Informal agreements regarding the administration of a deceased’s estate can lead to a residuary beneficiary inadvertently relinquishing their estate entitlements.
Consider the case of Ellen McKean who died in April 1992. By an unusual turn of events, issues concerning her estate came before the Supreme Court of Queensland some 30 years later, in November 2023.
By her last will made in November 1981, Ellen had gifted $5,000 to her brother; $40,000 to her only son, Peter; and the residue of her estate in equal shares to her grandchildren.
In the years following Ellen’s death, all grandchildren agreed with Peter that all estate assets – which consisted of properties at Prosperpine and Dingo Beach – should be transferred from the executors to Peter.
Peter then treated – as from 1995 – all of the assets owned by the estate as his own. He died in November 2020.
It appears that Peter’s will gifted his entire estate – including the assets of Ellen’s estate – to his surviving wife, Trudy.
Recognising that such bequest might defeat her rights to receive her share of Ellen’s estate, Julia Shaw – one of Ellen’s grandchildren – filed a lawsuit for a declaration that she was still entitled to a share of the residue of her grandmother’s estate.
The proceedings – to which Ellen’s estate was the respondent – turned on whether Julia had ‘disclaimed’ her interests therein.
Although uncommon in practice, a beneficiary has the right to disclaim their interest, ie they can refuse to accept a gift given to them by a will.
It was argued by Trudy – Peter’s widow, who also was acting on behalf of Ellen’s estate – that by agreeing to the transfer of estate assets to her father, Julia had disclaimed her entitlements in Ellen’s will.
This argument was supported by Peter and Trudy’s other children, being Julia’s siblings and the other residuary beneficiaries named in Ellen’s will.
On the other hand, Julia contended that the agreements regarding the transfer of estate assets to Peter could not be construed as a disclaimer of her entitlements.
Justice Catherine Muir observed there could be no disclaimer absent an unequivocal rejection of the gift in the will.
In her view, by agreeing to allow estate assets to be transferred to Peter, Julia had not rejected the gift.
On the contrary – Justice Muir noted – Julia had given directions for dealing with her gift in that she had indicated she intended to transfer her inheritance to Peter subject to certain conditions being met.
Interestingly however, the judge did not make any final conclusions or orders regarding Julia’s ownership of any assets of Ellen’s estate.
That was because all parties to the application requested Justice Muir not to determine those additional factors that might – of themselves – have defeated Julia’s claims.
These included whether Julia’s claim was time barred and whether the transfer of her interest in the assets of her grandmother’s estate to Peter in 1995 vested indefeasible title in him so as to prevent Julia claiming an interest by that means.
Those issues will come before the court on another occasion unless the parties agree on a resolution.
The case demonstrates that arrangements between family members need to be properly documented to avoid unintended consequences and expensive legal disputes further down the line.