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Wills & Estates

Common Myths About Wills

By | Wills & Estates

Wills & Estate Lawyers come across many common myths and incorrect assumptions about Wills. Relying on these mistaken beliefs can have serious financial and emotional consequences for your Estate and your family members following your death.

Myth #1 – “If I die everything will automatically pass to my husband/wife or partner”.

This is not always the case.If you die without a Will, you are considered to be intestate. The Queensland intestacy laws contain a set of rules for the distribution of assets where people have died without a valid Will. Under those rules, your spouse will receive a portion of your Estate. However, they may not receive all of your Estate depending on the size of your Estate and the other family members you leave behind. Further a partner may not be considered a spouse for legal purposes such as distribution of your Estate on intestacy.

Although the intestacy rules recognise the importance of providing for your spouse, the provision your spouse actually receives may not be adequate for his or her needs. In those circumstances your spouse may be forced to bring a claim on your Estate resulting in costly litigation and an enormous emotional burden for your spouse and your family.

By making a Will now, you can ensure your spouse or partner is adequately provided for and prevent your assets passing to those you do not intend to benefit from your Estate.

Myth # 2 – “If I don’t make a Will, my Estate will go to the State or the Public Trustee.”

This is a common misconception and although it is not completely untrue, the chance of this occurring is extremely low.

If you die without leaving a valid Will your Estate will be distributed in accordance with the Queensland intestacy rules. Generally your spouse and your children will inherit, but it can get quite complicated especially when there are current and former spouses and blended families involved.

In the event you that you are not survived by any spouse, child, parent or next of kin, the Estate is deemed to be bona vacantia and the State is entitled to it. This will only occur after a thorough search has been carried out to determine there are no living relatives who may be entitled to your Estate.

Myth #3 – “I don’t have any assets so I don’t need to make a Will”.

The Estate of a deceased person needs to be dealt with, regardless of whether there are many assets or not, and regardless of whether there is a Will or not.

Even if you think your Estate is not worth a lot, it is still important to make a Will. The administration of your Estate will be simpler, quicker and less expensive if you have made a Will.

Further, your Estate might be worth more than you think. Many people have personal possessions and superannuation. Superannuation may form part of your Estate and by law will require distribution.

Additionally, if a person dies accidentally there may be substantial compensation that falls into the Estate for distribution. Small Estates can be unnecessarily complicated if you have not made a Will.

Myth #4 – “I can write my own Will using a Will-kit an online template”.

Can an informal document be a Will? read more Making a homemade Will can be disastrous for your Estate and your family.

It is our experience that homemade Wills, do-it-yourself Will Kits, and online template Wills cause more problems than they are worth. It is very common for people to complete the Will Kit forms or online templates incorrectly or fail to have it signed and witnessed correctly.

This can result in a purported Will being challenged in court if the drafting is not clear or if there is any uncertainty about the meaning or interpretation of your words.

While leaving behind a note or homemade will might outline what you would like to happen, this type of document may not be legally effective.

The costs to have the Court determine if an informal document is your last Will and/or to interpret what the document means will be substantially greater than the up-front cost of seeing an experienced solicitor to prepare your Will.

It will also cause additional uncertainty, stress and delay for your family members following your death.

Myth #5 – “If I leave my child a nominal gift (eg $1) in my Will, they won’t be able to bring a claim on my Estate.”

This is not true. Leaving an estranged child a small or nominal gift will not protect your Estate from a claim. In fact, it might have the effect of upsetting the person you wish to disinherit and actually cause them to bring a claim on your Estate.

One of the significant factors in considering whether adequate provision has been made for a child or spouse is the needs and financial position of that person. A nominal sum obviously does not take into account those issues at all.

Related Myth #6 – “I can make a Will that no one can challenge or change”

In Queensland the spouse, child or dependents of a deceased person have a statutory right to make a claim on the Estate if adequately provision has not been made for their proper maintenance and support. For more information on this topic please see our guide “Have you been left out of a Will”. It is not possible to make a Will that no one can challenge or change. There is no certain way to guarantee that a claim will not be made.

Our experienced solicitors can give you advice on some of the steps you can take to reduce the risk that a person will make a claim on your Estate. These steps may include keeping assets out of the Estate and therefore beyond the reach of a claim (for example, through joint ownership, binding nominations on superannuation or trust structures). Such steps may have undesirable asset protection, tax and stamp duty risks so need to be carefully considered.

Myth #7 – “I cannot make a gift to the person I nominate as executor”

This is not true. It is very common to appoint your spouse as your executor and to leave your whole Estate to your spouse.

