With an increasing incidence of mental illness affecting a significant proportion of our ageing population, an enduring Power of Attorney is an important legal document that enables trusted friend(s) and/or family member(s) to assume the role of substitute decision maker for financial and legal matters when a person becomes incapable. By taking steps to put in place an enduring Power of Attorney today, you have the power to nominate who you want to make decisions for you if you lose capacity. Failing to make an enduring Power of Attorney means there is no guarantee that the people you want making decisions for you will be the same people appointed as your financial manager.
Sometimes the role of a substitute decision maker involves making some big decisions which can in turn effect the distribution of a deceased person’s estate when the willmaker dies. For example selling the family home to help pay for entry into a nursing home. With this in mind, a willmaker should ensure that their Will takes into account their wishes before incapacity strikes.
Ademption occurs when property that has been gifted in a Will ceases to form part of the willmaker’s estate when they die. This can lead to unfair or unexpected outcomes because the willmaker’s wishes go unfulfilled and can leave a beneficiary disappointed.
In NSW there is legislation that provides an exemption to the failure of a gift of property that has to be sold by an attorney acting as a substitute decision maker for a willmaker. This exemption applies to Powers of Attorney signed after 16 February 2004. However a better approach that creates less angst for an attorney or an executor and more certainty is for a willmaker to ensure their Will properly takes into account their wishes. The best way of ensuring this is for the willmaker to regularly review their Will and update it when their circumstances change.
A properly drafted Will can make provision for contingencies such as the gift of specific property to a beneficiary but if that property has been sold then the proceeds of sale. Alternatively if the sale of that property seems likely, a willmaker may prefer to make a gift of a share of their residuary estate to a beneficiary rather than making a specific gift of property to avoid the gift failing if it is not owned by the willmaker at the date of their death.
At Everingham Solomons, we have the experience and expertise to assist you with all your Estate planning needs because Helping You is Our Business.
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With an ageing population and mental illness on the rise, a recent Supreme Court case provides a unique insight into how one family resolved the dilemma of administering an incapable family member’s estate to accommodate his needs and the wider needs of his family as a means of avoiding future litigation after the man passed away. The case was unique insofar as it resulted in a 94 year old family patriarch’s estate being distributed before his death and was facilitated by family agreement with the approval of the court.
The case involved a 94 year old patriarch of a family, whose estate was subject to a financial management order (because the man had previously been declared incapable of managing his own affairs) with an estimated worth in excess of $15 million. The man’s family consisted of his de facto partner of over 30 years, a step-daughter and three adult sons by a previous relationship. One of the adult son’s was the appointed financial manager of his father’s estate pursuant to the NSW Trustee and Guardian Act. Prior to his admission to hospital in 2014, the man had lived in his own home with his de facto partner and step-daughter. Following his admission to hospital in 2014, it was clear that the man would not be fit to return home and would need to take up residence in an aged care facility.
The man was asset rich and cash poor. He owned his own home in which his partner and step daughter lived, and an investment property but a decision needed to be made as to what assets would be sold to come up with the funds necessary to meet the man’s ongoing needs. This inevitably led to family tensions. The issues to be resolved were fourfold:
(a) whether one or both of the man’s properties should be sold;
(b) the nature and extent of provision to be made, for the man’s de facto partner and step daughter, out of his estate;
(c) whether the Court could, and should, authorise the making of a statutory Will for the man; and
(d) if so, the terms of any such Will.
With the approval of the court, the man’s home was sold and out of that sale funds were paid to the de facto partner and step daughter to enable them to buy another home, the creation of a court made Will which amongst other things, made provision for the man’s three sons, and the man’s son was confirmed as his financial manager for the remainder of the man’s life.
Although each case turns on its own facts, this case demonstrates how in appropriate circumstances, a court can be empowered to facilitate the administration of estates, before and after death provided that stringent safeguards are adopted so as to ensure primacy is “given to the welfare, interests and benefit of the person in need of protection”.
Whilst this case was in many ways unique it does serve to highlight the need for people to plan ahead in case disaster strikes. At Everingham Solomons, we have the experience and expertise to assist you with all your Estate planning needs because Helping You is Our Business.
