Archive for the ‘Newsletters’ Category

Bankruptcy and family law proceedings

Dividing property after partners separate is generally stressful, with each party concerned about his or her financial future. The bankruptcy of one party adds a further dimension of complexity to a family law property settlement.

Even partners whose relationship is intact should seek urgent advice if one of them is facing bankruptcy or insolvency issues. In particular, the non-bankrupt party should take immediate action to protect his or her interests in assets.

This article provides an overview of bankruptcy laws, how property is usually divided after a relationship breaks down, and how the processes interact when one of the parties to a property settlement is bankrupt. Bankruptcy and family law are complex areas and the information in this article is general only. Parties should obtain professional advice relevant to their individual circumstances.

What happens when a person becomes bankrupt?

A person is considered bankrupt when he or she is unable to pay his or her debts. Apart from certain protected property, the bankrupt’s assets vest in an appointed trustee in bankruptcy who may sell those assets to satisfy the claims of creditors. Protected assets generally include clothing, certain personal possessions, tools of trade, a motor vehicle to a prescribed value, awards of compensation and superannuation and life policies.

The trustee controls the bankrupt’s financial affairs while the bankrupt is protected from being personally sued by creditors.

How is property divided after a relationship breakdown?

The division of property after a relationship breakdown generally requires a four-step process to:

  • identify the parties’ pool of assets available for distribution;
  • determine the parties’ respective financial and non-financial contributions;
  • consider the parties’ future needs; and
  • determine a split that is, in all the circumstances, just and equitable.

What happens when one of the parties to a property settlement is bankrupt?

When a relationship breaks down and one of the parties is bankrupt, the interplay of the Bankruptcy Act 1966 which regulates individual bankruptcy, and the Family Law Act 1975 which governs the division of property, must be considered.

The Family Law Act enables a person to apply for the alteration of property interests after the breakdown of a relationship, and specifically includes circumstances where property is vested in a trustee for bankruptcy if one of the partners is bankrupt.

This allows the Court to alter the interests of property that would otherwise vest in the trustee, enabling the non-bankrupt partner to claim an interest in vested assets for his or her benefit and / or the benefit of any dependants. The legal title to the property in such cases is irrelevant.

The interests in the family home of a non-bankrupt party may also be protected. The family home is generally not a protected asset and the bankrupt’s interest is available to a trustee to satisfy creditors. However, where legal title to a family home is held solely by a bankrupt, the Court may nevertheless conclude that the home is held jointly thereby protecting the interest of the non-bankrupt party.

A person affected by an order or proposed order such as a creditor, may apply to have it varied or set aside. In some circumstances, a trustee will apply to be joined as a party to the proceedings and to have orders set aside on grounds of fraud, duress or a failure to disclose relevant information. This could result in the recovery of certain assets to satisfy creditors.

The Court must balance the competing rights of the creditors and the non-bankrupt party and make orders that are just and equitable in the circumstances. It may take into account a range of factors including:

  • the non-bankrupt partner’s direct and indirect financial and non-financial contributions to the relationship;
  • the effect of a proposed order upon either party to the relationship;
  • the future needs of the non-bankrupt party including the responsibility for caring for children, employment status and health;
  • the effect any orders will have on creditors of the bankrupt person including whether the debt will be repaid in full.

The need to achieve a just and equitable outcome may result in the non-bankrupt partner and his or her dependants obtaining a share of certain assets that would otherwise be vested in the trustee, to the detriment of the creditors.

Key takeaways

  • The property of a bankrupt individual vests in the trustee in bankruptcy for distribution between creditors.

 

  • The ex-partner of a bankrupt person may pursue a property division despite the bankruptcy.

 

  • Court proceedings for a family law property settlement when one partner is bankrupt will generally be between the non-bankrupt party and the trustee in bankruptcy.

 

  • In such proceedings, the Court may be required to determine:

 

–        applications by the non-bankrupt party to restrain the trustee from dealing with certain property and / or distributing funds amongst creditors;

–        claims that property vested in the trustee and otherwise available to satisfy creditors should be altered for the benefit of the non-bankrupt partner;

–        claims that exempt property or property not vested in the trustee should be made available for distribution to creditors.

If you or your partner are facing insolvency issues, whether or not your relationship has ended, or is likely to end, you should obtain immediate legal advice.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Wage theft is a crime in Queensland

Failure to pay employees their proper entitlements could leave employers exposed to criminal charges (including jail time) under new laws introduced in Queensland.

Criminalisation of ‘wage theft’

The Criminal Code and Other Legislation (Wage Theft) Amendment Act 2020 (Qld) introduces new provisions to the Criminal Code Act 1899 (Qld) expanding the definition of ‘stealing’ to include a failure to pay an employee (or other person on his or her behalf) an amount in relation to the performance of work by the employee.

The Explanatory Notes of the introducing Bill state that the provisions are ‘intended to capture a broad range of payments and entitlements, including:

  • unpaid hours or underpayment of hours;
  • unpaid penalty rates;
  • unreasonable deductions;
  • unpaid superannuation;
  • withholding entitlements;
  • underpayment through intentionally misclassifying a worker including wrong award, wrong classification or by ‘sham contracting’ and the misuse of Australian Business Numbers; and
  • authorised deductions that have not been applied as agreed.’

