An estate plan involves more than signing a Will and leaving it in a safe place. An effective estate plan requires consideration of several matters and ongoing review to ensure it reflects your testamentary wishes and covers unexpected events.

In this article we look at some misconceptions about Wills and estate planning and dispel some common myths. The information is general only and you should obtain professional advice specific to your circumstances before you undertake any course of action.

I have a Will – isn’t that an ‘estate plan’?

A Will is a great start to planning your estate, however a Will alone does not appoint a trusted person to look after your financial and property affairs when you are away or if you are incapacitated. Likewise, a Will cannot appoint a guardian to make health and lifestyle choices on your behalf if you are incapacitated, taking into consideration your morals and values.

Tip: Various legal documents form part of your overall estate plan. Think about what you would do if the unforeseen happened and you could no longer manage your affairs. Talk to you lawyer about the benefits of appointing an attorney or guardian to assist you if you are incapacitated.

Only the rich need an estate plan

This is certainly not the case. No matter what your financial status, an estate plan enables you to appoint a trusted person to administer your assets when you die, ensure your hard-earned property is left to beneficiaries chosen by you and not others, maximise the gifts and benefits you leave to your loved ones through appropriate taxation planning, and prepare for unexpected crisis (illness and incapacity) by appointing somebody you trust to deal with your affairs when you cannot.

Tip: Think about your current assets and the assets you aim to accumulate in the future – they soon add up. Think about who you would like to benefit from your estate and how you can maximise the value of your assets for your beneficiaries.

I can leave joint property to whomever I wish

The right of survivorship means that upon the death of an owner of a jointly held asset that asset automatically vests in the surviving owner/s, despite any contrary intention expressed in a Will.

Jointly held assets such as real estate often comprise the bulk of the estate’s value. For spouses and de facto partners, this may be ideal as many would simply wish the surviving partner to benefit. However, joint ownership may not be appropriate such as property held with certain other family members, non-family members or other entities, or property that remains jointly held after divorce or separation.

Tip: Review your assets (real estate, bank accounts, investments) and check how they are held. Your lawyer can assist in this process and if necessary, sever joint tenancies so that your share of property can be separately held and left to whomever you wish.

Superannuation is automatically dealt with in my Will

Many people assume their superannuation will be divided up in accordance with the wishes in their Will, but that is not necessarily the case.

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

Tip: Review your superannuation and life policies to determine whether you have in place a valid and current BDBN. Talk to your lawyer about the formalities required to execute a BDBN and strategies to minimise adverse tax implications on the payment of your death benefits to your beneficiaries.

If I die without a Will my assets go to the Government

If you die intestate your assets are distributed according to pre-determined formulae set by legislation in each state and territory. The rules attempt to reflect society’s ‘expectations’ as to who should benefit from a person’s estate. They provide a specific order of distribution to the deceased person’s next of kin.

The problem with these statutory rules is that they do not necessarily consider the wishes of a deceased person nor his or her unique circumstances.

Tip: Don’t rely on a statutory formula to determine those entitled to benefit from your estate. Although only in the most extreme cases will the Crown have a right to an intestate’s estate, a Will is essential to nominate with clarity your executor and chosen beneficiaries.

I need to update my Will when I have a child or more children, move or acquire new assets

You should always review your Will when your personal and financial circumstances change significantly. Your Will may already provide for children (or future children) and you may not need to update it for every change, but it is good practice to review it when you experience major changes in your life.

You should also be careful about naming specific assets in your Will, for example details of a particular vintage car that you may own. A gift in your Will of a specific asset of considerable value which is disposed of during your lifetime may fail and cause an unintentionally unequal distribution amongst beneficiaries.

Wills are generally drafted to provide flexibility with respect to the nature and value of assets held, and to provide for future generations (unborn children) and substitute executors and beneficiaries.

Tip: Flagging to review your Will each year, for example when your annual tax return is prepared, makes good sense. In many cases, no changes will be needed but it is good practice to make a habit of a regular review. If you separate, divorce, or your financial or personal circumstances change significantly contact your lawyer immediately to see how these changes impact your existing Will and, where necessary, prepare a new Will.

Conclusion

Effective estate planning takes time and careful consideration. 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.

An executor is a person who will carry out the instructions in your Will once you have passed away.