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Acting as the Executor of an Estate can be a demanding task, especially if the deceased had complicated business affairs and/or left a complex Will. So can an Executor charge for time and effort spent in administering an Estate? In short: Yes.
There are two basic types of payments an Executor may claim:-
Professional fees for services provided to the Estate by the Executor acting in a professional capacity (i.e. accounting or legal services); and
Commission for the Executor’s “pains and trouble” suffered as a result of acting as Executor of the Estate.
Professional Fees
Many Wills will contain a clause which specifically allows an Executor to charge professional fees for work performed in his or her professional capacity in connection with the Estate.
If such a clause is present, an Executor will be able to recover payment for work performed in a professional capacity, provided that:-
he or she renders the Estate with accounts for work performed; and
the residual beneficiaries of the Estate (i.e. those whose share of the Estate will be diminished by the payment to the Executor) authorise such payment.
If there is no such clause present in the Will, an Executor cannot charge the Estate directly for professional fees. An Executor may, however, seek to have professional services provided to the Estate taken into account in a claim for commission under Section 86 of the Probate and Administration Act 1898 (“the Act”).
Commission
The Act provides that the Court may allow an Executor to be paid commission for “pains and trouble” as is “just and reasonable”.
Some factors the Court will look at when assessing how much (if any) commission to allow an Executor include:-
The time spent by the Executor in performing the duties;
The skill and responsibility displayed by the Executor;
The success which attends the Estate’s administration etc.
An Executor is able to claim commission without going to Court, if the residual beneficiaries unanimously consent to the commission being paid.
If you are an Executor and need guidance, please contact the experienced team at Everingham Solomons because Helping You is Our Business.
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A Will, as most people know, is a document prepared to express the wishes of a person upon their death, including most frequently, how the deceased’s estate is to be distributed.
The Will is obviously an important document and for this reason, there are a number of formal requirements mandated to the effective execution of a Will.
The NSW Supreme Court holds the power to grant Probate over a Will. A grant of Probate means that a Will has been certified by the court as being an effective expression of the deceased’s intention and that the deceased’s assets can be distributed in accordance with the Will.
Wills are however open to challenge on two main bases.
Firstly, the grant of Probate over a Will can be challenged. This is appropriate where it is asserted that the Will does not reflect the true intention of the deceased. That situation arises if the Will was said to have been executed under duress, through fraud or whilst the deceased was suffering an incapacity.
Secondly, the effect of a Will can be challenged under what has become known as a Family Provisions Claim (hereafter ‘FPC’). A FPC does not affect the grant of Probate and is often made after Probate is granted. It is not a claim against the intention of the deceased but rather a recognition by the law that there is an expectation on people to make adequate provision for their relatives when they pass away.
In FPCs, courts are not really concerned with what appears to be a fair or predictable distribution of an estate, but rather what the claimant needs for the maintenance and advancement of their life. Where a claimant is plagued by illness or disability which increase their need, their claim will be stronger.
For the reasons above, it is important that a Will is well drafted to ensure that it is effective. If you have concerns about the way a Will was drafted or executed, or the way an estate is to distributed, then contact us at Everingham Solomons because Helping You is Our Business.
A grandfather testator made a Will in which he left his estate to his only daughter (the defendant). The plaintiffs were the only grandsons of the testator, who owned, controlled and operated considerable pastoral holdings near Walgett. The plaintiffs commenced court proceedings against their mother as the executor of their grandfather’s estate, claiming that they were entitled to the entirety of their grandfather’s property, to the exclusion of their mother. Affronted by their conduct, the defendant made the decision to leave her sons out of her own Will. The result would have been, absent a court order or a change of heart by the mother, the plaintiffs would never receive the inheritance they long aspired to receive. It was left to a Court to determine the outcome of the family provision claim made by the plaintiffs against their grandfather’s Will.