The penalty for an offence is imprisonment for a maximum of 10 years and, in the case of an employer committing fraud against an employee, a maximum term of 14 years.

The laws target deliberate ‘wage theft’ and are not intended to apply to employers who accidently underpay workers and subsequently rectify their mistake.

Background to the reforms

The Queensland Parliamentary Education, Employment and Small Business Committee’s report, ‘A fair day’s pay for a fair day’s work?’ (November 2018) notes that over 437,000 Queensland workers do not receive their full entitlements – at 5% loss in income per worker, this would equate to $1.22 billion in wages annually.

The report suggests that wage theft not only affects workers and their families but impacts other businesses and the economy overall through the underpayment of superannuation, annual reductions in consumer spending and federal tax revenue.

The reforms target employers who blatantly engage in wage theft, gaining an unfair advantage at the cost of employees and other competitors in the market.

Proposed streamlined processes for recovery of wages

The reforms will also amend the Industrial Relations Act 2016 (Qld) by introducing a simplified process for workers to make wage recovery and fair work claims to the value of $20,000 through the Industrial Magistrates Court.

The system will promote the low-cost and efficient resolution of claims by enabling the registrar to refer parties to conciliation before a matter is heard by a Court. Parties not wishing to participate in conciliation will need to promptly notify the registrar. The purpose of conciliation will be to facilitate agreement between the parties, whether on all matters, or at least narrow the scope of unresolved issues. Once referred, conciliators will be required to commence the conciliation process as soon as practicable.

Employers should review wage systems

Rather than punish employers who have inadvertently made an error or oversight in calculating or paying employee wages, the laws target intentional conduct aimed at deliberately depriving workers of their full entitlements.

Workplace laws are constantly evolving, and employers should conduct regular checks to ensure compliance with relevant awards, industrial instruments, and employment contracts. All employees should be correctly classified and receive their full entitlements. Any underpayments should be flagged and rectified immediately, with processes implemented to foster ongoing checks and audits.

Employers should obtain professional advice if they are uncertain of their obligations.

Employees – recovering unpaid wages

Wage theft may cover a range of circumstances where full employee entitlements have not been met, for example, not being paid the minimum hourly rate of pay for the work carried out, the withholding of leave entitlements or a failure to make compulsory superannuation contributions.

Employees who believe they are not receiving the correct entitlements should raise these concerns with the appropriate person at their workplace. If unable to resolve the issue with the employer, employees can make a complaint to the Fair Work Ombudsman, the Australian Taxation Office, or pursue recovery of their entitlements through the Courts. We recommend obtaining legal advice before pursuing a matter in Court.

This article is intended to provide general information only. You should obtain professional advice before you undertake any course of action.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Ensure the Will is up to date before a loved one loses capacity

The question of mental capacity is an important consideration in will-making and can be a contentious issue. How often do we hear family members arguing over a loved-one’s ‘state-of-mind’ and ‘what Grandad would have wanted’ when sadly, his memory and ability to make reasonable decisions comes into question. This may be due simply to age, deteriorating health or a combination of both.

A person must have mental capacity to make or update a Will – this is one of the key elements to ensure the validity of a Will and limit the possibility of it being challenged on the grounds of testamentary capacity.

One way of reducing conflict and a potential challenge to a Will is to ensure a loved one (particularly if aged or in declining health) is encouraged to regularly review his or her Will and estate plan before mental capacity becomes dubious.

The test of mental capacity

The test of mental capacity was established almost 150 years ago in 1870, in a legal case Goods v Goodfellow. The language used reflects the era, but the key elements remain relevant:

It is essential to the exercise of such a power that a testator shall understand the nature of the act, and its effects; shall understand the extent of property of which he is disposing; shall be able to comprehend and appreciate the claims to which he ought to give effect; and with a view to the latter object, that no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties – that no insane delusion shall influence his will in disposing of his property and bring about a disposal of it which, if the mind had been sound, would not have been made.

Translated to a more contemporary understanding, the Will-maker must:

  • understand the nature and effect of the Will;
  • understand the extent of the property in the Will;
  • understand the claims he / she ought to consider; and
  • be free of illogical beliefs that are not in sync with his / her level of education and surroundings.

What happens if a Will-maker lacks mental capacity?

Lawyers must ensure that a Will-maker’s interests are protected and have an obligation to question a Will-maker’s mental capacity if it is in doubt. The lawyer must be able to obtain instructions directly from the Will-maker and be satisfied that he or she understands the legal implications of the documents being prepared and signed.

Given the many possible perceptions of an ‘unsound mind’ or being free of ‘insane delusions’, this is not always an easy task. A testator, who is intermittently unsound, may still make a valid Will if it can be shown that the Will was made at a time of sanity.

Unfortunately, once the capacity of a Will-maker comes into question, additional steps are required to confirm his or her ability to properly understand the nature of the contemplated document.

At the least, this usually requires obtaining medical and / or psychiatric reports from practitioners which may add expense and cause additional stress and anxiety to the Will-maker and his or her family. The extra time required to obtain these reports and to establish mental capacity is itself an issue, particularly when a Will-maker’s health is declining.

If the Will-maker’s capacity cannot be established, then the Will cannot be made or an existing Will updated.

An outdated Will that clearly does not express the intentions of the deceased can be a major disappointment to the deceased’s family and loved ones.