In general, you can appoint any person as executor of your Will, this includes solicitors. It is not uncommon for a solicitor to be appointed executor of a Will. The advantage of having a solicitor as executor is their experience handling Wills, as opposed to someone who has never undertaken the role of an executor.

It is quite likely that whomever you appoint as the executor will have to seek advice from a solicitor while acting as executor anyway.

Why should I appoint my solicitor as executor of my Will?

If you have a complicated estate and family situation, it may be worth considering appointing a solicitor as executor of your Will.

Solicitors bring professionalism and experience to the role of executor. It easier for a solicitor to remain impartial and manage disputes, should any disagreements arise as to the contents of the Will.

An experienced solicitor can also ensure your Will is executed in a timely manner, communicate the progress of execution of the Will to beneficiaries and ensure account keeping is properly maintained.

What is required from a solicitor who is to become executor of my Will?

If you decide to appoint a solicitor as executor of your Will, they must notify you in writing to confirm they will be acting as executor of your Will and should include the following in a confirmation letter;

• Any entitlements they may be able to claim from carrying out instructions in your Will;
• Costs and charges for legal fees or executor’s commission;
• Any people who may not make a claim against the executor’s commission.

The solicitor must disclose their fee structure for your consideration.

Can a solicitor charge a fee for executing my Will?

Yes, they can! There are a few ways in which a solicitor can be paid for executing a Will, for example, a clause in the Will provides for a legacy to be paid to the executor/s or a rate of commission or right to charge for professional rates for non-professional work.

Solicitors acting as executors must ensure they comply with Legal Profession Uniform Rules when renumerating themselves for executing the Will.

The subject of executors’ remuneration has potential to become complex, hence we recommend you speak to one of our specialist lawyers to ensure you have everything covered.

Conclusion

An experienced solicitor is able to bring professionalism and impartiality to the role of executor. If a solicitor has accepted to take on the role of executor of your Will, they must notify you in writing to confirm they will be acting as executor. They can also explain their obligations to you as executor of your Will and the different ways in which they can be renumerated for carrying out your final wishes.

This area of law is extensive and can be overwhelming to understand. We recommend you speak with one of our specialist lawyers, who can ensure you have everything in order when it comes to appointing a solicitor as executor of your Will, as they will after all, be fulfilling your final wishes.

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 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.

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.

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.

All jurisdictions in Australia provide statutory rights for eligible persons to contest a Will on the basis that they have not been left adequate provision by the testator for their proper maintenance, education and advancement in life.

In Queensland, an eligible person includes:

• a spouse of the deceased;
• a de facto partner (whether same or opposite sex) who had been in a continuous relationship with the deceased for at least two years at the time of death;
• a former spouse who was maintained by the deceased and not remarried, or is the parent of a minor child of the deceased and dependent at the date of death;
• a child, stepchild or adopted child of the deceased;
• a parent who was dependent on the deceased or the parent of a surviving child under the age of 18 years of the deceased, or other person under the age of 18 years who was wholly or substantially dependent on the deceased.

If a family provision claim is successful, the Court can order an appropriate adjustment to the terms of the Will to satisfy the claim. A range of factors are considered including the relationship the applicant had with the deceased, the obligations or responsibilities the deceased had to the applicant, and the nature and size of the estate.

The expectation that spouses should provide for each other generally places a widow’s needs ahead of other interested parties in a family provision claim. However, all cases will be individually assessed and balanced with the needs of the applicant and the competing needs of other entitled recipients.

The moral duty to provide for a spouse

There is a general expectancy that testators have a moral duty to provide for the proper maintenance of their spouse or de facto partner. The Court has explained this as providing what is necessary for the spouse to enjoy accommodation to the standard to which he or she is accustomed and, to the extent possible and having regard to the size of the estate, a fund to meet unforeseen contingencies. This is particularly so where the marriage or relationship has been lengthy.

Competing claims

Family provision claims by widows usually involve a contest between the applicant and a child or children from the deceased’s former relationship.

The applicant will generally apply for greater provision than what has already been provided in the Will based on his or her personal and financial circumstances, current financial position and future needs.

Generally, the widow and children of the current relationship (if any) will stand favourably against the children of a former relationship. This is because the testator’s primary duty is perceived as being owed to his current family and the likelihood that the children of the former relationship may have already been provided for through child support payments. This of course is not always the case and each matter will turn on its own circumstances in consideration of a range of factors.