Within the family group, the plaintiffs and their parents were all partly dependent upon the testator. He acted as a father figure to the plaintiffs, especially after their parents separated in 1992. He paid for the grandsons’ education. He provided the grandsons with paid work and accommodation on his properties. He shaped and directed their lives after school and to a considerable extent, groomed them for what he expected would be their eventual inheritance. “In the case of both young men, he encouraged them in the expectation that they would inherit the properties. In the circumstances in which they were brought up, the plaintiffs understandably developed an unhealthy sense of entitlement. But there were no promises and there was no agreement”.
The testator made Wills in 1987 and 2002. In both Wills, the testator left his estate to the defendant and provided for the properties to go to the plaintiffs only if his daughter pre-deceased him. The testator “never intended to leave the properties directly to them [the grandsons] while ever his daughter was alive and well, living on the properties and operating them”.
“It should be understood that the position under our law is that grandchildren have no claim as of right to the beneficence of grandparents…Nor should it be assumed that generosity by a grandparent to a grandchild, including by the payment of school fees, automatically converts the relationship into one of obligation to provide for the grandchild on the death of the grandparent”.
In order to make a family provision claim, a grandchild must be a person “who was, at any particular time, wholly or partly dependent on the deceased”. It is not enough for a grandchild to simply put their hand up for a greater share in an estate. Additionally, grandchildren must be able to demonstrate to a Court that “having regard to all the circumstances of the case (whether past or present) there are factors which warrant the making of the application”.
When determining an application for family provision, the Court noted it is appropriate to have regard to “perceived prevailing community standards of what is right and appropriate. This may be an imprecise, variable and contestable standard”.
Ultimately the family provision claim was not successful as the Court formed the view that the factors relied upon by the plaintiffs did not warrant the making of the family provision claim.
In family provision claims, there are principles that emerge from the cases which take into account prevailing community standards of what is right and appropriate but ultimately each case depends on its own facts. At Everingham Solomons, we have the expertise to assist you with all matters relating to deceased estates, estate planning and Family Provision claims, because Helping You is Our Business.
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A recent NSW decision has ignited the debate amongst those who oppose fettering a testator’s right to testamentary freedom against the proponents of current legislation which seeks to protect the family of the deceased by providing for members of the family who would otherwise be left without adequate provision. A recent case saw an applicant bring a successful family provision claim against her former lover’s estate.
The deceased died in 2011 aged 65 years. The deceased left a Will made in 2006. The Will provided for the estate to be divided equally between the deceased’s wife, son and daughter. The estate was worth over $6 million. No provision was made in the Will for the applicant who was the former de facto spouse of the deceased.
In order to make a family provision claim a person must be an “eligible person” as defined by legislation. In NSW the categories of eligible persons generally consist of a spouse of the testator (including de facto spouse) at the time of the testator’s death, a child, a former spouse, a dependent grandchild or a dependent member of the testator’s household or a person with whom the testator was living in a close personal relationship at the time of the testator’s death.
In this case the applicant was an eligible person because she was a person who was, for a time, wholly or partly dependent on the deceased and a member of his household.
The de facto relationship between the applicant and the deceased lasted about 8 years and ended 30 years before the death of the deceased. There was a child of the relationship. After the relationship ended, both re-partnered but there was no property settlement.
The wealth accumulated by the deceased came long after the relationship between the applicant and the deceased had ended. When the applicant returned to Australia in 2006 after working abroad, she turned to the deceased and he provided her with assistance.
The Judge stated “At first blush, one naturally hesitates to find factors warranting a family provision application in a case involving a de facto relationship 30 years distant from the deceased’s date of death, coupled with a divergence in the lives of the former de facto partners as they re-partnered and pursued different economic paths”. Against this the Judge noted “as life unfolded, there was (in social terms) a reconciliation” between the applicant and the deceased; “their estrangement was not, in that context, absolute or complete; the deceased remained solicitous of the welfare” of the applicant “in part, but not only in part, because he recognised her as the mother of his son; he encouraged her to return to Australia in 2006; and, when she did so, he provided her with assistance”.
In making an evaluative judgment, the Court made provision out the deceased’s estate to the applicant in the sum of $350,000.
At Everingham Solomons we have the expertise to assist you with all matters relating to family provision claims, because Helping You is Our Business.