If a Will is made or updated at a time when mental capacity is in dispute, a contentious challenge and / or a family provision claim may follow, after the testator dies.

What happens if no Will is made?

If no Will is made, then the Will-maker will die intestate and his or her assets will be distributed in accordance with pre-determined formulae set out in legislation in each state and territory.

Essentially, these rules provide for a specific order of distribution to the deceased person’s next of kin – those who receive an inheritance will depend on the individual and family circumstances of the deceased.

The distribution of an intestate estate generally reflects the moral expectations of society, but not always the wishes of the Will-maker. There are numerous reasons why a Will-maker may have wanted to leave out an expectant beneficiary or indeed include non-family members in the distribution of his or her estate. For a variety of reasons, the testator may also have wanted to allocate unequal shares to beneficiaries whom under the legislation would otherwise share equally.

Dying intestate therefore cannot guarantee that the Will-maker’s assets will be distributed as he or she intended.

Points to remember

The problems of intestacy or having an outdated Will can be avoided by ensuring a Will is made whilst a person is in good health and of sound mind. Some points to remember:

  • Mental incapacity can occur progressively or suddenly and can affect the old, the middle-aged and the young. Whilst we can all exercise caution and moderation, nobody is exempt from the fragility of life and an unpredictable future.
  • Determining mental capacity when in doubt is not straight-forward, will exacerbate the will-making procedure and add undue cost and stress to the process.
  • Planning your Will now and making the effort to review it regularly will safeguard your estate from the possibility of unintentional distributions.
  • Encourage your loved ones to review their Will and other estate planning documents when there is a change in personal or financial circumstances and particularly when they are ageing or in deteriorating health.
  • Lead by example and make or review your own Will and estate plan!

Summary

The real intentions of a testator cannot be established once he or she has died or is permanently incapacitated, unless a valid and up-to-date Will exists. Spending time on your estate planning today will avoid the uncertainty, additional costs and stress of trying to get it right when it is too late.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Estate Planning – what is an Estate Plan?

An estate plan involves more than signing a Will and storing it in a ‘safe place’. Estate planning requires a holistic approach in consideration of a person’s present circumstances and foreseeable future.

A plan needs to consider who matters, what you have now, what you may have in years to come, and what your final wishes will be. Your lawyer’s role is to document these wishes to ensure they are legally enforceable and can be carried out when you die.

This article considers what an effective estate plan may entail and explores some of the thought processes involved in preparing an estate plan. The information is for general purposes only and we recommend obtaining legal advice specific to your circumstances when planning your estate.

What is effective estate planning?

An ideal estate plan will:

  • Appoint a trusted person or persons to manage your affairs (attorney / guardian) if you are incapacitated; and a legal personal representative (executor / trustee) to administer your estate (and any associated trusts) after you die.
  • Nominate your intended beneficiaries with certainty or provide for a class of beneficiaries to ensure that your assets pass only to those you intend to benefit.
  • Prevent undue stress and expense by minimising uncertainty and potential family provision claims.
  • Provide flexibility in distributing assets in anticipation of the present and future needs of beneficiaries.
  • Maximise the value of your estate through effective tax planning to minimise capital gains, and income tax payable by beneficiaries on their inheritance.
  • If relevant, provide for effective business succession or the winding up of a business.

Steps in estate planning

Your family

Every family is different and there is no one-fit solution for all. You should start with an overview of your family circumstances and a list of all family members whether or not you would like them to benefit from your estate.

Acknowledging where there is conflict between family members and identifying any eligible persons who might claim on your estate will assist in devising strategies to reduce the potential for future claims.

Blended families are common and require special attention as there may be competing interests between past and present partners, biological children and step-children.

Choosing your executor and trustee

The executor and trustee will be your personal legal representative and should be chosen with care. For simple estates, a spouse or child / children (or combination) are usually appropriate choices to oversee the administration and finalisation of the estate.

For more complex estates, with business interests or which will have ongoing trusts, it may be preferable to appoint a professional with expertise in this area.

Similarly, if there is conflict within the family a ‘neutral’ executor may be more appropriate to ensure that the role is carried out with impartiality.

Powers of attorney, guardianship and advance care directives

Each jurisdiction in Australia allows for the appointment of an attorney, guardian and / or decision-maker to manage your financial, legal and / or personal affairs for a defined or ongoing period, and to make health-related decisions if you are incapacitated.

These documents provide for flexibility in choosing the type of functions to be carried out, and the duration for which the authority is given.

These documents form an important part of your overall estate plan by ensuring the ongoing management of your affairs by a trusted person if you are incapable. A lawyer will explain the relevant documents in your circumstances and for your jurisdiction.

Your assets

A detailed list of assets and liabilities will assist in determining the overall value of the estate, how and when assets should be distributed, the appropriate structure of the Will and whether a testamentary trust would be beneficial (see below).

You will need a precise description of the assets, their location, whether they are held individually or jointly and their value.

If you are including specific gifts, such as items of sentimental value, antiques, or artworks, these should be clearly identifiable and described in the Will.

Remember, your assets may change over time and this needs to be factored into your estate plan. A gift of a specific asset of considerable value which is later disposed of may fail and cause an unintentionally unequal distribution amongst beneficiaries.

Using a testamentary trust

In some cases, it will be beneficial for a Will to establish a testamentary discretionary trust. This is a trust that comes into effect after the will-maker dies. Administration of the trust is carried out by a trustee pre-appointed by the will-maker. The trustee determines how and when estate assets are managed and distributed.

