How Does Notional Estate Work in NSW Family Provision Claims?

Why Notional Estate Exists and Where It Comes From

The notional estate regime sits in Part 3.3 of the Succession Act 2006 (NSW), at sections 73 to 90. The rules exist so people cannot defeat a family provision claim by gifting, transferring, or restructuring assets out of their estate before death.

In every other Australian state, assets the deceased gave away or moved into joint names are usually beyond the reach of a family provision claim. In NSW, those assets can still be drawn back into the estate by court order.

This makes NSW the most claimant-friendly jurisdiction in the country for family provision matters, and it is one of the main reasons why anyone contesting a will in NSW needs to understand the notional estate rules early.

More: What is a Family Provision Claim in NSW?

What Counts as a “Relevant Property Transaction”

The starting point is the concept of a relevant property transaction. Under section 75 of the Succession Act 2006 (NSW), this is any act or omission by the deceased that results in property being held by another person or in a trust, where the deceased did not receive full valuable consideration in return. The most common forms include:

• Outright gifts of property. Where the deceased transferred real estate, money, or business interests to a family member or friend for nothing, or for far less than market value.
• Joint tenancy arrangements. The property the deceased owned as joint tenants automatically passes to the surviving owner on death by survivorship. That transfer is treated as a relevant property transaction.
• Superannuation death benefit nominations. Where the deceased directed superannuation to a beneficiary outside the estate, or failed to nominate the legal personal representative, the resulting payment can be caught.
• Life insurance proceeds are paid outside the estate. Where life insurance is paid directly to a nominated beneficiary rather than the estate, the proceeds can be designated as a notional estate.
• Self-managed superannuation fund distributions. Trustee resolutions paying death benefits to a dependant outside the estate can also be a relevant property transaction.
• Omissions to act. Failure to sever a joint tenancy, update a will, or revoke a binding death nomination can each count.

The transaction does not have to be deliberately aimed at defeating a claim. Ordinary estate planning often triggers these rules without the deceased ever intending it.

The Three Time Windows for Designating Property

Section 80 of the Succession Act 2006 (NSW) sets out three time windows during which a relevant property transaction can be the subject of a notional estate order. Each window has different requirements.

Transactions That Take Effect on Death

Where the transaction takes effect on the deceased’s death, there is no time limit. Joint tenancies, life insurance payouts, and superannuation death benefits all sit here. The fact that the transaction’s effect coincides with death is enough.

Transactions Within One Year Before Death

A transaction in the year before death can be designated as a notional estate where the deceased had, at the time, a moral obligation to make adequate provision for the applicant that was substantially greater than any obligation owed to the transferee. Intent to defeat the claim does not need to be proven for this window.

Transactions Within Three Years Before Death

A transaction in the three years before death can be designated where the deceased entered into it with the intention, wholly or partly, of denying or limiting provision to an eligible person. Here, the court looks at purpose. Statements made by the deceased, the family situation at the time, and the timing of legal or financial advice all matter.

More: How to Make a Family Provision Claim in NSW

Common Examples of Notional Estate in Practice

The same fact patterns come up repeatedly in NSW notional estate matters. If any of these apply to an estate you are involved with, a notional estate may be in play:

• A parent transfers the family home into joint names with one child. On death, the home passes outside the estate to that child. Other children left out of the will can ask the Supreme Court to designate the parent’s share as a notional estate.
• Superannuation is paid to a second spouse under a binding nomination. Adult children from a first marriage who were left out of the will can apply to designate part or all of the superannuation death benefit as a notional estate.
• A business is sold to a child for nominal consideration. If the transfer occurs within three years of death and was intended to keep the business away from other beneficiaries, the true value can be clawed back.
• A life insurance payout goes to a nominated partner. Where the estate is otherwise small, those proceeds can be designated as a notional estate to satisfy a claim from a child or former spouse.
• Assets are distributed quickly after probate. Even after distribution, section 79 allows the court to make a notional estate order over property already in the hands of beneficiaries. Speed of distribution offers no protection.

Tracing these transactions is rarely straightforward, and is one of the reasons working with an experienced wills and estates practice matters from the outset.

When the Court Will Actually Make a Notional Estate Order

A notional estate order is never automatic. Under section 78 of the Succession Act 2006 (NSW), the court can only make one if it is also going to make a family provision order or a costs order in the same proceedings.

The Family Provision Order Comes First

The court must first decide that the applicant is eligible, that adequate provision was not made for them, and that further provision should be ordered. Only then does the court turn to whether a notional estate is needed to give effect to that order.

The Actual Estate Must Be Insufficient

A notional estate order cannot be made unless the deceased’s actual estate is too small to fund the family provision order, or there is some other reason why drawing on notional estate is just.

The Court Weighs Competing Interests

A notional estate order takes property from someone who currently holds it: the transferee, joint tenant, or superannuation beneficiary. The court must be satisfied that this is justified, given all the surrounding circumstances and the strength of the applicant’s claim.

Limits and Protections Under Sections 87 and 88

Sections 87 and 88 build in important protections for people who hold property at risk of becoming a notional estate. The court is required to consider:

• Avoiding undue hardship. Where the transferee is themselves financially vulnerable or has changed their position in reliance on receiving the property, the court will weigh that carefully under section 87.
• The nature and circumstances of the transaction. Was it an arms-length sale or a sham transfer? Did the transferee know what was happening? These facts go directly to the court’s discretion.
• Sufficiency of the actual estate. Section 88 requires the estate to be insufficient before the notional estate can be reached. If the actual estate alone can fund the order, the notional estate is unavailable.
• The size and nature of the property. The court may designate only part of an asset, or limit the order to a specified amount rather than the full value.

These protections mean notional estate orders are powerful but discretionary, and never made lightly.

Speak to a Notional Estate Specialist

If you believe a deceased estate has been depleted before death, or you hold property that may be at risk of a notional estate order, call Empower Wills and Estate Lawyers on 1300 414 844. We act for both claimants and defenders in family provision and notional estate matters under the Succession Act 2006 (NSW). We offer flexible fee structures including sliding fee scales, payment plans, pensioner discounts, and no-win, no-fee agreements in eligible cases. Clients remain liable for disbursements and barrister’s fees regardless of outcome.

Frequently Asked Questions

Is the notional estate available outside NSW?

No. Notional estate is a feature of the Succession Act 2006 (NSW) only. No other Australian state has equivalent claw-back provisions. Family provision claims in Victoria, Queensland, and elsewhere are limited to the assets in the estate at death.

Can superannuation be designated as a notional estate?

Yes. Superannuation death benefits paid outside the estate, including under binding death nominations, can be designated as notional estate where they arose from a relevant property transaction. Self-managed superannuation fund distributions are also caught.

How far back can the court look for relevant property transactions?

The court can look back three years before death for transactions entered into with the intent to limit provision, and one year for transactions where the deceased had a moral obligation. Transactions taking effect on death itself have no time limit.

Can joint tenancy property be clawed back?

Yes. Property held as joint tenants passes to the surviving owner on death by survivorship, and that transfer is treated as a relevant property transaction under the Succession Act 2006 (NSW). The deceased’s share can be designated as a notional estate without any time limit.

Does a notional estate order affect property after probate has been granted?

Yes. Section 79 allows the court to designate property as a notional estate even after the estate has been distributed. Beneficiaries who have already received property can be ordered to return some or all of it.

Who decides whether to make a notional estate order?

The Supreme Court of NSW, within its Probate and Family Provision List. Notional estate orders are made under sections 78 to 82 of the Succession Act 2006 (NSW), after, or as part of, a family provision order being made.