On a separate but related note, your executor is entitled to claim a commission from your Estate for performing the role of executor. To claim commission the executor must obtain the Court’s permission. It is common for the Court to allow commission in the range of 1.5% – 3% of the Estate, depending on the size and complexity of the Estate and the time and skill involved in its administration.

To avoid the cost of obtaining the Court’s permission, an executor will sometimes obtain the consent of each of the beneficiary’s to the commission to be paid.

If you do choose to leave a gift to your executor, it is important that your Will is clearly drafted to express if that gift is conditional upon that person performing the role of executor and if that gift is in substitution for any rights the person would have to claim executor’s commission.

It is best to appoint an adult family member whom you trust and consider reasonable and sensible as your executor. If you do not have a trusted family member or friend to perform the role of executor, you can consider appointing the Public Trustee or a solicitor from our firm to be your executor in their professional capacity. If you appoint a professional executor your Estate will have to pay for the professional services of that person to administer your Estate. Given that an executor who is a family member will generally not be paid nor claim commission it is far preferable to appoint a family member where possible.

Myth #8 – “I can use my will to make a gift of my superannuation benefits”.

Your Will disposes of all assets you own at the date of your death. If you have funds held in a superannuation account, technically those funds are held by the Trustee of the Superannuation Fund, for your benefit. You do not yet own them and they will not automatically form part of your Estate.

Given that superannuation often represents a significant part of your net wealth, and that you may have substantial sums in death benefits connected to your superannuation, it is critically important to understand how your superannuation will be dealt with on your death.

For more information on how your superannuation will be dealt with following your death please see our guide “Superannuation: Your Biggest Asset

Myth #9 – “I can make a gift in my will of assets held by a family trust because I am the trustee of that Trust”.

If you are a trustee of a family trust or a unit trust or a self-managed superannuation fund, you should obtain specialised Estate planning advice about what will happen to the trust and the assets owned by the trust following your death.

In your Will it may be possible to appoint a person who will take on the role of trustee from you on your death. This allows you to pass the day to day control of the trust to another person. However, since you do not personally own any of the assets of the trust, you cannot use your Will to give away or deal with any of the assets owned by the Trust. Only the Trustee can make distributions from the Trust in accordance with the Trust Deed.

At the time of making your Will, the terms of the original Trust Deed (and any amendments to that Deed) will need to be consulted to consider the beneficiaries, the clauses regarding death of a trustee, and any powers of appointment of trustees, appointors or principals, to ensure that you have an effective plan regarding the control and beneficial interests of the assets of the trust following your death.

Myth #10 – “I can keep my will confidential after my death and tell my executor not to show it to anyone else”.

Following your death your Executor is entitled to all of your property, including all of your documents.This includes your original Will, which will not be provided to any person other than the Executor you have nominated in your Will, following proof of their identity and proof of your death.

Section 33Z of the Succession Act 1981 (Qld) provides that a number of other people are entitled to obtain a copy of your Will, including:

  1. A person mentioned in the will;
  2. A person mentioned in any earlier will of the deceased;
  3. A spouse, parent or child of the deceased;
  4. A person entitled to a share of the Estate if the person had died intestate
  5. A creditor of the Estate;
  6. A person entitled to bring a family provisions application against the Estate.

Even if you have instructed your Executor not to show your Will to anyone else, or not to your Will to a specific person or persons, if one of the people listed in s33Z requests a copy, they are entitled to it and your Executor will have to provide them with a copy.

Lawyer Says, “Leave The Will Alone”

By | Wills & Estates

In her Will, the deceased women gave her second husband the right to live in her home, free of all cost apart from rates and insurance, for the rest of his life.

The Will provided that after his death the house was to be sold and the proceeds divided between the three adult children of her first marriage. The deceased and her second husband did not have children of their own. The second husband was aged 60 of the time of his wife’s death and was living in her home throughout the marriage. Although, the children of the first marriage had the right to claim a better share from her estate they chose to make no claim. Despite his right to live in the home for the rest of his life the second husband was not satisfied and made a claim to full ownership of his late wife’s home. By lodging his claim for a greater share the second husband gave each of the three children an opportunity to claim further provision for themselves which they did.

When the parties and their Solicitors met to resolve their differences, it became clear that the cost of the debate could not be met out of the small cash estate left by the deceased. The cost of all parties with legitimate claims is usually paid out of the estate assets and the home had to be sold to meet the legal expenses and the claims of the three children. In the end the husband ended up with only a small sum of money, far less than needed to buy an alternative home. It was a poor result for him because he and the new wife he married only months after his first wife’s death, lost the opportunity to live cost-free for the rest of his life in a home they could call their own. The children, on the other hand, received their share of the mother’s estate many years sooner than they could have expected to receive it.