If managed properly, the flexibility of a discretionary trust may allow beneficiaries to access the most advantageous taxation treatment with respect to their inheritance and can provide protection for at-risk or vulnerable beneficiaries from claims by creditors or ex-partners.

Even modest estates may benefit from having a testamentary trust, particularly where the will-maker is part of a blended family.

Your superannuation

Death benefits, comprising the superannuation account balance and any life insurance payments, are paid to a ‘dependant’ determined by the fund trustee, or in accordance with a Binding Death Benefit Nomination (BDBN).

Most funds allow members to nominate their intended beneficiaries through a BDBN. This process forms an important part of estate planning – without a valid BDBN, the beneficiaries may be decided by the trustee in accordance with the terms of the trust deed and the relevant legislation. This decision may not reflect what the will-maker intended.

Business succession

If you are carrying on a business whether as a sole trader, partnership or through a company, you will need to think about how you would like these interests dealt with after you die.

If you conduct the business as a sole director through a corporate entity, you will need to consider who will take your place as shareholder and managing director. Alternatively, you may wish for the business to be wound up.

Some partnerships will have buy-sell insurance in place. This is a policy allowing a surviving partner to acquire the deceased partner’s share so the business can continue.

Business succession planning also requires consideration of the intended beneficiaries and whether they have the desire, skill and competence to continue managing the business.

Conclusion

Effective estate planning takes time and careful contemplation. Your estate plan will usually comprise various documents to ensure the effective management and finalisation of your affairs so that your life’s efforts reward those you intend to benefit.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

The top 5 visa application mistakes

To be granted a visa, an applicant must meet the prescribed eligibility criteria for the relevant subclass and submit a valid visa application in accordance with Australia’s immigration laws. An invalid application cannot be considered and will be returned by the Department of Home Affairs to the applicant (or representative), even if that person might otherwise meet the required criteria.

Submitting an invalid visa application can waste thousands in preparation costs, extend wait times by months, and cause great inconvenience as the applicant remains in a state of limbo. An invalid application is particularly detrimental when timing is a critical element in the application process.

While it’s true that some applicants do not meet the criteria required for the grant of a certain visa type, many applications are unsuccessful because of procedural errors rather than actual ineligibility.

Navigating a complex immigration system and being familiar with the Department’s policies and procedures is essential for submitting a valid application. This article looks at some common pitfalls which can lead to costly visa application mistakes. The article is intended to provide general information only. You should obtain professional advice before you undertake any course of action.

Applying for the wrong visa type

Australia’s immigration system provides pathways for temporary and permanent residency. With around 100 visa subclasses available, each prescribing very specific eligibility criteria, making the right choice from the outset is essential to avoid wasting time and money and to increase the prospects of being granted residency.

Applying for the wrong type of visa can also be detrimental to a successful grant down the track. For example, if a person who proposes staying in Australia long term applies for, and is granted a tourist visa, then the visa holder’s real intention (to stay longer) may be seen as a breach of a condition attached to that visa and jeopardise the grant of a further long-term visa.

Assessing the most appropriate pathway based on an applicant’s skills, qualifications, personal circumstances and visa history requires a considered approach, usually with the assistance of an immigration lawyer.

Lack of supporting documents

The Department assesses thousands of visa applications and must be satisfied that an applicant meets the required eligibility for the class of visa sought.

In addition to verifying an applicant’s personal identity through birth certificates, passports, etc, various visa types require proof of other matters such as:

  • Relationship status – documents to prove a genuine de facto relationship exists such as joint bank account statements, and testimonials from friends and family regarding the nature and length of the relationship.
  • Business activities – evidence of company trading history such as financial reports and accounting records, which may need to be audited and verified.
  • Personal assets and resources – complex personal wealth, company and trust structures need to be analysed and presented in a manner consistent with Departmental requirements.
  • Qualifications, trades and skills – credentials gained overseas need to be matched with the relevant Australian standards and validated through skills assessments.
  • Employment records and experience – tax returns, payslips and work references.

Immigration lawyers understand the documentation required to authenticate this information and often draw on experience in other areas such as corporate law and trusts to ensure an application is properly supported.

Mistakes in the application

The correct and most recent visa application form must be completed in accordance with the instructions. Common mistakes include failing to complete separate applications for additional applicants (such as a dependent child over 18 years), application forms not being signed by all applicants, and using a post office box rather than a residential address. These simple mistakes can be avoided by carefully reading and checking forms and instructions.

Inconsistencies

Information provided to the Department is scrutinised for inconsistencies. Details may be checked against a range of sources including previous visa applications, supporting documents, government records and even social media profiles. Information provided to the Department that is contradicted through Facebook posts can be a problem.

It is important to triple check everything before lodging the application, paying particular attention to inconsistent dates which can raise legitimate questions. Transparency is essential and copies of all information submitted should be retained by a visa applicant.

Innocent irregularities can usually be explained, however identifying issues before they are queried at Department level is preferable. Working with an immigration lawyer to understand and address any matters that could raise concern is wise.

Bad timing

Delays in meeting eligibility criteria and obtaining documents within prescribed timelines can impact significantly on the application outcome. Generally, little flexibility is permitted when it comes to non-compliance, even if a deadline is only marginally missed.