Making a valid Will is one of the most important things a person can do to protect their loved ones. Over time a Will needs to be reviewed and updated so that it properly reflects life changing events. A recent South Australian court case highlights what can happen when appropriate professional advice is not sought before changing a Will. The effect can be devastating if the gift fails which was the result in this case.
The deceased left a valid Will dated 21 January 1993. The deceased subsequently prepared a note by hand on 12 May 1994 which sought to make a change to the 1993 Will. The terms of the 1994 document provided “Michael may have the use of the house for as long as he needs it”. Unfortunately the 1994 note did not comply with the legal formalities required to change a Will for example there were not two witnesses present when the note was written out by hand by the deceased and signed. This resulted in the case having to go before a court to determine a proper construction of the 1994 handwritten note of the deceased. This in turn caused delay and inconvenience to the administration of the estate.
Notwithstanding that the 1994 handwritten note prepared by the deceased did not comply with the strict formalities prescribed by legislation, courts are empowered to dispense with the formal requirements of a Will if certain requirements are met. In this case much turned on the 1994 document using uncertain language. “In the circumstances of this case, the expression ‘for as long as he needs it’ is, without more, entirely uncertain”. For example, how is Michael’s ‘need’ for the residence to be determined, by an independent arbitrator or by Michael himself? Is regard to be had to Michael’s financial situation and are emotional factors, such as sentimentality, to be considered also? The Judge emphasised that a reasonable beneficiary would require answers to these kinds of questions since the ultimate realisation of their bequest depends upon their answer.
In the end the court determined that the gift set out in the 1994 document was uncertain and therefore the gift failed. “In the circumstances, I am unable to give precise meaning to the expression, ‘as long as he needs it’, and therefore the duration of the … the gift is uncertain. I am not prepared to make any presumptions to remedy the ambiguity”.
In a 2013 case, a timely warning was issued “Homemade Wills are a curse. Occasionally where the assets of a testator are limited and where the beneficiaries are not in dispute no difficulties may arise in the administration of an estate. Flaws in the Will can be glossed over and the interests of all parties can be reconciled. But where, as here, the estate of the deceased is substantial, the Will is opaque and there is no agreement among the beneficiaries, the inevitable result is an expensive legal battle which is unlikely to satisfy everyone. All of this could have been avoided if the testator had consulted a lawyer and signed off on a Will which reflected his wishes”.
At Everingham Solomons we have the expertise and experience to assist you in making a Will that is in conformity with current law and deals with your particular circumstances Because Helping You is our Business.
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A testamentary trust is a trust established by a Will that comes into existence upon the death of the testator (the person making the Will). Creating a testamentary trust provides an alternative from giving a gift to a beneficiary absolutely. Instead, the gift is given to the trustees of the trust (usually the executors of the Will), to distribute to the intended beneficiary at a later time.
Benefits of Testamentary Trusts
Including a testamentary trust in your Will can have various benefits, including:
Providing trustees with flexibility and the ability to respond to the changing circumstances of various beneficiaries;
Protecting your assets from being squandered by an irresponsible beneficiary;
Providing an avenue to protect assets that are intended for a disabled/ underage beneficiary; and
Various taxation benefits.
Pitfalls of Testamentary Trusts
Whilst testamentary trusts have the potential to provide numerous benefits, they are not without their drawbacks. Namely:-
The cost of having your Will prepared will be increased and there will be ongoing administrative costs once the trust comes into existence;
Your affairs may be unnecessarily complicated; and
A great responsibility and onus is placed on trustees to administer the trust.
Who should include a Testamentary Trust in their Will?
The inclusion of a testamentary trust should be considered by all persons making a Will, however, they will not be suitable to everyone.
Testamentary trusts may prove particularly useful in the following cases:-
Where there is a large asset pool;
Where the minimisation of tax will be particularly important to beneficiaries; and
In families with young and/or disabled children.
For more information about testamentary trusts and how they can benefit you, please contact the experienced team at Everingham Solomons because Helping You is Our Business.
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The rhetoric regarding the dangers of the “age of entitlement” recently espoused by politicians in relation to the Federal Budget has rung true in relation to a Family Provision Act case made in relation to a family farm.
