owner’s Will or the intestacy provisions.  For most states and territories in Australia, this means that the property will not be vulnerable to a family provision claim against the deceased’s estate.

However, if a tenant in common dies, the deceased owner’s share of the property will form part of the deceased’s estate.  The deceased’s share of the property therefore passes in accordance with the deceased’s Will (or in accordance with the rules of intestacy if there is no Will).  This means that the deceased’s interest in the property will be vulnerable to a family provision claim.  

Adviser’s duties

In Calvert v Badenach, the Court held that when preparing a Will, an adviser owes a duty of care to a Willmaker and his or her intended beneficiaries to:

  • identify the manner in which co-owned property is held (i.e joint proprietors or tenants in common);
  • inquire as to the possibility of a family provision claim and likely ramifications of such claim; and
  • advise the Willmaker as to ways of dealing with his or her interest in the property (and any other assets) to minimise the risk of a family provision claim.

In this case, the Willmaker co-owned two properties with a friend as tenants in common.  The Willmaker instructed a lawyer to prepare a Will leaving his whole estate to that friend.

When the Willmaker died, his share of the two properties formed part of his estate, with the intention (in his Will) that the properties pass to the friend as sole beneficiary under the Will.  However, the Willmaker had an estranged daughter, who successfully brought a family provision claim against the estate.

The court found that the lawyer failed to advise his client of the possibility of a claim by the daughter and of the options available for dealing with the deceased’s interest in the properties to minimise or avoid a family provision claim.  Damages are yet to be assessed.  

Minimising a claim

In this case, the lawyer would have satisfied his duties if he had made independent enquiries as to the manner in which the Willmaker held his interest in the properties and advised the Willmaker to:

  • transfer the manner of holding from tenants in common to joint proprietors (so that ownership would “automatically” pass to the friend); or
  • gift his share of the property to the friend during his lifetime.

Either option would have avoided the property forming part of the Willmaker’s estate and therefore being available to the estranged daughter in her claim against the estate.

Whether the Willmaker would have actually taken either of these steps was considered irrelevant.

What does this mean for advisers?

It is important for advisers to be aware of:

  • the significance and effect of the different types of property ownership during life;
  • the significance and effect of the different types of property ownership on death;
  • the importance of verifying the manner in which a property is held;
  • a client’s personal circumstances and who may be eligible to claim against their estate; and
  • how to protect property and other assets from potential claims, including seeking specialist advice where necessary.

More information

For more information about estate planning, asset protection and family provision claims, please contact a member of our Estate Group on (03) 8600 8885.

Note: This update is a guide only and is not intended to constitute legal advice.