The validity of some visa applications can be affected by the applicant’s location at the time the application is made. Attention to timing requirements for submission with respect to whether an applicant must be on-shore or off-shore when an application is lodged is critical.

Processing times for applications vary, and it is important to plan strategically to ensure that eligibility criteria can be met and supporting documents provided as prescribed.

Conclusion

Many visa refusals are based on procedural issues rather than an applicant’s inability to meet the required criteria. In many cases, an application will not even be considered and be returned to the applicant as invalid. In some cases, an invalid visa application may be relodged, and a visa refusal reviewed. Of course, it is preferable to avoid this situation in the first place by submitting a valid and supported visa application.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

The duty of disclosure and family law property proceedings

The division of assets after couples have separated can be finalised by financial agreement, consent orders or proceedings in the Family Court.

The Family Law Act 1975 (Cth) requires parties to make genuine efforts to resolve disputes. Generally, parties must participate in dispute resolution, explore options for settlement and comply, as far as practicable, with the duty of full and frank disclosure.

These ‘pre-action procedures’ must be followed before commencing proceedings in the Family Court, the objectives being:

  • to encourage early disclosure through the exchange of information;
  • to minimise the potential for legal action by reaching an early settlement;
  • to construct a process to resolve a matter quickly and to limit costs; and
  • if proceedings are necessary, to assist in their efficient management by identifying the real issues in dispute.

What is the duty of disclosure?

Broadly, the duty of disclosure requires that the parties exchange information and documents (whether or not these are known to both parties) that are relevant to an issue in the case.

The disclosure obligations exist from the beginning of the matter and continue until the case is resolved. This means that a party must disclose when certain circumstances change or new information or documents come to that person’s attention.

Full financial disclosure is essential to enable a lawyer to properly advise a party on his or her rights and disclosure obligations must be followed even if the parties settle their financial affairs without going to Court.

Disclosure in property matters

The information and types of documents required to be disclosed in property matters will depend on the asset pool and the business or financial interests of the parties.

The Rules set out an exhaustive list of disclosure requirements. Compliance may be met by providing a statement of financial circumstances, producing certain documents and / or answering specific questions.

Generally, the types of disclosure documents required include:

  • all sources of earnings including income from paid employment and business interests, rental income and interest on shares and investments;
  • other financial resources;
  • financial interests whether existing or contingent, in property, including real estate and other assets;
  • details of property disposals (whether by sale, transfer, assignment or gift) made within 12 months before separating;
  • taxation returns and assessments;
  • superannuation details;
  • market valuations for certain assets, particularly if values are not agreed;
  • liabilities and contingent liabilities.

More exhaustive information is required if the parties have interests in a company, trust or partnership. The parties will need to provide balance sheets, profit and loss statements, business activity statements, recent annual returns, deeds and agreements.

Additionally, where there are matters in dispute, such as an assertion by one party of having made significantly greater financial contributions, then evidence to support those claims is required.

A practical approach

The duty of disclosure refers to ‘relevant’ matters and for compliance ‘as far as it is practicable’. Whilst this is not a mechanism for avoiding the disclosure obligations, it does foster a sensible and practical approach.

Disclosure is required so that an understanding of the parties’ asset pool can be ascertained. It need not extend to disclosure of information from third parties unless that person’s financial circumstances are relevant to the issues in dispute.

Matters that are common knowledge between the respective parties do not need exhaustive documentation. For example, a bank balance of say $200 need simply be noted without providing the past three years’ bank statements.

Locating, identifying and collating the necessary disclosure information can be onerous. Your lawyer will explain the extent of your obligations and provide guidance to assist you in meeting your obligations.

Risks of non-disclosure

Lack of disclosure and ongoing disputes regarding the parties’ financial circumstances will exacerbate settlement, add unnecessary legal and other costs, and risk depleting valuable resources.

Importantly, there are significant penalties that may be imposed by the Court for failing to disclose relevant information or attempting to mislead the other party.

A person failing to disclose a relevant document as required or providing a false or misleading document may result in that person:

  • being unable to rely on the document as evidence in proceedings;
  • having his or her matter dismissed or postponed;
  • having the Court attribute a value to an undisclosed asset (which is generally not in that party’s favour);
  • being found guilty of contempt, leading to fines or imprisonment;
  • being ordered to pay legal costs.

Conclusion

The parties to a family law property settlement have an obligation and ongoing requirement to be transparent with respect to their financial affairs.

The duty of disclosure ensures that the Court is fully informed of the parties’ financial position and is relevant whether or not a matter proceeds to Court.

This article is intended to provide general information only. You should obtain professional advice that is relevant to your circumstances before you undertake any course of action.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Varying the terms of a Will after death

In Australia, a person is ‘technically’ free to choose who should benefit from his or her estate. Testamentary freedom is a well-founded principle. This principle however may be subject to community expectations of moral obligations. Consequently, in some circumstances a Court may order that the terms of a Will be varied to satisfy a claim by an eligible person. These claims are commonly known as family provision claims.

Alternatively, there may be a mutual agreement between the beneficiaries of an estate to vary the terms of a Will for any number of reasons.

Variations to a Will can be legally effective by the parties entering a deed of variation or deed of family arrangement.

