Australian Estate Law Today

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.

Two weeks ago, John Goodman was found guilty of DUI, manslaughter and vehicular homicide in the USA.

The charges related to an incident that occurred on 10 February 2010 when Mr Goodman, an air-conditioning mogul from Palm Beach Florida, allegedly ran a stop sign in his Bentley convertible and struck a Hyundai being driven by Scott Wilson, a 23 year old civil engineering student.  Wilson’s car landed in a nearby canal where the young man drowned.

The criminal proceedings coincide with a wrongful death civil suit filed by Wilson’s parents.

Fortunately for Goodman, he had set up a very large trust fund reportedly worth several hundred million dollars for the benefit of his children that is beyond his control. So far as his lawyers are concerned it is also beyond the grasp of Wilson’s parents should their case prove successful.  What makes this case particularly interesting however, is the fact that one of those children is also his 42 year old girlfriend.

At the advice of Goodman’s estate planning attorney, Goodman has recently adopted his girlfriend, Heather Laruso Hutchins, making her a beneficiary of the Trust.  The craftiness of this situation would be that the parents of Mr Wilson would be unable to claim the Trust funds as a component of their lawsuit in the event that they are successful.

According to a recent article on slate.com there is actually a growing trend in the United States of adopting one’s adult lover or spouse for the associated estate planning benefits.

Before you race out and adopt your significant other here in Australia, there are a number of implications that you will need to consider:

1. Whilst in an earlier decision, Palm Beach County Circuit Judge Glenn Kelley ruled that the Trust Fund that Goodman had created for his children was “off limits”, in a recent decision, Judge Kelley ruled that when a jury decides next month whether Goodman should pay Mr Wilson’s parents for the death of their son, they will be able to consider the millions of dollars that Goodman’s girlfriend is now a beneficiary to.  As Judge Kelley stated, “the Court cannot ignore the reality of the practical impact of what Mr Goodman has now done.  [Goodman] has effectively diverted a significant portion of the assets of the children’s Trust to a person with whom he is intimately involved at a time when his personal assets are largely at risk in this case”.
2. The second implication is whether or not Mr Goodman could be charged with incest, which pursuant to Section 222(5) of the Criminal Code Act 1899 (QLD), is defined to include without limitation, sexual relations with adoptive offspring or other lineal descendants.

Rumors are currently swirling that the civil matter has been resolved by an out of court settlement. In any event however, in my view, whilst Mr Goodman’s estate planning attorney’s approach was a novel one, it is not one that I believe carries prospects of success in Australia.

Whilst it is important to consider asset protection in your estate planning, this case probably takes it a bit too far!

Please contact me if you have any questions regarding Asset Protection and Estate Planning.

I have been following with interest thenews 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 read with interest a recent article in the Australian Newspaper in relation to a  Victorian Supreme Court decision where a stepdaughter was awarded a large payment by the Court for a claim made against her stepfather’s estate.

The claim was made against the estate of the late Harold Ward.  Mr Ward died in 2007 and left his shares in the family company Ward McKenzie to his three natural children.  These shares were valued at approximately $30 million.

The natural children argued that their father never wanted anyone other than a blood relative to own shares in the company.  He had indicated the success of the company was put down to wholesome family values.

The claimant was the daughter from the deceased’s second wife.  She lived with him for four years between the ages of 14 and 18 when she became independent.

The deceased, Mr Ward did not make provision for his stepchild for the reasons outlined above, and also that the stepchild was to receive provision from her own mother’s Will.

The natural children argued it would be difficult to provide for the stepchild as the only asset in the estate were shares and there was no cash.  The shares will be difficult to sell because it was the deceased’s wish that they remain in the Ward Family.

Justice Hargrave of the Victorian Supreme Court ordered that the Ward children pay an amount of $750,000.00 to the stepsister to be held in trust, plus $50,000.00 a year living expenses until her mother dies.  The lump sum was to be held in trust by a trustee if who could make sound financial decisions.

This case highlights the importance of identifying any potential claims when drafting and preparing your estate plan.  In this case the Judge did not interfere with the deceased’s wishes of having ownership of the company outside the family.  Instead the lump sum payment was made.

Assessing these types of claims a Court will take into consideration the circumstances of the party making a claim, and at this instance, the Judge thought it appropriate to make the award, despite the wishes of the deceased.

Please do not hesitate to contact me if you have any questions about this very important topic.

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 depletethose 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 often get queried by clients as to what amounts to a “de facto spouse” in the context of claims being made against an Estate. It is very important to understand that the definition of a de facto relationship in the context of succession law is different to family law.

A “de facto spouse” is a reference to either one of two persons who are living together as a couple on a genuine domestic basis, but who are not married to each other, or related by family. 

