Australian Estate Law Today

When people prepare a Will, they sometimes may not consider what will happen to their Estate if all of the beneficiaries listed in the Will are no longer alive to benefit from the Will. 

In this situation, the balance of the Will maker’s Estate, known as the residuary Estate, will be given to the reserve beneficiaries.  If a Will maker decides not to list reserve beneficiaries, the Will maker’s Estate may pass to family members who the Will maker would never have imagined could benefit from their Will.

For example, a Wife lists her Husband as a beneficiary in her Will and if he passes away, then her Estate is to be left to their Son.  The Wife has listed no reserve beneficiaries in her Will as she believes that her Son will still be alive to inherit her Estate once she or her Husband have passed away.

However, if the Wife, Husband and Son were all to pass away at the same time, then there are no beneficiaries alive to inherit the Wife’s Estate.  The Estate would then be given to the reserve beneficiaries.  As there are no reserve beneficiaries listed in the Wife’s Will, the Estate may be distributed as follows:

1. Where the parents of the Will maker are still alive:

• The parent is entitled to the whole of the residuary estate, or if both parents are alive, they are entitled to the whole of the residuary estate in equal shares.

2. Where the Will maker is not survived by a parent, but is survived by a next of kin:

• The next of kin is entitled to the residuary Estate – that is, the Will maker’s brothers, sisters (and their children), grandparents, uncles and aunts.

3. Where the Will maker has no surviving children, parents or next of kin that are still alive:

• The residuary Estate will be deemed to have no owner and the Crown, or State Government, will be entitled to receive the Will maker’s entire Estate.

Accordingly, if all of the beneficiaries in the Will have passed away and no reserve beneficiaries are listed, then the Will maker’s Estate may be given to people that the Will maker would never have considered to benefit from their Will.  As a result, it is important to consider listing reserve beneficiaries when preparing a Will.

For information on including or adding reserve beneficiaries to your Will, or Estate law in general, please do not hesitate to contact me.

Many parents, prior to their death, provide gifts to their children to avoid any disputes under a Will.   However, if the Will also provides for another gift of the same amount, the payments could potentially be challenged on the basis that they are a double payment.

For example, a few months prior to his death, Bill gives his three daughters a gift of $100,000.00 each.  Once he has passed away, it is discovered in the Will, that Bill has left $100,000.00 to each of his daughters and the remainder of his estate to his Wife Heather (who is not the mother of his daughters).  Unfortunately, the Will does not make it clear whether the $100,000.00 left to each of the daughters under the Will was in addition to the $100,000.00 gifted to each of the daughters while he was alive.

The situation becomes complicated as Heather may allege that:

• The $100,000.00 to each daughter left under the Will has already been satisfied or paid to the daughters while Bill was alive.
• Bill’s three daughters should not receive further payments of $100,000.00 each under the Will. 
• If Bill’s daughters do receive a further $100,000.00 each under the Will, the remainder of the estate which was left for her, will be reduced by a total of $300,000.00. 

Bill’s daughters believe that:

• The gifts of $100,000.00 they received while their father was alive are separate and in addition to the $100,000.00 that has been left to them under the Will.
• They should each receive a further $100,000.00 under the Will.

When determining the issue of whether the gifts paid by Bill while he was alive, and the gifts under the Will result in a double payment, a Court will consider:

• Bill’s intention when providing the gifts while he was alive.
• Bill’s intention under the Will. 
• Whether the gifts to the children while Bill was alive and the gifts left under the Will were provided to the children in equal or unequal shares.
• Whether, for various reasons, one child may have a greater claim to the remainder of the estate compared to the other children.
• Whether the surviving widow has any claim for a fairer provision under the estate due to the further amounts left under the Will.
• Who is alleging the double payment?  The Courts will only allow certain parties to make this claim.

Depending on the Court’s decision and the facts of each case:

• Bill’s three daughters may receive an extra $100,000.00 under the Will and the remainder of the Estate which was left to Heather will be reduced by $300,000.00; or
• Bill’s three daughters receive nothing under the Will and the remainder of the Estate is left in full to Heather; or
• Bill’s three daughters and Heather have to share the remainder of the Estate in various portions, as determined by the Court.

Accordingly, it is very important when providing gifts while alive, and then subsequently leaving gifts under a Will, that:

• The specific intention of the person making the Will is clear having regard to the factors that may be considered by a Court.  This can have a dramatic effect on the remainder of an Estate which is available to be distributed amongst the parties.
• The Will is amended to reflect any items that have already been gifted while the Will maker is still alive.

It is equally important to obtain detailed advice before proceeding with a legal argument on this issue, as it is a complex area of Estate Law.

For any further information regarding Wills and Estate Law generally, please do not hesitate to contact me.

I have been following with interest the news reports over the family dispute between Gina Rinehart and three of her children, in relation to a dispute over a trust formed from the estate of Gina Rinehart’s late father, Lang Hancock.

Lang Hancock left a large portion of his estate in a trust for his grandchildren (Gina Rinehart’s children).  Gina Rinehart is the trustee of the trust and it is alleged that the trust was to come to an end when the youngest daughter turned 25 in September 2011.

In Court documentation filed, the three children allege they discovered that their mother changed the vesting date of this trust until 2068, effectively delaying the date the children to receive the proceeds from the trust until that time.

The three children are now trying to remove their mother as trustee of the trust.

I am not familiar with the details of this case, and therefore I am not in a position to provide my opinion.  This case however does highlight the necessity to have a very detailed estate plan, especially when assets are owned in structures such as trusts and companies.