Varying a Will in the face of a family provision claim

An eligible person may claim against the estate of a deceased person if he or she can demonstrate that the testator failed to give adequate provision for his or her proper maintenance, education and advancement in life. The definition of an eligible person differs between various jurisdictions in Australia, however eligible persons generally include:

  • the spouse or de facto partner of the deceased at the time of his or her death;
  • a former spouse of the deceased person;
  • a child of the deceased person;
  • certain persons who were dependent on the deceased.

When facing such a claim, an executor or administrator of an estate must make a judgment on whether it is likely the claim will succeed. Some claims will be morally justified by persons who may not have been adequately provided for.

Whilst an executor has a duty to uphold the provisions of the Will, he or she also has a duty to preserve estate assets. This duty includes considering the merits of a justifiable claim and making efforts to resolve it rather than defending it in Court.

In this regard, a negotiated settlement is almost always possible and will avoid costly litigation that may deplete estate assets. A further consideration is that often the legal costs of a successful claim must be met from the estate.

Other reasons to vary a Will

An agreement to vary the terms of a Will need not eventuate in the face of adversity. It may be obvious that the testator’s Will does not reflect what the testator would have intended had he or she been aware of the full circumstances of the claimant. For instance, there may have been a significant material change in a family member’s circumstances rendering the terms of the Will inappropriate and the remaining beneficiaries are on board with adjusting the Will’s provisions.

Another reason for varying the Will is to allow a beneficiary to ‘buy-out’ another beneficiary’s share in real estate.

Alternatively, a reluctant beneficiary may not wish to accept an inheritance due to the financial implications of doing so (such as the loss of a pension) or a falling out with the deceased.

The process of varying a Will

A negotiated settlement, whether the result of mediation or otherwise, is documented in a legally enforceable deed of variation or deed of family arrangement. The deed should be signed by all beneficiaries and the executor (or administrator) to evidence the mutual consent of all parties who have an interest in the deceased’s estate.

The deed makes reference to the deceased and the Will and sets out the agreed variation of its terms. The deed should provide for the beneficiaries to indemnify and release the executor and estate from any future claims.

Depending on the circumstances, it may be advisable for each party concerned to obtain independent financial and legal advice. Beneficiaries should ensure they are fully aware of the legal and financial consequences of the proposed variation. Financial implications include stamp duty and taxation issues such as capital gains tax and any effects on Centrelink payments.

Adverse capital gains tax can be avoided if the deed eventuates from a potential family provision claim and the necessary requirements under the income tax law are met. Court proceedings need not have commenced to evidence a potential family provision claim.

Conclusion

The terms of a Will can be varied to settle a family provision claim that is likely to succeed or to reflect an agreement between the beneficiaries of an estate.

Variations may have significant tax and stamp duty consequences and parties should seek appropriate advice.

This article is intended to provide general information only. You should obtain professional advice before you undertake any course of action.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

What happens when your ex-partner squanders your assets

Unfortunately, many separations end in hostile disputes over money. A common situation when trying to resolve property matters is when one partner makes a considerable dent in the family finances by squandering assets or racking up additional debt.

A bitter ex-partner may go on a spending spree, ignorant of the consequences. Alternatively, he or she may have been reckless during the relationship either through risky business ventures, gambling or other addictions.

Whether the wastage has occurred before or after the relationship ends, the potential for a fair split of the assets after separation may seem flawed. Fortunately, the Family Court is empowered to use discretion to achieve a just outcome. These discretionary processes have traditionally included the concept of ‘add-backs’.

This article explains how a family law financial settlement may be dealt with when one party independently deals with property to the detriment of the other.

Dealing with property matters generally

It is first useful to outline the steps a Court takes to determine how property should be divided. The process involves:

  1. identifying the assets, liabilities and financial resources of the parties;
  2. assessing the parties’ respective financial and non-financial contributions;
  3. evaluating the parties’ future needs taking into account their relative earning capacities, state of health and the need of the primary carer of children to provide a suitable home;
  4. in all of the circumstances, making orders that are ‘just and equitable’.

The starting point is usually an equal distribution of assets before consideration of several other factors.

Notional property and add-backs

The Court’s approach to a financial settlement is discretionary, allowing it to consider the parties’ circumstances with the objective of providing an outcome that is fair and just.

Adding back property means including into the pool of assets a notional value for property or funds that have been wasted, exhausted or prematurely disposed of for the benefit of one party or a third party.

The ‘notional’ property will form part of the asset pool from which a division of property is made. The purpose is to bring back the value of assets that would otherwise have been available to both parties, had the other party not caused the asset to be depleted.

When will an add-back be appropriate?

The starting point is that assets accrued or losses sustained (whether jointly or individually) during the course of the marriage or relationship should be shared between the parties, although not necessarily, equally. However, in exceptional circumstances it is appropriate for the Court to deviate from this principle. Generally, add-backs will arise in the following circumstances:

  • losses incurred as a result of a party’s deliberate efforts to diminish or deplete the value of assets, such as a premature distribution of assets;
  • losses sustained by a party’s reckless, negligent or wanton conduct;
  • where a party has used joint funds to pay for his or her own legal costs.

Premature disposition of assets

Occasionally, a party deliberately sets out to diminish the matrimonial assets, making them unavailable for distribution. This may occur by selling or transferring property to a third party or making extravagant or lavish gifts.

