How to Handle Unequal Inheritance in Australia

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Unequal inheritance, a thorny issue that can sow seeds of discord in families, requires meticulous handling, especially in Australia’s intricate legal framework. 

Whether seeking to understand your rights as a beneficiary or planning your will, our guide offers vital insights and practical strategies to navigate this sensitive terrain, ensuring your peace of mind amidst potential family conflicts and tax implications.

Unequal Inheritance Definition

Unequal inheritance is the unequal distribution of a deceased person’s assets among their heirs, often stipulated in a will.

This could occur for various reasons, such as differing needs among heirs, involvement in the deceased’s care, or personal preference.

Although legal, it can spur conflict among the heirs, especially if the reasoning is unclear, necessitating careful handling to avoid legal disputes and preserve family harmony.

Reasons Behind Unequal Inheritance Choices in Families

  • Financial Stability of Heirs: Some families opt for unequal inheritance when one heir is financially stable and another may be in need. In such a case, the family may allocate more to those in financial distress to ensure their security.
  • Caregiving Responsibilities: Often, a child who has taken on the role of a primary carer or has significantly contributed towards the care and wellbeing of a parent might receive a larger share of the inheritance as recognition of their efforts.
  • Special Needs Considerations: If a family member has special needs or disabilities, a larger share of the estate might be allocated to provide for their ongoing care and support.
  • Reparation of Past Inequities: Unequal inheritance may also be used to rectify perceived past injustices or imbalances within the family, such as one child receiving more financial support during the parent’s lifetime.
  • Legacy and Business Continuity: If a family owns a business, the family member who has shown interest and is involved in the business might inherit a more significant share or even the entire business to ensure continuity.

Remember, the choice to distribute an estate unequally can be personal and subjective, varying significantly based on individual circumstances and family dynamics.

In Queensland, Australia, individuals can distribute their estate as they wish, but family provision laws moderate this testamentary freedom.

These laws, outlined in the Succession Act 1981 (QLD), allow eligible parties, like dependents or spouses, to contest a will for inadequate provision.

Considering factors like the applicant’s finances and the estate’s size, the court may adjust the will to ensure financial support for close relatives.

Due to the complexity, legal consultation with a wills lawyer is recommended when handling unequal inheritance.

How Can Unequal Inheritance Be Legally Managed?

Managing unequal inheritance in Australia can be streamlined using the following steps:

  1. Craft a Concise Will: Develop a precise will specifying asset distribution, leaving no room for misinterpretation.
  2. Justify Unequal Shares: Detail the reasoning for uneven asset distribution in a related letter to clarify and lessen disputes.
  3. Family Discussions: Arrange family talks about the will’s terms, enabling the testator to explain their decisions and the beneficiaries to voice concerns.
  4. Trust Utilisation: Establish a trust for controlled asset management posthumously, such as a testamentary trust for special needs beneficiaries.
  5. Legal Guidance: Seek professional legal advice for optimal estate planning to achieve desired objectives and minimise potential conflicts.
  6. Routine Revisions: Regularly update the will, particularly during significant life events, to maintain relevance.

The aim is to harmonise the testator’s wishes with potential conflict management, leveraging transparency as a critical tool.

Remember, the aim is to balance the testator’s wishes with potential conflict and legal challenges. A transparent and consultative approach can help manage unequal inheritance effectively.

What are the Tax Implications of Unequal Inheritance?

In Australia, managing tax implications related to inheritance involves understanding several aspects:

  1. Capital Gains Tax (CGT): Inherited property doesn’t incur CGT at the owner’s death but may do so when the beneficiary sells it, with its market value at the time of death serving as the cost base.
  2. Superannuation Death Benefits: Depending on the recipient and the fund’s composition, superannuation death benefits may be taxable.
  3. Income from Inherited Assets: Income from inherited assets, such as rent from real estate or dividends from shares, is taxable.
  4. Family Trusts: Inheritance involving family trusts may have unique tax implications, warranting advice from a tax professional.
  5. Foreign Assets or Beneficiaries: Tax implications could arise if the estate includes foreign assets or beneficiaries living abroad.

Unevenly distributed inheritance doesn’t change the tax obligations based on the nature of the inherited assets and the beneficiary’s actions. Professional tax advice is encouraged to understand these potential tax implications.

Unequal Inheritance Disputes

Yes, an unequal inheritance can be contested in Australia. This is typically done through a family provision claim.

A family provision claim is a legal process allowing certain eligible people (like a spouse, child, or dependent) to challenge a will if they believe they have not received adequate provision for proper maintenance and support.

Here’s an overview of the process:

  • Eligibility: The person contesting the will, known as the applicant, must be eligible according to the specific rules in the legislation of the relevant Australian state or territory. This typically includes spouses, children, and dependents, but the precise categories of eligible people can vary.
  • Time Limit: There are strict time limits for contesting a will. For instance, a family provision claim must be made within 9 months of death in Queensland. In Victoria, the time limit is six months from the date probate, or letters of administration are granted. These time limits may vary by state, so acting promptly and seeking legal advice is crucial.
  • Adequate Provision: The applicant must demonstrate to the court that the provision (if any) made for them in the will needs to be revised for their proper maintenance and support.
  • Court Consideration: If the court is satisfied that the applicant has not received adequate provision, it will then consider various factors, including the applicant’s financial needs, the nature of their relationship with the deceased, the size of the estate, the claims of other beneficiaries, and the deceased’s wishes as expressed in the will.
  • Court Orders: If the court decides that the will does not make adequate provision for the applicant, it can order that further provision be made out of the estate for the applicant.

Remember that contesting a will can have significant consequences for family relationships, so it’s essential to consider all options and potential outcomes before deciding to proceed with a claim.

In some cases, mediation or a family agreement may be a preferable way of resolving disputes about unequal inheritance.

Successful Resolution of How to Handle Unequal Inheritance

Our client approached us, distressed over her unequal inheritance after her father’s passing. Despite being equally involved in caring for her father, she received less than her brother.

We carefully studied the Succession Act 1981 (QLD and helped our client contest the will, arguing it failed to provide adequate maintenance and support.

After thoroughly analysing her financial circumstances and considering her relationship with the deceased, the court approved an adjustment to provide her with a fairer share.

This case demonstrated our commitment to ensuring justice and fairness in complex inheritance situations.

Need help on how to handle unequal inheritance? 

At Walker Pender, we’re experts in managing inheritance disputes and ensuring your rights are respected. Allow us to guide you through this challenging process with clarity and compassion.

Contact us for your consultation today, and let’s achieve fairness together.

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