Does Bankruptcy have an Effect on Challenging a Will?

When a will is being disputed, the financial situation of all those involved is of significant importance and will be likely to influence the final outcome.

For an individual to be declared bankrupt, they must be incapable of repaying some or all of their debts. This process will typically involve a debtor, who lodges a formal petition and actions a court order that imposes bankruptcy. 

So, What Happens if You Challenge a Will When Bankrupt?

If you believe you were inadequately provided for in a will, or wrongly excluded from mention, you have the option to either challenge or contest the estate. In such cases an eligible person actions a family provision claim to, ultimately, reach a fair outcome and receive what they’re entitled to.

When the Court determines the merit of your claims, they will take numerous factors into account, one of which is your financial position. If you haven’t received adequate provision to support your needs, this will not always guarantee that your claim will be successful.

While the financial needs of someone who has been excluded from a will can sometimes be defined with few complications this is, often, not the case when bankruptcy is involved. The circumstances directly involved in your bankruptcy, current financial situation, future needs and the like will all be considered by the Court.

It is, however, important to note that bankruptcy still acts as a clear indication that an individual is experiencing severe financial hardship. Because of this they may, in fact, have a better chance of being administered a greater portion of the estate in question. 

A Bankrupt Claimant Won’t Always Be Successful

In the following case, the son of the deceased made a claim against their estate. The claimant was a beneficiary, with the testator’s assets being split equally between him and his sister. At the time of the parent’s passing the son was bankrupt and, evidently, experiencing a notable amount of financial difficulty.

Due to his past, present and future financial concerns, the claimant believed he was entitled to a greater share of the estate. Because of this, he contested the will on the grounds that he had not received adequate provision and proper maintenance.

The claimant proposed that his sister, being in a far better financial position, had a lesser need for support and should have received a smaller portion of their parent’s estate.

When assessing the merit of this case the Court took into account that the claimant had been bankrupt for six years but was, actually, no longer experiencing severe financial hardship. At the time of the hearing the claimant had over half of his working life left, was earning an annual salary in excess of $80,000 and had saved more than $200,000 in superannuation.

The Court found that, although the man had been bankrupt for a number of years, he was now in a far more stable position than originally indicated. For this reason, the claimant was denied further provision and remained purely entitled to his initial fifty per cent share of the estate.

What Other Factors Will Be Considered by the Court?

When a bankrupt individual decides to contest or challenge a will, their financial situation is not the only factor that will be taken into account. In fact, the Court will likely assess several other important conditions that also play a significant role in determining what proportion of the estate they are entitled to.

When a will is contested or challenged, the following will be considered:

• The applicant’s relationship with the deceased, both ongoing and at the time of the testator’s passing;
• The applicant’s physical, mental and intellectual state;
• Whether the applicant had received any benefits from the deceased prior to their passing;
• Whether the applicant was maintained by the deceased, either wholly or partly, prior to their passing;
• The financial standing of the estate.

Once all of the above have been assessed, a final decision will be reached that determines your legal entitlement to the estate. This process ensures that all relevant information is taken into account and that the outcome is, in fact, fair.

Find Out More Today

If you’re considering instigating an estate dispute, by either contesting or challenging a will, we can help you determine the merit of your claim. For specialist advice and guidance during each stage of your proceedings, get in touch with Hentys expert estate lawyers today. We have extensive experience resolving will disputes and are committed to getting you the outcome you deserve.