 

© Delaney & Delaney Solicitors. This publication is for information only and is not legal advice. You should obtain advice specific to your circumstances and not rely on this publication as legal advice. Should you have any queries in relation to this publication, please contact our office on (07) 3236 2604.

Drafting A Will

By | Wills & Estates

Considering Availability of Assets When Drafting a Will

Delaney & Delaney administers many deceased estates, acting for the executors of Wills.  On behalf of the executor, we collect the net assets of the deceased and distribute them in accordance with the Will.

It is common nowadays for people to deposit funds in various investment organisations who invest the funds for the investor, and in return, the investor receives dividends and sometimes a weekly pension.

We have administered a number of estates of deceased who held investments in these particular financial institutions.  Since the global financial crisis, some of these institutions have frozen the funds.  Now, instead of contacting the institution and withdrawing the deceased’s invested funds, the investment may only be withdrawn at the discretion of the institution.  Often, the investment may only be withdrawn in small instalments.  Consequently, the estate administration process can be prolonged unnecessarily and beneficiaries may not receive their gifts from the estate for years after the death of the will maker.

Anyone who makes a Will should consider how readily accessible his or her assets are, and whether particular clauses need to be drafted in the Will in consideration of frozen assets.

 

© Delaney & Delaney Solicitors. This publication is for information only and is not legal advice. You should obtain advice specific to your circumstances and not rely on this publication as legal advice. Should you have any queries in relation to this publication, please contact our office on (07) 3236 2604.

An Unsent Text Message Can Count as a Will – But at What Price?

By | Wills & Estates

In Re Nichol; Nichol v Nichol [2017] QSC 220, the Supreme Court of Queensland ruled that an unsent text message on the mobile phone of a deceased person, could be treated as a Will pursuant to section 18 of the Succession Act 1981 (Qld).

he effect of the text message was to bequeath the deceased person’s Estate to his brother and nephew, rather than to his wife of one year, with whom he had had a difficult relationship. The mobile phone with the unsent message was found with the deceased when he was discovered after tragically taking his own life. The deceased had made no formal Will during his lifetime.

Generally there are very strict execution requirements for a Will. It must be in writing, signed by the person making it, dated when it is signed, and witnessed by two independent witnesses. If these formalities are not complied with, the Will may not be valid.

The outcome of the case is a surprise for Estate lawyers, who meticulously ensure that the Wills they draft for their clients comply strictly with the legislative requirements.

The case of Re Nichol shows that the courts are endeavouring to keep up with modern times, where it is becoming common for people to record their feelings and wishes in electronic form. The general perception that a binding legal document must display a handwritten signature is fast going out of fashion. In response to the changing times, courts are taking a more flexible approach to Wills that are not executed in accordance with the traditional requirements.

The High Price of a Cut-Price Will

However, the court’s decision in Re Nichol does not mean that there is no need to make a formal Will.

In circumstances where a Will is properly drafted and executed, having complied with the strict legislative formalities, the process of Estate administration is much more smooth and inexpensive.

There is no doubt in this case that a substantial portion of the Estate would have been spent in litigation costs. There would also have been significant stress for all parties involved.

The relatively small cost to have your Will properly drafted and executed while you are alive, could save your Estate thousands of dollars in litigation costs after you die.

What Did the Deceased’s Brother and Nephew have to Prove?

In limited situations, an informal document that purports to state the testamentary intentions of a deceased person can be classified as a Will, or part of a Will. The Court must be satisfied that the person really intended that document to be a Will.

Proving that a person really intended an informal document to be a Will is a strenuous task.  It involves compiling evidence to prove complex legal concepts, including the intent to make a Will and the testamentary capacity to make a Will.

In Re Nichol, after considering all of the evidence, the court found that the deceased had testamentary capacity and that the text message was intended to operate as his Will upon his death.

The Court also decided that almost all of the costs of the parties to the litigation would be paid out of the deceased’s estate. These costs would have been substantial.

Delaney & Delaney has over 100 years’ experience drafting Wills, advising on Estate planning, and administering Estates. We welcome you to contact us today so that you have the peace of mind that your wishes are in a form that the Court will simply accept as valid.

The case of Re Nichol can be accessed here: http://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/qld/QSC//2017/220.html

 

By Ingrid McCabe

© Delaney & Delaney Solicitors. This publication is for information only and is not legal advice. You should obtain advice specific to your circumstances and not rely on this publication as legal advice. Should you have any queries in relation to this publication, please contact our office on (07) 3236 2604.