Determining the sufficiency of proper maintenance

The Courts have explained the difficulties of determining the meaning of ‘proper maintenance’. In Re Harris [1936] SASR 497 it was considered to be ‘…more than a provision to keep the wolf from the door – it should at least be sufficient to keep the wolf from pattering round the house or lurking in some outhouse in the back yard – it should be sufficient to free the mind from any reasonable fear of any insufficiency as age increases and health and strength gradually fail’.

Sometimes, widows are left a ‘right of residency’ in the testator’s property. This allows the widow to occupy the family home or other property of the deceased for his or her lifetime with the intention that the property will pass to a residuary beneficiary, such as the testator’s child or children from a former marriage, after the widow’s death.

A right of residency however is not always practical and may be considered insufficient to meet the moral duty expected of the testator. The widow may, due to age or health, need to vacate the residence, being left vulnerable and without security of a home.

The alternative approach to leaving the home to the widow may also be inappropriate – if the widow passes soon after the deceased, then the result may be a significant capital asset being inherited by the widow’s relatives, contrary to the wishes of the testator.

As can be seen there needs to be a balance between a tokenistic provision and the risk that a testator’s significant assets might inadvertently be inherited by an unintended beneficiary.

In Luciano v Rosenblum (1985) 2NSWLR 65 the Court gave some guidance as to the expectation of a widow after the death of a spouse:

‘Where the marriage of a deceased and his widow has been long and harmonious, where the widow has loyally supported her husband and assisted him to build up and maintain his estate, the duty which a deceased owes to his widow can be no less than to the extent to which his assets permit him to achieve that result…’

Conclusion

A testator owes a moral duty to provide for his or her spouse and, as a general rule, a spouse will have priority over other entitled beneficiaries in a Will contest. Having said that, every case is different and will turn on its own unique circumstances.

There are a range of factors a Court must consider when assessing the merits of a family provision claim. Your family circumstances should be assessed in light of these factors when preparing your Will to minimise the potential of a Will contest when you die.

Strict time limits apply with respect to making a claim for family provision. If you feel you have not been given adequate provision from the Will of a family member or 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.

There are various ‘Will Kits’ available on-line – most are cheap or ‘free’ and all you need to do is download them and fill in the blanks. Many websites boast that you can prepare your Will ‘without spending hundreds of dollars on legal fees’.

Simple, right? Not really.

Generating an on-line Will may seem easy, but the ‘hundreds of dollars’ that you might save will never make up for some of the possible pitfalls in preparing a Will without sound legal advice.

When you generate your own on-line Will, you don’t meet personally with the writer of the Will. This is the most significant issue with self-generated legal documents. You don’t have the opportunity to discuss your family and your circumstances, and a lawyer does not have the opportunity to identify issues unique to you, that could otherwise be addressed with careful planning.

A lawyer with an understanding of succession law will guide you through this process and create not just a Will, but an effective estate plan.

The following are some of the important considerations that an experienced lawyer will address, that a Will-Kit may not.

Your lawyer will prepare an estate plan, not just a Will

A lawyer will take a holistic approach and will consider all aspects relevant to your estate plan. Not only is it important to plan how your assets are distributed when you die, but you need to provide for contingencies such as appointing guardians and attorneys if you become incapacitated and are unable to manage your financial and personal affairs.

A lawyer will also consider how your assets are held – whether that is jointly or individually – as this can determine how and to whom those assets may be left. For example, when assets are held jointly with another person, the surviving person will automatically inherit the deceased person’s share when he or she dies. A contrary direction in a Will to leave that share to somebody other than the joint tenant will not override this legal principle. A lawyer will advise whether it is in your interests to sever the tenancy which will then enable you to leave your share to whomever you wish.

Your lawyer will also discuss your superannuation and death benefits which do not automatically form part of your estate. In most cases, your benefits will be paid directly to a superannuation dependant either at the discretion of the trustee or in accordance with a death benefit nomination.

Different categories of beneficiaries are taxed differently under taxation law and your lawyer can advise on these tax implications so you can make an informed decision.