It is essential to consider many different objectives when preparing your estate plan.  These include:

1. Who will have the effective control of the entities that own your assets.
If the asset is not in your own name, your estate plan should address who takes control of the assets, and when.  This is highlighted in the current dispute in the Rinehart family.  It is understood that the children were to receive approximately $1 billion each from the trust, and this has now been potentially delayed for a very long time;
2. Tax – Tax considerations, and the impact that your wishes have from a tax perspective, are very important factors that should be taken into account.  It is important to work with an accountant and other advisors to ensure that your tax objectives are not breached in your estate plan;
3. Asset protection – It is important to take to consider personal circumstances of your beneficiaries and implement your estate plan to ensure that their assets, and assets of the estate are protected;
4. Financial support – It is very important to ensure that your spouse and children are properly supported from your estate, to avoid any potential claims;
5. Anticipating  family disputes and battles for control – This is something that the late Lang Hancock may well have considered (I am not in a position to know what considerations were taken into account by him).  By pre-empting and anticipating any potential family disputes, steps can be taken prior to death to minimise the risk of a dispute that could ultimately affect the value of the estate, and destroy family relationships;
6. Superannuation – It is important to consider what will happen to your superannuation benefits upon your death.

These are not all the considerations that need to be taken into account when formulating a strategy for your estate plan.  By taking the time, and seeking appropriate advice, you can do everything in your power to reduce the risk of family dispute subsequent to your death.  Often it will be the case that advice needs to be obtained from a lawyer, accountant and financial planner.

If you have any queries or any questions in relation to estate planning, or reducing the risk of a claim being made against your estate, please do not hesitate to contact me.

I am receiving increasing interest and enquiry from clients about abuse, or perceived abuse, of an Enduring Power of Attorney.  Often I am approached by one family member who is concerned about the conduct of another family member who has been appointed as an Attorney for their parents who have lost capacity.

The Attorney’s Control

It is very important to understand the extent of control that an Attorney can have over a person’s assets.  These powers include:

1. Dealing with monies in bank accounts;
2. Dealing with property;
3. Applying to the Court for a statutory Will to be made;
4. Severing joint tenancies for the ownership of property;
5. Taking out mortgages on behalf of the attorney;
6. Installing themselves as “Carers”;
7. Changing death benefit nominations for insurance and superannuation;
8. Taking control of family trusts;
9. Amending trust deeds;
10. Withdrawing superannuation.

A “creative” attorney can deal with the assets of the person who appointed them in a number of ways to deplete those assets.

Control the Controller

It is very important that the actual document appointing a person as an Enduring Power of Attorney is thoroughly considered to protect your assets.  Matters that need to be taken into account include:

1. Who to appoint
– it is imperative that a person you appoint is someone that you absolutely trust and that some protection mechanisms are put into place.  For example you can have more than one attorney who must jointly make decisions;
2. Controls - You can insert some protective controls to restrict the attorney’s power to deal with some of following:
3. Business affairs - Dealing with the incapacity of directors and shareholders, carrying on your business, providing guarantees for any borrowings;
4. Family Trust – You should review your trust deed to consider what happens on the incapacity of a trust and consider who has the power to control the trust and appoint a new trustee;
5. Conflict transactions - where the attorney may transfer assets to him or herself.  You can prevent the attorney from engaging in a conflict transaction unless specific transactions are allowed and recorded;
6. Your Will – You should make sure that the attorney is aware of the contents of your Will and the effect that their decisions may have on bequests you have made;
7. Have more than one attorney appointed;
8. Superannuation – You should ensure that proper advice is obtained before superannuation is dealt with and consider whether or not an attorney can make or renew any superannuation death benefit nomination;
9. Your accommodation in to the future – If a nursing home is not preferred you may stipulate what type of care you would like;
10. Obtaining financial and legal advice;
11. Caring for pets and children;
12. Life and lifestyle generally.

It is very important to invest your time to properly consider all of the implications in appointing a person as an Enduring Power of Attorney.  Detailed consideration of these matters could avoid considerable for you and your family.

Please do not hesitate to contact me if you have any queries or concerns in relation to an Enduring Power of Attorney.

I recently spoke at an educational seminar run by the Institute of Public Accountants.  An interesting discussion evolved about estate planning for blended families and what controls can be implemented to ensure that a Willmaker’s wishes are carried out.

Blended Families

Blended families arise where a couple enters into a relationship and one, or both of them, have children from pre-existing relationships.  Willmakers in this instance often want to leave all of their assets to each other in the event that one passes away, but they also wish to ensure that their respective children benefit from their estate after the surviving spouse passes away. 

Without specific strategies in place, there is the risk that the surviving spouse could change their Will and leave everything in their estate to their own children.  One way to manage this risk is to have mutual Wills.

Mutual Wills

Some key matters to be taken into account when considering mutual Wills include:

1. A mutual Will exists when each spouse agree to leave his/her property to the survivor of the 2 of them, and then that survivor is to leave the property to the beneficiaries that have been mutually agreed - usually a child or children of both husband and wife (including children from previous relationships);
2. A constructive trust actually arises in a true mutual Will;
3. A Court must be satisfied that a constructive trust arises, and it is the constructive trust that beneficiaries can enforce;
4. A Court must be satisfied that there was an agreement between the 2 parties not to revoke the Will without the knowledge of the other;
5. An agreement to make mutual Wills is revocable by one party giving notice to the other of their intention to revoke the Will;
6. Revocation of a Will by re-marriage does not impact on the constructive trust that is created in mutual Will.  Divorce does however free the surviving spouse from any obligation;
7. A mutual Will does not stop a beneficiary from making a family provision application if they have been left out of the Will;
8. A family provision application can still be made after the death of the first party to the agreement.

It is imperative to obtain qualified and experienced advice or in considering preparing mutual Wills, as a number of considerations need to be discussed and thought through before the Wills can be properly implemented, and the risk properly managed.  Please do not hesitate to contact me if you would like to discuss or enquire about mutual Wills.