An Insight into Special Disability Trusts

By | Wills & Estates

Special Disability Trusts can be established to great benefit for vulnerable people with a disability. William Delaney shares his expert insight into how Special Disability Trusts operate.

What Is a Special Disability Trust?

A kind of Trust established for Succession Planning for current and future care of a person in a family with a severe disability or severe medical condition.  There is only one beneficiary namely, the person with the disability.

It is not called a “Special Disability Trust” because the Disability is “Special”.  It is “Special” because of the benefits available through Centrelink.

What is the purpose for the Trust funds?

The Trust fund can only be spent on the care and accommodation needs of the beneficiary. However, up to $11,500 can be applied each year for other needs on related items.  This is called, “discretionary spending”.  The Trust cannot pay a family member for providing any service or accommodation.

Is there an end date to the Trust?

The Trust comes to an end on the date of death of the beneficiary or when all funds have been expended.

So there needs to be a clause in the Trust Deed, directing the Trustees to pay the balance to a nominated person or persons, after death.

How much money can I contribute to this Trust Fund?

Anyone can contribute but the maximum allowable is $500,000.  Amounts over this can still be received but the concessions do not apply to the excess.  A contribution of some or all of this amount by a Pensioner, is not included in the asset test of that Pensioner.

Centrelink Benefits for the Beneficiary 

The beneficiary can own the principal place of residence (which is exempt in the asset test) plus up to $650,000 in other assets in the Trust and still receive a full pension.

The income of the Trust, regardless of what profit is made, is not added to the Income Test for the beneficiary.

The beneficiary can work up to 7 hours a week and can receive normal wages.

Discretionary expenditure includes private health insurance, medical expenses and maintenance of the Trust property.

Tax Treatment

The Trustee lodges a Tax Return and is assessed at the beneficiary’s marginal rate.  There are CGT advantages when Trust assets are sold.

Stamp Duty

As a general rule no Stamp Duty is payable when the Trust acquires a property for the beneficiary’s principal place of residence (PPR).  A contribution of a residential home to the Trust for the use of the beneficiary as a PPR is also free of stamp duty.

What are the Disadvantages?

Goods and services including accommodation supplied by the beneficiary’s family members cannot be paid for by the Trust.

Example:The parents of a beneficiary, who provide the beneficiary with accommodation in their home or in another place owned by them, cannot be paid rent or board from the Trust.  If another family member, parents, spouse or children of the beneficiary provide care or support, they cannot be paid for those services from the Trust.

Is the Beneficiary Eligible?

The Trust is only available if the beneficiary qualifies as having a severe disability or severe medical condition.  Medical and other health reports would have to be obtained to prove eligibility.  There may be a need for other evidence to prove that the condition is severe and is unlikely to change.

The persons proposing to establish the Trust will need to spend a lot of time and money to get this evidence.  They will then need to get expert Financial Tax Advice and Medical Advice which could be costly.  If they believe they have good reason to proceed they should make an appointment with the Centrelink Special Disability Trust official for final advice.

If a decision is made to proceed it is wise to engage Lawyers to draft the Trust Deed which must comply with the Model Trust Deed approved by Centrelink.

Who Can be a Trustee?

The Trust needs two or more Trustees.  They cannot include the beneficiary or the person who established the Trust.  They should be independent but family members.  They have to be Australian residents and they must not have any prior problems with bankruptcy or and not convicted of any dishonest conductor an offence under the Veterans’ Entitlements Act.

Obviously there is a need to appoint a person who will have a long term commitment which is likely to mean the appointment of someone much younger than the beneficiary and this can be an issue if there are no suitable persons.  The same applies for the need for a Nominator/Appointor who has the task of appointing additional Trustees when the need arises.

What to Think About

There are many reasons why it can be advantageous but there is a lot of work to be done before you can be confident that it is suitable for you, your circumstances and your beneficiary’s circumstances.

Your decision hinges on the financial and tax advice and the advice and guidance you get from the Centrelink Official.

Speak to One of Our Solicitors

Our Estate solicitors are experienced in drafting Special Disability Trusts, which can be established to great benefit for vulnerable people with a disability.

We invite you to make an appointment with our Mr William Delaney, Ms Julia Marler, Ms Kristy Schaefer, or Ms Anna Delaney to discuss whether this is an appropriate Trust for your succession planning.

 

By William Delaney

 

© Delaney & Delaney Solicitors. This publication is for information only and is not legal advice. You should obtain advice specific to your circumstances and not rely on this publication as legal advice. Should you have any queries in relation to this publication, please contact our office on (07) 3236 2604.