Can a former spouse make a claim on my estate?

A recent Supreme Court decision (Lodin v Lodin; Estate of Dr Mohammad Masoud Lodin [2017] NSWSC 10) has highlighted the rights that former spouses may have to make a claim on a deceased’s estate – particularly if the estate is substantial and the Court finds that the deceased had a moral obligation to provide for their former spouse and either did not make provision in their Will, or died without having a Will in place.

Background to the matter

The plaintiff (Mrs Lodin) and the deceased (Dr Lodin) started their relationship in 1984, after the plaintiff attended the deceased’s Bangor surgery as a patient.  Their daughter was born in 1986 and they began living together in 1988, until Dr Lodin moved out in 1991.  A financial settlement was finalised by the Family Court in 1992, which the plaintiff unsuccessfully appealed against.

Over the course of the following 23 years until the deceased’s death, the plaintiff’s relationship with the deceased was one of “relentless hostility” (as described by the Court), with the plaintiff making various threats to the deceased (such as reporting him to the NSW Health Department Complaints Unit for commencing a relationship with his patient - which resulted in the deceased being reprimanded for unsatisfactory professional conduct).

In the meantime, the plaintiff continued to care for their daughter, with the deceased paying child support to the plaintiff.  For the most part, the deceased had limited contact with his daughter.

Following the financial settlement, the plaintiff’s financial assets were scarce and badly managed – whilst the deceased’s financial position prospered.

In 2007, the plaintiff asked the deceased to pay her spousal maintenance, which he did not agree to.  In 2008-2009, she asked the deceased to pay for their daughter’s university fees – otherwise she “would make what was left” of his “wretched life not worth living”.

In 2014 the deceased passed away intestate – that is, he did not have a Will in place.  At the time of the death, the plaintiff was a diabetic, had chronic pain from spinal injuries suffered the numerous car accidents, and had various other health problems.  Her financial resources were limited, relying on a disability support pension as her main source of income.  The plaintiff was also estranged from her daughter.

The law for intestate estates

Because the deceased died intestate (without a Will), the distribution of his estate was determined according to the rules set out in section 127 of the Succession Act 2006 (NSW).  That is, his daughter was to receive his entire estate.

The family provision claim

Applications for provision out of the estate of a deceased person essentially involves a 2 stage approach (Singer v Berghouse (No 2)in which the Court needs to consider:

1.       Whether the applicant has been left with inadequate provision for their property maintenance, education and advancement in life.  This requires an assessment of a number of things:

• The applicant’s financial position
• The size and nature of the deceased’s estate
• The totality of the relationship between the applicant and the deceased
• The relationship between the deceased and other persons who may have legitimate claims on the Estate.

2.       If the Court considers that the applicant has been left with adequate provision, what provision ought to be made out of the estate for the applicant.

Overriding these considerations is the Court’s reluctance to “interfere with the dispositions in the will except to the extent necessary to make adequate provision” for the applicant’s proper maintenance, education and advancement in life (Re Fulop Deceased (1987) 8 NSWLR 679).

As noted by Young J in Stewart v McDougall (1987 NSW Supreme Court, unreported):

"[The Family Provision Act] recognises that Australians have freedom to leave their property by their will as they wish with one exception.  The exception is that a person must fulfil any moral duty to make proper and adequate provision for those whom the community would expect such provision to be made before they can leave money as they wish.  Thus, in these cases, one does not ask if the will is fair, one does not ask if the testatrix divided her property equal, one does not as a judge ask how would I have made a will had I been the testrix.  What must be asked is did the testatrix fail in her moral duty to those who have a claim on her.”

The result

The Court awarded an amount of $750,000 to be paid to the plaintiff from the Estate, noting that over the course of their relationship, the plaintiff indirectly contributed to the deceased’s estate.  Also, they placed weight on the fact that:

• the estate was substantial,
• the plaintiff is plainly in circumstances of need; and
• the daughter did not object to her mother’s application.

The Court determined that making a proper provision would enable the plaintiff to acquire a reasonably appropriate home, have living expenses for the expected duration of her life, and have a small monetary fund for contingencies.

Justice Brereton commented:

“[T]here is something unbecoming about an arrangement under which the plaintiff is left in circumstances of considerable need, reliant on a social security pension, while the daughter whom she raised inherits in excess of $5 million.”

But what about the financial settlement back in 1992?

It would be expected that the purpose of a financial settlement as part of divorce proceedings is to enable each party to “embark on a new life afresh, untrammelled by further obligations to each other”.  However, this only applies if there has been an approved release of rights to apply for a family provision order (section 95).

As Justice Brereton noted:

“Another feature of the case is that the plaintiff has, since the matrimonial settlement, made an ongoing indirect contribution to the deceased’s estate, within Succession Act section 60(2) through her care responsibility for Rebecca … [The plaintiff’s] indirect post-separation contribution to the deceased’s estate warrants recognition beyond that which it was afforded in the matrimonial settlement.”

In summary

Essentially, the plaintiff’s successful claim was based on a combination of the unique aspects of her case:

• the unusual and enduring impact of the relationship and marriage on her;
• her care responsibility for the defendant for 15 years after the matrimonial property settlement and associated indirect contribution to the deceased’s estate;
• the respective post-divorce deterioration in her circumstances and great improvement in those of the deceased;
• the relative paucity of the matrimonial estate at the time of the property settlement compared to the amplitude of resources now available;
• her current circumstances of need which are in part attributable to her relationship and marriage with the deceased;
• the only other claim on the deceased’s estate is that of the defendant, for whom ample will remain after making proper provision for her mother.

How can someone have a moral duty towards their former spouse?

In the 1986 case of O’Shaughnessy v Mantle (1986) 7 NSWLR 142, Young J identified four classes of case which “would clearly be ones where there would be factors warranting the Court considering the application”:

1. where there has been a divorce but a spouse has died before financial matters have been resolved by the Family Court;
2. where the husband and wife have not finally settled all their property dealings at the time of the divorce;
3. where maintenance was being paid to the ex-spouse as at the date of the deceased’s death and the orders for maintenance were inadequate to provide for the ex-spouse after death of the paying spouse; and
4. where despite the divorce there was some dependency on the deceased as at the date of death (e.g. for medical treatment expenses).

He then referred to a 5^th class – where the moral obligations arising out of marriage have not been fully discharged by the matrimonial financial settlement (e.g. because the available resources at the time of the settlement were then insufficient to do so).

Of course, the above list is not meant to be exhaustive.  Considering that the O’Shaughnessy v Mantle list was formulated prior to the introduction of former spouses as “eligible persons” under the family provision legislation, there is an over-riding public policy consideration of moral duty towards former spouses.

As noted by the Court of Appeal in Dijkhuijs v Barclay (1988) 13 NSWLR 639, there is a predicament between “the public interest of ending once and for all financial relations between the formerly married persons and sentimental factors involving the appellant as an ex-wife of a long marriage finding herself with insufficient financial resources”.

Could the situation have been avoided?

• It appears that the plaintiff may not have agreed to give up her rights as part of the financial settlement back in 1992.  Any financial settlement as part of divorce proceedings should contain an acknowledgement by both parties to the effect that the financial settlement is in full and final settlement of all and any claims that each other might have against each other’s estate (see also section 81 of the Family Law Act 1975 (Cth).
• Also, if the deceased had left a Will, it could have specifically given reasons as to why there was no gift for his former spouse – particularly considering their failed relationship and the financial settlement back in 1992, no doubt on the understanding that no further claim would be made on each other’s estate.