In deciding whether two persons living together as a couple on a genuine domestic basis, any of the following factors may be taken into account by a Court:

1. The nature and extent of the common residence
– it is generally necessary to show that the parties have been sharing a common residence.  Maintaining separate homes makes it more difficult to prove a de facto relationship exists.  It is also important to demonstrate how the parties share the common residence.  For example, if the parties occupy separate bedrooms it weakens the factor of common residence.
2. Length of the relationship – naturally the longer the relationship the more likely it is to be treated as a marriage-like relationship.  In Queensland there is a two year minimum period.  Short periods of separation may not necessarily mean the de facto relationship has ended.  The intention of the parties will be a relevant consideration of the Court.
3. Whether or not a sexual relationship exists or existed – the existence of a sexual relationship, during, or at least at some stage in the relationship, needs to be established.
4. Degree of financial dependence or interdependence – where parties, in a financial sense, treat each other with trust and generosity and intermingle their finances, this provides good evidence of a common household.
5. Ownership, use and acquisition of property – joint ownership of property is a very important factor indicating a marriage-like relationship, particularly where property is owned by the parties as joint tenants (meaning that the property automatically transfers to the surviving person upon the death of one person).
6. Degree of mutual commitment to a shared life - evidence of a future intention to marry is very relevant. Physical, emotional and financial support and caring in times of hardship and/or sickness is also relevant.  The stronger the support shown, the stronger the evidence of this factor.
7. Care and support of children – where one party takes the principle caring role for either their own or the other party’s children, this will be deemed good evidence of this factor. This however does not apply if the parties do not live together under the one roof.
8. Performance of household tasks – this factor is relevant when one party can be shown to undertake most household chores, or if household chores are shared jointly.  Evidence of cleaning, shopping for food and household goods, preparation of meals, maintaining gardens, household maintenance etc will be relevant factors.
9. Reputation and public aspects of the relationship – it is very important to be able to provide evidence as to how a couple present themselves socially or in business situations. Evidence from either of the parties, and those who have been in contact with them, will be useful in any Court proceedings. As will evidence of taking holidays together, attending family occasions such as weddings. Evidence from neighbours can carry a great deal of weight.
10. Courts may also take into account other issues including:

(a)   Whether a single pension is received whilst living under the same roof;

(b)   The exclusivity of the relationship is only one factor that the Court will consider;

(c)   The subjective beliefs of each party to the relationship will also be considered, but the       Court will look primarily to objective evidence.

The above is certainly not an exhaustive list of factors that will be taken into account. Each case will be assessed on its own merits by a Court.

If you have any queries or concerns in relation to your relationship, or whether a claim could be made against an Estate, do not hesitate to contact.

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.

A question that will undoubtedly be asked more and more frequently in the preparation of estate planning documents is what will happen to the online identity of a person when they die. 

As our online presence becomes more and more aligned with how we define ourselves, Will makers are beginning to recognise the need to ensure that they consider how the online component of their lives will continue, or cease to continue, upon their death.

News.com recently flagged an interesting article on this very issue.  Across the World it is estimated that 1.78 million Facebook users are expected to die this year, nearly 200,000.00 of them over the age of 55.

The issue that this raises is what will happen to the email, internet banking, Facebook, Twitter, Youtube, iTunes, and Linked In accounts of these people following their death.

The article calls for heavier regulation and the establishment of a code of conduct for website providers in the way in which they deal with approaches by family members of a deceased, however in my view, the matter could in some circumstances be better dealt with by way of pre-emptive estate planning.

While there may be legal implications with the disclosure of pertinent banking and other online passwords, it may be prudent for Will makers to provide a list of online passwords amongst their personal papers that can be passed to their Executors upon their death. In this way, the passwords are not openly disclosed as part of the Will, but the deceased’s accounts may still be managed in accordance with their wishes, provided they are clearly set out in the Will.

Thought must be given here as to how online service providers and regulators will handle the disclosure of passwords and other pertinent personal information by their users into the future, as generations who have grown accustomed to enjoying an online identity approach old-age.

While a solution to this issue is far from clear-cut and traverses a number of sometimes conflicting areas of law, the consideration is one that we are more than more likely to be faced with into the future.

If you have any questions about this important topic, or your Estate Planning needs in general,  please contact me.

I was recently involved in a dispute regarding the payment of a Deceased member’s death benefit from a superannuation fund. It highlighted to me the importance of considering your Superannuation when undertaking your Estate Planning, and the consequences of not properly considering your Superannuation.

FACTS

In this matter:

1. The Deceased had a substantial amount of money in superannuation;
2. The Deceased had advised her children prior to her death that they were to share equally in her Estate (which she said included her superannuation) with her de facto;
3. The children and the de facto did not get on;
4. After the Deceased passed away it was established that assets had been transferred to the de facto prior to the Deceased’s death and other assets were held jointly with the de facto (meaning that they went automatically to the de facto);
5. The de facto made an application to the Trustee of the Superannuation Fund for 100% of the death benefits to be paid to the de facto;
6. There was very little left in the Estate assets to be distributed, as the Superannuation did not form part of the Estate assets;
7. The children also applied to the Trustee of the Superannuation Fund, for the Trustee to exercise his discretion to pay the superannuation fund consistent with the wishes outlined in the Deceased’s Will;
8. The Trustee of the Superannuation Fund determined that it would pay all money to the de facto.

In this case there was no Binding Death Benefit nomination signed.

WHAT IS A BINDING DEATH BENEFIT NOMINATION?