Preventing a gift from failing

A common problem with do-it-yourself Wills is the risk that a gift to a beneficiary may fail. ‘Ademption’ occurs when specifically named property in a Will no longer exists at the time the Will-maker dies. Consequently, the intended beneficiary of that gift may lose out altogether. The ademption of a gift, can have a significant impact on the value of assets received by a beneficiary, particularly where the asset is significant such as real estate or a prestige motor vehicle.

Fortunately, the law has developed certain exceptions to the rules of ademption and a beneficiary may be saved from missing out on his or her inheritance. Having said that, a properly drafted Will can prevent the issue arising in the first place and is likely to avoid the potential for unwanted estate disputes.

Protecting your assets and tax planning

Your lawyer will advise on how to best structure your Will to protect your assets against distribution to an unintended beneficiary (such as a child’s estranged partner or the creditors of a bankrupt beneficiary).

A testamentary discretionary trust may be recommended. This is a trust created in your Will that comes into effect after you die. The trust is administered by a pre-appointed trustee who determines how and when estate assets are managed and distributed.

If properly managed, the flexibility of a discretionary trust allows beneficiaries to access favourable taxation treatment with respect to their inheritance and provides protection for vulnerable beneficiaries. With careful planning, the timing of transferring estate assets may also postpone or minimise capital gains tax liabilities.

An on-line Will Kit is unlikely to consider these matters and, in any event, cannot provide the legal advice necessary to decide whether this type of Will is appropriate in your circumstances.

Guarding against family provision claims

A successful family provision claim may result in the terms of your Will (despite your intentions) being amended to provide for an ‘eligible person’.

Family provision rules vary between jurisdictions however an eligible person generally includes a current or former spouse or de facto partner, a biological, adopted or step-child of any age, and certain dependent members of the deceased’s household.

An eligible person may make a claim against the estate of a deceased person if he or she believes they have been unfairly treated under the Will or the proposed distribution is unfair. Whilst warranted in some circumstances, such claims are usually an unwelcome interruption and will result in additional time, delay and cost in finalising the estate.

Your lawyer can identify potential claimants under the family provision rules relevant in your jurisdiction and, if necessary, advise on how to reduce the likelihood of such a claim.

Conclusion

Planning your estate and having your Will prepared by a lawyer is a smart move. Your lawyer will ensure your Will is valid, correctly signed and protects your assets and your beneficiaries. He or she will advise how future changes may affect your estate plan and will usually provide a friendly reminder to review your Will when your circumstances change.

Yes, you can prepare a valid Will on-line however, there is considerable risk that it will not be tailored to your unique circumstances, may not achieve exactly what you want, and may not take advantage of structures to protect assets and save tax.

Meeting with a lawyer to discuss your estate plans and finalise a well-considered Will that caters to your circumstances is money well spent.

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.

All jurisdictions in Australia provide statutory rights for eligible persons to contest an unfair Will if they can show that they have been left without adequate provision by the testator.

In Queensland, an eligible person includes:

• a spouse of the deceased;
• a de facto partner (whether same or opposite sex) who had been in a continuous relationship with the deceased for at least two years at the time of death;
• a former spouse who was maintained by the deceased and not remarried, or is the parent of a minor child of the deceased and dependent at the date of death;
• a child, stepchild or adopted child of the deceased;
• a parent who was dependent on the deceased or the parent of a surviving child under the age of 18 years of the deceased, or other person under the age of 18 years who was wholly or substantially dependent on the deceased.

If a family provision claim is successful, the Court can order an adjustment to the terms of the Will to satisfy the claim.

When contesting a Will, a de facto partner must first establish the existence of the de facto relationship with the deceased, then show that he or she has been left without adequate provision. Claims are assessed based on a range of factors and the unique circumstances relevant to each case.

What is a de facto relationship?

It is generally expected that testators have a moral duty to provide for the proper maintenance and support of their spouse or de facto partner.

A de facto relationship exists where a couple of the same or opposite sex and who are not legally married or related by family, live together in a genuine domestic relationship.

Factors considered in establishing a ‘genuine domestic relationship’ include the length of the relationship, the care and support of children, the nature and extent of a common residence, the existence of a sexual relationship, financial interdependence, property acquisition and ownership, and the public perception of the relationship.

What must an applicant prove in a family provision claim?

An applicant must prove that, at the time of considering the application, he or she has been left without adequate provision for his or her proper maintenance, education and advancement in life. A claim may be made because the applicant was completely left out of the Will or that, in light of the applicant’s financial needs, the inheritance proposed is insufficient to support those needs.

