Lessons from Hallam v Tancred: Estate Planning and the Cost of Informality

Why Estate Planning Demands Legal Precision

When planning your estate, good intentions aren’t enough. In fact, as seen in the recent Federal Court decision in Hallam v Tancred [2024] FCA 837, informal agreements, unwritten understandings, and trust between close parties can lead to costly and prolonged legal disputes. While the case itself focused on the question of employment versus partnership in a small business context, the broader legal lessons apply directly to estate planning—especially when it comes to managing trusts, defining roles, and avoiding ambiguity.

This case serves as a powerful reminder of why engaging an experienced estate lawyer is essential when creating documents that control the future of your wealth and your family's well-being. From trustee powers to business succession, the precision of your estate documents can mean the difference between certainty and chaos.

The Facts: An Oral Agreement Gone Sour

In 2016, Mr Matthew Tancred entered into an oral business arrangement with Mr Stuart Hallam. The two had previously discussed Tancred buying a half share in Hallam’s Poolwerx franchise business for $50,000, with the understanding that he could begin working immediately and pay later.

For nearly two years, Tancred worked in the business, and his partner, Ms. Nagel, also contributed. Both parties exchanged emails referring to their profit "drawings," and neither formalised the arrangement in writing. Things took a turn when the relationship broke down in 2017. Tancred and Nagel then claimed they had in fact been employees and launched proceedings for unpaid wages, entitlements, and breaches of the Fair Work Act 2009 (Cth).

The Legal Issue: What Was the Relationship?

At trial, the Federal Circuit Court found that Tancred and Nagel were employees and awarded them over $180,000 in compensation and interest. However, on appeal, the Federal Court disagreed. It held that the evidence—including the use of terms like “drawings,” the lack of PAYG deductions, and the mutual references to business ownership—indicated a partnership arrangement, not employment. The appeal was allowed, and the initial orders were overturned.

Estate Planning Lessons: The Dangers of Informality

While the Hallam v Tancred case arose in a business context, the key issues it exposes—informality, lack of documentation, and unclear roles—are central to estate planning as well. Here are the core lessons for clients preparing their estate plans:

1. Always Put Agreements in Writing

At the heart of the dispute in Hallam v Tancred was a failure to document what had been agreed. Whether it’s a business partnership, a testamentary trust, or a gift to a family member, if your intentions are not formalised in writing, courts will be left to infer them later—often with conflicting interpretations.

Estate planning tip: If you're appointing a trustee, granting powers of appointment, establishing conditions for distribution, or entering into any agreement involving family or friends, those arrangements must be set out in a clear, signed legal document.

2. Trustee Powers Must Be Clear and Express

In this case, Hallam acted through entities including a discretionary trust. However, the lack of clarity around ownership and entitlement created a legal minefield. Who was entitled to what? Was there a trust in favour of Tancred? Was he owed a duty of loyalty?

These same questions arise regularly in estate litigation when trustees are not given clear powers or when trust structures are misunderstood.

Estate planning tip: Clearly define the powers and obligations of trustees in your estate plan. This includes the power to distribute income or capital, discretion limits, rights to remuneration, and succession of control. An estate lawyer can ensure that your trust deed avoids ambiguity and reflects your wishes.

3. Be Wary of 'Handshake 'Deals'—Especially With Family or Friends

Tancred and Hallam’s arrangement started with goodwill and shared intent. But without legal structure, the relationship deteriorated. Many estate disputes involve family members who relied on verbal promises or assumed they would inherit property or be “looked after” based on years of helping a parent or relative.

Estate planning tip: Relying on promises or informal agreements can lead to family provision claims, disputes over trust distributions, and litigation over ownership of assets. A properly drafted estate plan will reduce the risk of a claim by making your intentions clear and legally binding.

4. Define the Nature of Relationships: Beneficiary? Employee? Partner?

In Hallam v Tancred, the legal consequences hinged on the correct classification of the parties: were they employees or partners? Courts considered labels used in emails, financial treatment of payments, and surrounding conduct to determine the true nature of the relationship.

Estate planning tip: When drafting your Will or trust, be explicit about the nature of each person's role. Are they a beneficiary, a trustee, an executor, a guardian, or a business successor? Mixing roles or failing to define them can lead to disputes over duties, entitlements, and control.

5. Time Doesn’t Heal—It Complicates

This case spanned nearly seven years from the end of the relationship to the final appeal. The longer a matter drags on, the more legal costs accumulate, memories fade, and relationships break down further.

Estate planning tip: The best time to clarify your wishes is now. Don’t delay formalising plans with the hope that things will “sort themselves out.” A well-structured estate plan prepared with legal advice provides clarity, reduces future costs, and avoids uncertainty for your loved ones.

6. Language Matters

The federal court gave considerable weight to the use of words like “drawings” and “owner” in emails between Tancred and Hallam. Despite Tancred’s later claim to be an employee, his own language reflected business ownership—and that was fatal to his claim.

Estate planning tip: The words you use in your estate documents—and in related communications—must align with your legal intentions. Casual language or inconsistent terminology in letters, emails, or side documents can undermine the validity or interpretation of your estate plan.

7. A Trust Is Not a Simple Substitute for a Will

Hallam operated the business through a discretionary trust—but without properly documented beneficiary entitlements, Tancred had no standing. Many people assume that “leaving it to the trust” or “letting the family sort it out” is a simpler option. It's not.

Estate planning tip: Trust structures can be very effective, but only when they are properly documented, managed, and understood. An estate lawyer can help you determine whether a testamentary trust, discretionary trust, or other structure is appropriate for your estate and how it should be controlled after your death.

Conclusion: Estate Planning Requires More Than Good Intentions

Hallam v Tancred is a stark reminder of what can go wrong when legally significant relationships are left undefined or undocumented. While the case may seem remote from traditional estate planning, its lessons are highly relevant: unclear arrangements, inconsistent language, and failure to document intentions will almost certainly lead to disputes.

If you're planning your estate—whether it involves real property, trusts, business interests, or simply ensuring that your family is looked after—your best investment is working with a qualified estate lawyer. They will ensure your documents are not just valid but strategic, protecting your assets, your intentions, and your legacy.