The numbers don’t lie – the rise and rise of inheritance claims

The numbers of inheritance disputes and challenges to Wills and estates that end up in court are well and truly on the march, and the numbers continue to grow rapidly year on year.

But why? It’s certainly not by mere chance.

It’s a combination of our increasing wealth, coupled with increasing financial inequity between generations and between siblings and other family members, complex family structures including second marriages, stepchildren and blended families, complex asset pools including superannuation and trusts, lack of considered estate planning and communication between family members, increasing loss of mental capacity in the elderly who are living longer and longer, and a growing awareness of inheritance law thanks to celebrity and wealth family cases making the front pages. Not to mention the ever-present allure of TV shows like the worldwide smash Succession out of the US, and in the UK the hit series Inheritance Wars – which, unsurprisingly, is a BBC documentary about families litigating over Wills.

And it’s not just the number of challenges that are on the rise, it’s also the increased vigour in the challenges. These claims are across the spectrum of estates ranging from the very small, where an additional small sum from an estate can make a big difference to a person, to the other extreme, where there are vast sums up for grabs in the estates of the ultra-wealthy.

Interestingly, there is something of a newer class of challenger appearing too. These are adult children who appear to be doing all right, who have decent jobs and houses, but who due to current financial conditions just cannot get ahead, carrying hugely burdensome mortgages or paying extortionate sums in rent and who have nothing to show at the end of the day due to the rising costs of living.

These are real potential challengers to estates who perhaps were not thought of as challengers in years past, and this means real focus needs to be had in modern estate planning where once it might have been easy to dismiss the seemingly more successful child in favour of the ‘black sheep’.

The following are a few interesting and key statistics that might keep you awake at night:

$4.3 trillion is the size of the prize.

We’re at the start of the largest wealth transfer in Australia’s history – in human history. $4.3 trillion in Australian assets must change hands between now and 2050, when the last of the baby boomers shuffle off this mortal coil. This wealth is largely in the family home, in privately owned businesses, family trusts and superannuation, and (unless it’s already spent before death, which to be fair is a pretty legitimate strategy to avoid family disputes after you go) it must come down the line. The question then is who does it come down to? And how?

49% of today’s national wealth is held by the baby boomer generation alone.

Those who are born 1946-1964 only make up 21% of the population. Compare this to the Gen Y population (born early 1980s to late 1990s) who own just 5% of national wealth but make up 15% of the population. The baby boomers are, financially speaking, the most successful generation in the history of humankind. This is not hyperbole. It is surmised that there will never be another generation who manage to acquire such wealth, and the current wealth transfer is not just once in a generation, but perhaps only once in human history.

The war is within– 80% of claims come from immediate family.

Each year the number of Wills challenged or contested leaps ahead of the last, with the majority being contested under family provision legislation. In these contests adult children are the most common claimants in Will contests. Recent research reveals that more than 80% of claims against Wills are brought by immediate family members (not, as many seem to believe, from secret lovers and illegitimate children like a Charles Dickens novel). More than 60% of claims are brought by adult children of the deceased and more than 20% from partners or ex-partners.

74% of estate challenges succeed.

When a challenge does arise, research reveals that nationally there is a high rate of success, with 74% of cases involving a change of distribution from what was outlined in the original Will. Claims by partners and ex-partners were most successful with 83%, followed by children at 76%, extended family at 73% and others at 64%. (Extended family and others also include other categories of claimants in NSW and Victoria not allowable in Western Australia – itself a point of caution that the laws vary from State to State and there are some subtle but important differences across the country).

The size of the estate matters.

Estates worth less than $600,000 have around a 60% chance of success in a challenge. That is, only 60% of challenges to an estate worth less than this succeed. But once you get to an estate worth between $1 million and $3 million, the odds ratchet up to around 88%. And once the estate is over $3 million, the rate of success hits the 100% mark. To be blunt, any challenge to an estate worth more than $3 million is going to succeed to some degree. Alarming figures, to be sure, but figures that offer an enormous point to leverage in good estate planning. The good news is that these disputes can be foreseen and planned for.

Australia is in the minority and the clock may be ticking.

Inheritance and estate taxes were abolished in Australia at both State and Federal level by 1980, but it’s not to say they might not be back. We are one of the very few western countries without death duties, and the threat of them coming back in seems to rise each year as the national debt rises. Some economists think an increase in GST would be preferable, and some say an increased resources tax instead. But as long as there is $4 trillion changing hands, it may pose a serious target for tax reform.

40% of Australian adults die without a Will.

This is a pretty sobering statistic. When you die without a Will you are called intestate. Being intestate is in just about every case a disaster. Even a poorly made Will is usually better than being intestate. Even one of those horrendous DIY Will kits found on the line, something derived from ChatGPT or a dusty template with tragic font choices found at the post office is better than being intestate. Frankly, even scrawling a note on a cocktail napkin and signing it is likely better than being intestate. Don’t die without a valid Will. Your family will never forgive you if you do.