The deceased’s moral obligation to provide for the applicant, the value of the estate and the competing financial needs of other entitled persons are all considerations.

Family provision claims often involve the contested interests between a de facto partner and the deceased’s child or children from a former relationship. Every case is different, however the typical matters that a Court considers in such claims include:

• the length of the de facto relationship;
• the respective financial and non-financial contributions of the applicant and the deceased to the estate assets;
• the personal circumstances of the applicant such as his or her education, employment, age, health and special needs;
• the financial position and financial needs of the applicant;
• the personal circumstances, financial position and financial needs of the deceased’s children or other beneficiaries or applicants;
• whether there were joint assets that already transferred to the applicant after the deceased’s death;
• whether the applicant received any benefit from the deceased’s life insurance or superannuation payments.

Case study                                                        

Lawrence v Martin [2014] NSWSC 1506 considered a claim by a de facto partner who had been left out of the deceased’s Will. Although their relationship had lasted for 16 years, the deceased had not updated his Will since divorcing his former spouse in 1999. The Will left his entire estate to his (then) spouse, and then to his two sons of that marriage. The effect of the divorce was that the wife was precluded from benefiting under the Will. Consequently, his estate worth around $1.6 million, was left equally to his sons.

On the testator’s death, the applicant received a life insurance benefit of $229,000 and the interest in their jointly held family home was transferred into her sole name. The home was worth around $1.5 million with a mortgage of $78,000.

The applicant claimed provision of $660,000 from the estate and the Court took account of the following:

• that the applicant had already received a substantial life insurance benefit and the transfer of the family home into her name;
• that the applicant had made substantial financial contributions to the family home and assets of the deceased;
• that the applicant and the deceased were interdependent financially;
• that the relationship was genuine and long lasting with the applicant making substantial contributions towards the deceased’s welfare;
• that the applicant, aged 60, would likely cease work over the ensuing years resulting in a substantial reduction in income;
• although in reasonable health, the applicant suffered some limitations due to neck, back and shoulder issues;
• the intentions of the deceased which declared a desire to leave each of his sons a house;
• the financial position and needs of each son, one of whom suffered a bipolar condition making it difficult to sustain long-term employment, as well as other health issues.

In balancing the competing needs between the applicant and the sons and in consideration of all the circumstances, the applicant was awarded $350,000.

This case illustrates the factors unique to each claim that must be considered when balancing the competing needs of the applicant and other beneficiaries.

What if there is no Will?

When a person dies intestate (without leaving a Will), the estate is distributed according to a statutory formula set out in legislation. The distribution follows the deceased person’s next of kin and the priority is generally the spouse and children (if any). A ‘spouse’ includes a married or domestic partner. Accordingly, the non-existence of a Will does not prevent a de facto partner claiming provision from an intestate estate.

Conclusion

A de facto partner may make a family provision claim if the proposed distribution under a Will or intestate estate does not make adequate provision. Strict time limits apply for bringing such claims and it is wise to obtain early legal advice.

Most family provision claims can be settled between the legal representatives of the applicant and estate which will avoid costly Court proceedings.

To reduce the possibility of a family provision claim it is important to obtain good legal advice when preparing your Will and to ensure that your Will is regularly reviewed.

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 recent death (or purported death) of Gerald Cotton, former Chief Executive Officer of Canadian cryptocurrency exchange company, Quadriga CX, emphasises the importance of planning your electronic after-life.

Mr Cotton’s death in India at the age of 30, has not only raised suspicion as to its authenticity (and allegations of an exit scam), but reiterated the chaos that can be created if digital assets have not been considered in an estate plan.

Mr Cotton was the sole custodian of encrypted passwords ‘protecting’ over $200 million worth of digital assets. His untimely death has left numerous Quadriga customers unable to access their assets with trading on the Quadriga platform suspended while authorities try to work out where to next.

Mr Cotton’s widow states that she played no role in the running of Quadriga and, despite efforts, has been unable to unlock the laptop used by Mr Cotton nor access any of his accounts.

The digital assets referred to in the Quadriga saga comprise cryptocurrency (virtual currency created and stored electronically such as Bitcoin, Litecoins and Ethereum). The cryptocurrency system is decentralised and not subject to a governing authority, raising unique challenges in identifying and ‘locating’ the assets.