A Binding Death Benefit Nomination is a document signed by a member of a Superannuation Fund binding the Trustee of the Superannuation Fund to pay amounts from the Member’s entitlements in the Superannuation Fund to those parties nominated.

FORMAL REQUIREMENTS OF A VALID BINDING DEATH BENEFIT NOMINATION

To be valid a Binding Death Benefit Nomination must satisfy all of the following:

1. It must be in writing;
2. The people nominated must be dependants or a legal personal representative of the member, at the time of the member’s death.  Dependants can include inter-dependants (e.g. two persons living together and providing financial, domestic and personal support to each other;
3. It must state the proportion of the benefit payable to each nominated beneficiary;
4. It must be signed and dated by the Member in the presence of two witnesses over the age of 18 years, neither of whom are nominated to receive a benefit;
5. The witnesses must sign and date the declaration stating the Member signed the document in their presence;
6. It must have been signed, confirmed or updated within a three year period (or shorter period if specified in the Trust Deed).

The formal requirements of the Superannuation Industry (Supervision) Regulations must also be complied with.

WHAT IF THERE IS NO BINDING DEATH BENEFIT NOMINATION?

If there is no Binding Death Benefit Nomination the Trustee of the Superannuation Fund has a discretion with respect to who should get paid.

Regulation 6.2.2 of the Superannuation Industry (Supervision) Regulations 1994 provide that a Trustee of the Superannuation Fund must pay a death benefit to either or both of:

• The Member’s legal personal representative (i.e. the Estate); or
• One or more of the Member’s dependants.

Dependants can include a spouse (including a de facto spouse), child or a person in an inter-dependency relationship.

In this particular situation, if a Binding Death Benefit Nomination had been signed, the death benefits from the Superannuation Fund would have been paid directly to the children in the desired proportions, and no dispute would have arisen. It is disappointing when the wishes of a Deceased person are not seen to fruition, due to an oversight or misunderstanding of what is required to fulfil your objectives within your Estate Plan.

To avoid this situation occurring in your family, it is important to obtain expert legal advice when preparing your Estate Plan, Wills and other associated documents. Please do not hesitate to contact me should you have any questions in relation to this issue.

IS AN ELECTRONIC WILL A WILL?

I recently read an interesting case from the Supreme Court of Queensland called Mahlo v Hehir.

In that case the Deceased had typed on her home computer a document in the form of a Will, two weeks prior to her death. The Will appointed her brother as Executor and allowed for gifts to her parents, along with the balance of her Estate to her son and daughter.

The Will was not signed.

The Deceased had a previous Will made approximately three months earlier, where she appointed her then de facto as Executor and Beneficiary of her Estate.

The Deceased’s children sought an Order from the Court that the electronic document was in fact the Deceased’s last Will, rather than being in a situation where the Deceased’s former de facto was the sole Executor and Beneficiary of her Estate.

The document was an electronic document. The Succession Act allows for an electronic document to be determined as a Will.

There was no evidence of the electronic document being printed. On the face of it the document purported to state the Deceased’s intentions , however, an issue arose as to whether the document was made by the Deceased or her daughter. The issue of testamentary intention therefore became evident.

The Respondent in this matter, Mr Hehir, was a financial planner and neither admitted nor denied that he had drafted the clause in the February Will leaving a residence owned by the Deceased to him.

One month after the February Will, Mr Hehir rented an apartment, however, he continued to sleep at the Deceased’s house. 

The Deceased had indicated to other family members that her relationship with Mr Hehir had ended.

Importantly, on 8 May 2008, Mr Hehir emailed the Deceased, attaching a copy of previous Wills indicating that he had recreated her Will for her.  Mr Hehir asked the Deceased to send a copy of the Will for him to peruse to ensure that it still met with the legal criteria before resigning it.

There was a lot of evidence lead as to discussions and communications had between the Deceased, family members and Mr Hehir in relation to the electronic Will.

In deciding the question as to whether or not the electronic document was a Will, the Court found:

1. The question is whether the electronic document was intended by the Deceased to form her Will;
2. The Court was not satisfied that the Deceased intended the electronic document to form her Will.  The Court found that the Deceased knew that in making a new Will she had to do more than type or modify a document on a computer. She understood that she had to sign it.
3. The Deceased had a fairly recent experience in making a Will, which was signed and witnessed.
4. The electronic document made specific provision for where the signature was to appear and be witnessed, and the Deceased had been reminded by Mr Hehir of the necessity for her signature.
5. The case was different to the case of Re Trethewey, where the Deceased had said on several occasions that he had left Will on his computer. The Deceased, in this instance had described a paper document as being her Will.

The Court dismissed the claim that the electronic Will formed the last Will of the Deceased. The result of this was that the former de facto benefitted generously from the Deceased’s Estate, over and above the Deceased’s children.

This case serves as a timely reminder to ensure that:

(a)     Your Will is updated if personal circumstances change; and

(b)     You act quickly to ensure that your Will is prepared properly, with qualified legal advice; and

(c)     Your Will is executed promptly to ensure there is no argument as to what your intentions are.

If you have any questions in relation to this particular matter, or finalising your Will, please do not hesitate to contact me.