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  • Writer's pictureMelanie Palmer

Understanding Notional Estate in NSW: A Crucial Aspect of Wills and EstatesIntroduction

In the intricate world of wills and estates, the concept of notional estate plays a pivotal role, especially for individuals in New South Wales (NSW), Australia. Notional estate is a term that encompasses assets and property that may not be directly included in a person's estate but are considered when determining the distribution of assets according to the deceased's wishes. In this blog post, we will delve into the intricacies of notional estate in NSW and its significance in the context of wills and estates.

An elderly couple reviewing a document with their lawyer
When estate planning you should consider notional estate issues

Defining Notional Estate

Notional estate refers to the broadened scope of a deceased person's assets that are considered for distribution among beneficiaries, even if these assets do not fall directly within the traditional definition of the deceased's estate. This concept was introduced to prevent individuals from evading their responsibilities by transferring assets outside of their estate before passing away.

Assets that fall under the category of notional estate typically include:

  1. Gifts made within three years of the deceased's death: Any significant gifts made by the deceased within three years of their passing may be considered part of the notional estate. This prevents individuals from depleting their estate by gifting assets shortly before their death.

  2. Assets held in joint tenancy: While jointly-owned assets may generally pass directly to the surviving joint tenant, notional estate rules apply when the deceased contributed a substantial portion of the asset or when the joint tenancy was created close to the time of death.

  3. Assets held in superannuation funds: In certain circumstances, the notional estate may include superannuation assets, particularly if the deceased had significant control over the distribution of these funds or if they made a nomination within three years of their death.

  4. Assets held in trusts: Notional estate rules may apply to assets held in trusts where the deceased had significant control or influence, allowing for a more comprehensive distribution of assets.

Significance in the Context of Wills and Estates

Understanding notional estate is crucial for both individuals planning their estates and beneficiaries involved in the distribution process. Here are some key reasons why notional estate is significant in the context of wills and estates:

  1. Preventing Asset Avoidance: Notional estate rules are designed to prevent individuals from deliberately transferring assets out of their estate to avoid certain claims or obligations.

  2. Ensuring Fair Distribution: By considering a broader range of assets, notional estate rules aim to ensure a fair distribution among beneficiaries, preventing any unjust enrichment or disadvantage.

  3. Addressing Recent Transactions: The inclusion of gifts made within three years of the deceased's death ensures that recent transactions are scrutinized, preventing individuals from disposing of assets shortly before passing away.

In the realm of wills and estates in NSW, notional estate is a critical concept that extends beyond the traditional understanding of a deceased person's assets. By encompassing gifts, joint tenancies, superannuation funds, and assets held in trusts, notional estate rules aim to create a more comprehensive and fair distribution of assets. Individuals planning their estates should be aware of the implications of notional estate, and beneficiaries should understand its role in ensuring an equitable distribution of assets in accordance with the deceased's wishes.


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