Chapter 17 dfmo anti avoidance present position and

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Chapter 17 DFMO: Anti-avoidance Present position and recommendations ___________________________________________________ Present position 17.1 The whole object of the DFMO is to ensure that certain individuals are able to secure reasonable provision for maintenance from an estate, in the event of no such provision having been made by the deceased. However, the DFMO contains no "anti-avoidance" provisions. It is therefore possible at present for a testator who wishes to make fruitless any application under the Ordinance after his death, to do so by the arrangement of his financial affairs during his lifetime. Without anti-avoidance provisions, the whole object of the Ordinance may therefore be frustrated. There may be no "estate" left against which to make an application. Disposition 17.2 In England and Wales, sections 10-13 of the 1975 Act (set out in Annexure 5) give the court certain powers in relation to transactions which are intended to avoid applications for financial provision under the Act. Under the terms of section 10, the court has power, in effect, to set aside "dispositions" made by the deceased up to six years before the deceased's death, if – (1) they were made with the intention of defeating an application under the Act; and (2) full valuable consideration was not given. 17.3 Under section 10(7) of the 1975 Act, a "disposition" includes a payment of money (including a payment of an insurance premium), and any conveyance of other property (or assurance, appointment or gift of property) of any description, whether made by instrument or otherwise. It does not include a provision made in a will, a "nomination" of property, a donatio mortis causa , or an appointment of property made (otherwise than by will) under a special power of appointment. (See the discussion in Chapter 16.) 17.4 The test of whether the deceased "intended" to avoid the legislation is satisfied if, in the court's opinion, the deceased's intention (though not necessarily his sole intention) in making the disposition, was to prevent the making of an order for financial provision or to reduce the likely 77
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amount awarded. The court must be satisfied on the balance of probabilities that this was the case. (See section 12(1) of the 1975 Act.) Contracts to leave property by will 17.5 Under the provisions of section 11 of the 1975 Act, a "contract to leave property by will", if made by the deceased with the intention of defeating an application for financial provision under the Act, and where full valuable consideration had not been given by the beneficiary under the contract, may in effect be set aside by the court. Trustees 17.6 Section 13 of the 1975 Act provides a measure of protection to a person who receives money or property as a trustee for another under a disposition or contract to leave property by will. Recommendation for Hong Kong 17.7 The Commission recommends that anti-avoidance provisions similar in effect to those contained in sections 10-13 of the 1975 Act be introduced in Hong Kong. (See clauses 12 to 15 of the Bill at Annexure 8.) 78
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PART IV - CONSOLIDATION AND REVISION Chapter 18 Consolidation __________________________________________________ Terms of reference 18.1
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