The court proceedings involved the Will of Mr W, who had left three farming properties in western NSW to his daughter. The daughter had been a partner in the farming business with her father
One of the daughter’s sons, that is a grandson of Mr W, commenced a Family Provision Act claim challenging his grandfather’s Will and seeking an immediate inheritance from his grandfather.
The grandson argued that he was entitled to receive one of the farms now and should not have to wait for his mother to hand over the reins when she retired or passed away.
The court considered whether the grandson had a right to inherit from his grandfather’s estate.
As a general rule, grandparents have no responsibility to provide for a grandchild – unlike a parent who should make adequate provision for the proper maintenance, education or advancement in life of a child. There are obvious exceptions to this rule, such as the grandparents who raise a grandchild on the death of the child’s parents.
In this case, the court also investigated the practicality of the grandson’s request – that is, whether the family farms could be divided between the grandson and his mother, and still operate as an economically viable enterprise. A court appointed expert deemed that division of the various landholdings on which the farming business was conducted would not be financially feasible.
Accordingly, the court upheld the grandparent principle and ruled that Mr W’s Will would stand – the daughter would inherit the farms to the exclusion of her son.
Needless to say, the court case created bad blood between the mother and the grandson, and it seems the mother had the last laugh – at the conclusion of the case she informed her son that he would be disinherited and had no prospect of ever running the family farm.
To ensure your Will does not create a family feud, contact the experienced Estates Team at Everingham Solomons where Helping You is Our Business.
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“[T]he complexity which attaches to family relationships” is never more apparent than in the arena of family provision cases. For one Queensland family “the bonds of family life were tested to extremes”, leaving some of the children “hurt and resentful by the actions of their father [the deceased]”. This case is significant because it is the largest provision order made ($3,000,000) by a Queensland Court to date.
The deceased died in 2010 aged 78 years leaving a will made in 2000 and codicil in 2008. The deceased left behind a wife and children and a $27,000,000 estate. The applicant in this case was Steven, a son of the deceased. The deceased named his widow, Jane as executor of his Will and left her the majority of his estate save only for some real estate left to one son, Jonathon. The deceased made no provision for Steven or his daughters, Natasha or Tania setting out reasons for each in the Will.
There were three other applications for provision made by Jonathon, Tania and Natasha. Each of them was settled out of Court.
Steven contested his father’s Will arguing that his father failed to make adequate provision for him in the Will. Steven relied upon the work he had undertaken over many years for his father, and the extent to which that work assisted in the amassing of the estate. Also Steven had been involved in a motorcycle accident prior to his father’s death, sustaining injuries that prevented Steven from working as a pilot and restricted him performing physical work.
The Court’s role was to determine whether Steven had been left without adequate provision for his proper maintenance, education and advancement in life. There were a number of factors that the Court was required to take into account. The following factors were persuasive for the Court in finding that Steven had been left without adequate provision:-
(a) The estate was very large.
(b) Steven worked long and hard for his father and contributed to the growth of his father’s property interests.
(c) At the date of death Steven had substantial assets but also had substantial liabilities which were subject to the vagaries of the financial market.
(d) Two of the reasons for the deceased not providing for Steven in the will were either misconceived or based on a misunderstanding of their value.
(e) Steven‘s injury meant he could no longer be a pilot and he could not perform labouring work on his own properties.
(f) The provision made during the deceased‘s lifetime was subject to Steven entering into debt in order to obtain the benefit of the properties. In other words, what was received was not a gift but, in effect, a discounted sale.
At Everingham Solomons we have the expertise and experience to assist you in all aspects of family provision claims because Helping You is Our Business.
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With an increasing incidence of mental illness affecting a significant proportion of our ageing population, an enduring Power of Attorney is an important legal document that enables trusted friend(s) and/or family member(s) to assume the role of substitute decision maker for financial and legal matters when a person becomes incapable. By taking steps to put in place an enduring Power of Attorney today, you have the power to nominate who you want to make decisions for you if you lose capacity. Failing to make an enduring Power of Attorney means there is no guarantee that the people you want making decisions for you will be the same people appointed as your financial manager.