To justify an add-back, the Court will need to assess the reasonableness of the expenditure in light of the surrounding circumstances, including an assessment of the overall asset pool and the amount spent. For example, in one case, the wife assisted her adult daughter by gifting $15,000 as a deposit to purchase a property. The Court considered that it was not unusual for parents to assist their children and, given the magnitude of the asset pool, it was unreasonable for that amount to be added back.

In another case the husband sold his taxi licence and vehicle, which had been used to operate a business throughout the course of the marriage. He benefited from the proceeds and the Court determined that the value of the funds received should form part of the asset pool for distribution between the parties on the basis that the wife had a legitimate interest in the taxi business.

Reckless conduct and waste

Money wasted on individual pursuits or gambling addictions during or after the relationship may be added back to the asset pool. The conduct of the spendthrift party will be relevant in determining such cases and the Court plays a discretionary role in deciding whether or not the losses should be borne individually or jointly. Considerations may include whether the person has an underlying illness, and his or her attempts to obtain help.

Adding back legal costs

Parties are required to fund their own legal costs and outstanding legal fees do not constitute a liability forming part of the asset pool.

Money taken from a joint account by one party to pay his or her legal fees may be subject to an add-back. This however is a matter for discretion and will depend on the particular circumstances – if the funds existed at the time of separation and both parties have an interest in them, then it is likely they would be added back. Conversely, if funds used to pay legal costs were sourced from a party’s own efforts or provided as a gift or loan post-separation, then it is unlikely these will be added back to the pool of assets.

Key points

  • Separating couples should share financial losses incurred during the relationship unless those losses result from one party’s negligence, recklessness or intentional conduct to reduce or deplete matrimonial assets.
  • Each case will turn on its merits and the entire circumstances of the expenditure is considered when assessing its reasonableness.
  • Funds existing at the time of separation and subsequently used for reasonably necessary living expenses are not added back to the asset pool.
  • Clear evidence is required of assets and expenditure before and after separation and separating parties should take care to record assets and liabilities at the time of separation and thereafter.

Conclusion

High Court cases such as Stanford v Stanford [2012] HCA 52 and Bevan v Bevan (2013) FLC 93-545 suggest that concepts of add-backs and notional property may have become outmoded and their application more the exception than the rule.

There is no guarantee that a dissipated asset will be notionally ‘returned’ to the asset pool on a dollar for dollar basis. However, and as confirmed in subsequent cases, the Family Court has discretion to adjust property interests by considering a myriad of factors and on a just and equitable basis. Such factors include circumstances where assets are purposely, negligently or recklessly depleted.

It is important to obtain good legal advice before or soon after you separate from your spouse or de facto partner. An experienced family lawyer can assist in preserving hard-earned assets, preventing wastage and maximising your chances of a fair property settlement.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

What happens if your house is damaged before settlement?

You’ve walked the streets, negotiated with agents and vendors, signed contracts and loan documents and finally await the settlement date with great anticipation.

With just a week to go before the big day your lawyer calls to advise you that last night’s big stormfront hit your dream home. The roof of your house is no more and there is extensive water damage to most of the internal fixtures.

Can you get out of the contract? Is the vendor obliged to fix the damage before settlement? What if you still want to proceed with the purchase but the vendor does not?

This article explores the legal position of a purchaser and vendor when the subject of the sale is damaged after exchange of contracts but before settlement – the information is relevant to both parties involved in a residential conveyancing transaction.

The passing of risk

In Queensland, standard contract terms generally provide that the risk of loss or damage to a property passes from the vendor to the purchaser at 5.00 pm on the first business day after the date of the contract. It is therefore essential that a purchaser takes out insurance to protect the property and for public risk, from this time.

Although the risk passes to the purchaser, the vendor has an obligation to take reasonable care of the property until settlement and not do anything that would significantly alter the property to the detriment of the purchaser. In other words, if a vendor is reckless or negligent in caring for the property, the purchaser would likely have rights to claim damages.

Can the purchaser terminate the contract if the property is damaged?

The right for a purchaser to terminate a contract due to damage depends on the significance of the damage.

The Property Law Act 1974 (Qld) entitles a purchaser to rescind the contract if, prior to possession or completion (whichever is the earlier), a dwelling house (including a unit in a strata complex) is ‘so destroyed or damaged as to be unfit for occupation as a dwelling house’. This is a statutory right of termination and cannot be omitted or altered by a contrary provision in the contract.

If the purchaser wishes to rescind, he or she must give written notice to the vendor or vendor’s solicitor before possession or completion. The purchaser is entitled to recover the full deposit.

Whether or not a house or unit is unfit for occupation will be a matter of fact and degree in each case. Generally, if the property is unsafe or where it would be impossible to live in the dwelling without a reasonable level of comfort, then the purchaser will have the right to terminate.

Minor damage / fair wear and tear

A purchaser has no statutory right to terminate a contract or be compensated for damage that does not make the dwelling unfit for occupation. The purchaser must therefore settle on the completion date relying on his / her own insurance to recover any loss.

In some circumstances, purchasers who fail to take out insurance at the contract date, may be able to claim under an insurance policy held by the vendor but it is unwise to rely on the vendor’s insurance and always prudent for purchasers to obtain their own.

Summary

The extent of damage sustained to a property will affect the termination rights of the parties to a contract after exchange and prior to completion.

Vendors and purchasers should be aware of their respective rights and ensure adequate insurance is maintained to cover the risk of loss.

