The Executor has the power to compromise a family provision claim, but do proposed settlements or consent orders require the consent of the beneficiaries.

Consent of Beneficaries NOT Required

The parties to the proceedings need to consent to any proposed settlement. Relevantly, section 98 of the Succession Act provides that:

The Court may make a family provision order in terms of a written agreement (a consent order) that—

(a)  is produced to the Court by the affected parties in relation to an application after mediation, or on the advice of a legal practitioner, and

(b)  indicates the parties’ consent to the making of the family provision order in those terms.

As a general rule, however, beneficiaries are NOT parties to family provision proceedings, meaning there is no legal requirement for the beneficiaries to consent to a proposed settlement. But in any event, it is prudent practice for the executor to obtain consent from the beneficiaries.

Beneficiaries may Challenge a Proposed Settlement NOT Consented to

While consent of the beneficiaries is not required, if the beneficiaries do not agree with the proposed consent orders they are entitled to be heard by the court on an application to have the orders made/approved.

The court has a discretion NOT to approve any settlement between the executor and the plaintiff. In determining whether or not to approve consent orders, the court may have regard to (amongst other things):

  • the effect of the proposed orders on the beneficiary;
  • whether any adjustment should be made to how the beneficiaries will bear the burden of the settlement;
  • whether the proposed settlement favours the executors over the beneficiaries.

Some Cases in Point

The deceased was survived by her siblings, nieces and nephews, stepchildren and step-grandchildren. Under her will, specific pecuniary legacies were left for each of her nieces, nephews, stepchildren, step-grandchildren and various charities, and one of her siblings with the residue being left to the remaining siblings. Gabrielle, the deceased’s sister, was named as executor.

Two of the deceased’s stepchildren, Edward and George (by tutors) sought family provision. A settlement was negotiated under which each plaintiff would receive an additional $125,000 of which 50% would come out of the step-grandchildren’s legacies and 50% would come out of the charities legacies. The step-grandchildren challenged the approval of the orders.

Hallen J declined to approve the settlement noting the following:

  • The proposed settlement would substantially deceased the step-grandchildren’s entitlement without their consent.
  • There was a lack of evidence about the enquiries made by the Executor about the competing claims, and whether the Executor had given proper consideration to the interests of the step-grandchildren.
  • The proposed settlement favoured the Executor’s interests as it did not decrease the residuary estate which the Executor was entitled to.

The deceased left his estate to his five daughters in equal shares subject to a life interest in the matrimonial home to his de facto wife and appointed two of his daughters as executors. The de facto wife claimed family provision, and after mediation an offer of compromise was agreed between the executor and the plaintiff that she receive a payment of $175,000.

Two of the non-executor beneficiaries expressed dissatisfaction with the agreement, objecting to the form of settlement and how the burden of the settlement should be borne, and contended that the plaintiff had undisclosed assets. The orders contended for by the beneficiaries were as follows:

The beneficiaries’ opposition was rejected, and the settlement was approved, with the Rein J noting the following:

  • There was no proof in respect of the allegation of undisclosed assets.
  • The order contended for by the beneficiaries, that the plaintiff obtain a life interest in alternative housing, and that interest be distributed to the beneficiaries after her death, would require a continuing contract between the plaintiff and executors.
  • The purposed orders had the benefit of finality and the immediate distribution of the estate to the beneficiaries.
  • The beneficiaries’ contention that the burden of the settlement should not be shared equally was not persuasive and it was appropriate to uphold the testator’s wishes and distribute the residue equally.

DISCLAIMER: The information provided above is published for general informational purposes only and is not intended to be nor should it be relied upon as a substitute for legal or other advice.