Regardless of how the Quadriga saga unfolds, it is a timely reminder of how important it is to consider what happens (or should happen) to our digital assets when we die.

What are digital assets?

A person’s ‘digital life’ may encompass a range of online transactions, activities and accounts such as:

• cryptocurrency;
• financial assets including online bank accounts and shares;
• intellectual property attached to domain names or online literary works;
• online sporting and gaming accounts;
• loyalty programs such as Flybuys, Rewards and Frequent Flyers;
• online shopping accounts such as eBay and Amazon;
• personal / business social media accounts such as email, Facebook, Linked-In.

All should be considered, and included, in an effective estate plan.

Issues unique to certain digital assets

Traditional cash-based assets such as money deposited in a bank, shares or other paper-based investments are held by title to the owner and can be transferred to the beneficiary of a deceased person with the relevant documentation.

Ownership of digital assets like Bitcoin, however, is anonymous with owners accessing their cryptocurrency with private keys which are used to unlock and deal with the assets. This information may be held on a computer device (via a digital wallet), on a USB, or printed separately. These assets can easily be overlooked or ‘keys’ misplaced, representing unique challenges when it comes to administering an estate.

Many digital assets are also held globally and may therefore raise jurisdictional issues from an estate planning perspective. In most instances, there is no uniform legislation governing access to a deceased person’s online accounts, so it is imperative that these matters are dealt with specifically in an estate plan.

Following are some steps you can take to ensure your online life is appropriately dealt with when you are gone.

Identify your digital assets

You should start by making a list of your digital assets (including online accounts) and determining what you would like to happen to them when you die.

Keep records of your online accounts and subscriptions including user names and passwords and store this information in a secure place.

Remember your online accounts and login details are likely to change frequently and your list should be maintained accordingly.

Understand your online accounts

Understanding how various accounts are dealt with by service providers will help to determine the type of action you would like taken when you die.

For example, Facebook account holders can advise in advance whether their account is to be deleted or memorialised. A memorialised account can provide a place for family and friends to share memories after a person dies on the deceased’s profile, and any content shared by the deceased person remains visible to those with whom it was shared. Nobody can log into a memorialised account.

Some loyalty programs such as Frequent Flyers may not be transferrable or redeemable after a person dies, so it may be wise to keep tabs on these types of accounts to utilise benefits regularly.

Include digital assets in your Will and appoint a technology custodian

Your Will should define and identify important digital assets and provide executors and trustees with appropriate directions and powers to deal with them.

Assign your executor or other trusted person, who is familiar with technology, the role of managing your online life after you die and ensure this direction is included in your Will.

Record your after-life technology instructions with respect to each account separately and ensure these instructions are secure, but accessible to your technology custodian. Never disclose passwords in your Will.

Online maintenance

Online accounts contain personal information which should be protected. Technology presents a real risk of identity fraud and unmonitored accounts can be particularly vulnerable. Regular monitoring and unsubscribing or deleting unused accounts can help minimise risk and keep your technology life tidy.

Regularly downloading photos and videos from your mobile to a storage device can ensure that memories are accessible to your family when you die.

Consider incapacity

It is also important to consider what happens to your online life in the event that you are incapacitated. Appointing a trusted person to manage your online affairs and including specific instructions in an enduring power of attorney is a logical step to ensure the appropriate management of your digital wealth if you are incapacitated.

The instrument making the appointment should be specific to the jurisdiction in which the assets are held, and in this respect, more than one document may be required.

Consider trusts

It may also be beneficial to hold substantial digital assets through a trust structure, if possible, for greater protection and better taxation outcomes. In doing so, the trust must be considered and dealt with under the Will, which should nominate beneficiaries of the trust or shares in the trustee company and include provisions to ensure the trust can achieve the desired objectives.

Conclusion

It has become increasingly difficult for executors, lawyers and family members to ascertain and access online assets after a person dies, with many financial and other institutions operating in a ‘paperless’ environment. Certain digital assets such as cryptocurrency can present additional problems for a deceased’s family.

Inaccessible online accounts make it difficult to identify assets, and leaving online accounts open indefinitely raises concerns of potential identity theft.

Good online management and ensuring your digital assets are included in your estate plan will help your executors and family manage your online life after you are gone.

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.