This article is intended to provide general information only. You should obtain professional advice before you undertake any course of action.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.

Top five things to consider when moving into a Retirement Village

A retirement village is a community-style residential development offering accommodation, facilities and services to people from retirement age onwards.

There are many types of arrangements which should be carefully explored before making your move to retirement-village living.

You will need to ensure that the village you choose meets your specific needs and that you understand your legal rights and responsibilities under the retirement village contract.

Following is a brief overview of the different legal arrangements for retirement village living and our top five tips when considering your move.

Retirement village arrangements

Buying into a retirement village does not necessarily result in outright ownership of the property. Whilst many strata or community developments facilitate this, most retirement village arrangements are either loan-licence or leasing arrangements.

In a loan-licence arrangement the resident pays an up-front contribution (interest-free loan) to the retirement village operator. Ongoing contributions follow and the resident occupies but does not own the premises. When leaving, the resident may need to pay an exit fee and may or may not share in any capital growth from the property.

A leasehold arrangement requires the resident to pay regular fees set at a market rate. The payment of other contributions and outgoings will vary between villages depending on the level of accommodation and services provided. Again, the resident may be required to pay a departure fee when leaving.

Following are our top five tips when considering your retirement village move.

What do you want to achieve?

When planning your move, consider your goals and objectives in light of your personal circumstances such as your age, health, family arrangements (who and how close they are) and your personality (whether you are social or prefer solitude).

If you are recently retired, independent and in good health, you might be looking towards accommodation that is spacious, includes a garden, and is set in a village offering various facilities and activities. If you are more sedate, you won’t want to be paying for the upkeep of golf courses, tennis courts and a swimming pool if these activities do not interest you.

Consider also whether the care services offered will be sufficient to support you for the years to come. Although you cannot predict the future, it is sensible to assume that you will require more care and assistance as we age. The availability of health and nursing services, meal preparation and assistance with cleaning and other domestic duties are important factors.

Remember, entry into a retirement village does not result in an automatic subsequent entitlement to aged care services. This assessment is made at the Commonwealth level.

Once you have a clear idea of what you are trying to achieve, consider the retirement village’s location, the proximity of entertainment, shopping and health services, the quality of buildings, care services and available facilities. Obviously, the more lavish the village and extensive facilities offered, the more you will pay.

What will ‘village life’ be like?

Your day-to-day retirement living will be influenced by the managing body and rules setting out the rights and obligations of residents.

The rules include matters concerning the keeping of pets, whether friends and family can stay over, car parking arrangements, maintenance of buildings, common areas and gardens, whether social activities are arranged and use of recreational facilities such as libraries, communal dining areas, etc.

Some retirement villages are operated by private enterprises whilst some are run by the community, churches or charitable organisations. This may impact upon the daily ‘vibe’ of the village and the types of activities arranged.

Accommodation and services and the associated village rules can vary significantly between villages – it is important to get the right fit for your lifestyle.

Understand your legal rights and obligations

It is important to understand the type of arrangement you are entering, whether it be an outright purchase, loan-licence or leasehold arrangement. The legal relationship between the resident and village operator and contractual provisions from village to village can vary significantly.

Always have your documents reviewed and explained by an experienced lawyer. It may be helpful to take a family member or friend with you when meeting your lawyer to discuss issues raised during the meeting, and help to recall matters afterwards for follow up.

Village operators and agents should be transparent when giving information and provide detailed disclosure regarding the fees, amenities and services. Contracts should set out the terms and conditions pertaining to the resident’s right to occupy the premises, the permitted use of common facilities and types of services available which may include assisted living or aged care.

Consider the financial implications

Fees and charges comprise waiting list fees, holding deposits, ingoing contribution fees (purchase fee) and ongoing payments and service fees. Potential residents should ask whether maintenance costs are covered in regular payments or if these are additional and check under what circumstances deposits are refundable.

Often under-estimated when entering the contract, is when and how exit or departure fees are calculated when leaving the village – in some instances residents may be shocked to learn that they receive significantly less than anticipated. Exit provisions should be set out clearly – if in doubt ask for an explanation and example.

Meeting with your financial advisor is recommended if you need to plan or restructure your financial affairs. You will need to ensure your obligations can be met and determine the most effective financial strategy for your circumstances.

Regulation and reputation

Retirement villages are regulated by legislation in each state and territory. The governing laws require retirement villages to be registered or accredited with a specific government department charged with administering these rules. Village registration and accreditation can be verified with these organisations.

Village operators must give adequate disclosure and information regarding the retirement village before a person signs a contract. Proposed residents can request information about the services offered and details regarding financial arrangements and fees, budgets, sample contracts, site layout and plans.

Potential residents should enquire about the retirement village’s reputation and ask questions about how it is managed. Speaking to other residents is a good starting point.

Retirement village legislation provides important protection for people considering retirement village living – being aware of your rights and seeking good advice will help you to make a careful and well-informed choice.

Summary

Retirement villages provide an opportunity for older residents to live in maintenance-free accommodation in a secure community with access to services and facilities. Villages vary in style, quality, availability of services, legal arrangements and cost.

Potential residents should shop around, gather as much information as possible and not be pressured into signing a contract.

If you or someone you know wants more information or needs help or advice, please contact us on 07 3281 6644 or email mail@powerlegal.com.au.