The New South Wales Court of Appeal has overturned a decision of the New South Wales Supreme Court after it deemed that an indexed annuity of $52,000 per annum was inadequate for a widow and instead awarded the widow a legacy of $1.75 million.
The judgement in the matter of Steinmetz v Shannon [2019] NSWCA 114 can be found here.
The facts of the case were as follows:
- the widow (the Appellant in this case) was the second wife of the deceased. The widow and the deceased had been in a relationship for about 28 years;
- the deceased left his widow an indexed annuity of $52,000 for the remainder of her life, to be paid in quarterly instalments. The remainder of the estate was left to the deceased’s two children from his first marriage;
- the Estate was valued at approximately $6.8 million;
- the deceased and his widow were financial independent of each other. Their assets were kept largely separate, they resided in separate homes, though, the deceased would spend his funds on mutual expenses, entrainment and holidays;
- at the time of the appeal, the widow’s assets (including the value of her home) were just over $700,000. She declared her income as just over $70,000 and expenses just under $40,000 per annum;
The Supreme Court Trial Judge dismissed the widow’s application for further provision on the basis that the annuity was adequate provision to the widow’s proper maintenance.
The Trial Judge further mentioned that the annuity would enable the widow to continue living in the same house as she did during her relationship with the deceased, and to maintain the same lifestyle. In concluding that the annuity was adequate, the Trial Judge stated the following:
She will not be in a position to live extravagantly, but she did not do so when married. She will not have the benefits, the security, the holidays, the comforts and the additional financial advantages that she enjoyed during her relationship with the deceased. But as a matter of law, should she be entitled to expect more?”.
The widow appealed to the Court of Appeal. The Court of Appeal held:
- that an indexed annuity of $52,000 for the remainder of the widow’s was not considered to be adequate provision.
- that 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.
- that “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” [emphasis added]
The Court of Appeal allowed the appeal, set aside the orders of the Trial Judge made in the previous year and awarded the widow a legacy of $1.75 million.
The Respondents (the children of the deceased’s first marriage who opposed the application) were ordered to pay the widow’s costs of both the appeal and the proceedings in the first instance.
The “Take away points” from this case
Whilst not a ground-breaking decision, this case serves as an important warning and a reminder to both Willmakers and litigants as to considerations the Court takes into account when reviewing the adequacy of provision for a widow/widower.
The following two points should be taken into consideration:
- viability of an ongoing relationship – the Court of Appeal held that the present value of the $52,000 per annum annuity was $880,000.
In awarding a legacy of $1.75 million to the widow, the Court almost doubled her entitlement but was primarily motivated by ensuring that the widow was not left at the “mercy” of the respondents (the children from the first marriage).
The Court was very much conscious that an ongoing relationship between the widow and the respondents would not be appropriate.
- “moral duty” is preferable to “community standards” – as a measure of proper provision, the Court held that that an emphasis should be placed on what a testator is morally obliged to do as opposed to what the community would expect a testator to do.
- Whether you are considering your Estate Plan, or are a litigant in Court proceedings, it is important to consider the interplay between the parties left behind, in addition to whether provision is adequate to each party. Please contact our Estates & Estate Planning team for more information.
