Using court drafted wills to achieve asset protection and tax planning

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Last week's post focused on the recent case of Re Matsis. This recent decision was one of the first situations where a court permitted a new will to be prepared for someone who had lost capacity where the primary reason for the application was not that the person had no will. Instead, the catalyst was that the beneficiaries were wanting to ensure the appropriate level of commercial asset protection and tax planning would be available.

The decision is particularly important because there are other cases where, in the past, similar requests have been denied.

Arguably, the important factors here included:

1. evidence was able to be shown that the will that was in place before the will maker lost capacity was largely seen by him as an 'interim' document; 
2. the only person who could have brought a challenge against the estate was the will maker's daughter, who indicated in the proceedings that she was independently wealthy and had no intention of challenging the estate; 
3. the ultimate beneficiaries of the estate (and the people bringing the application) were the will maker's grandsons. While each of them potentially had asset protection risks, none of them were aware of any potential litigation; 
4. the change to the existing will did not alter any of the provisions in relation to, for example, executorship or any specific gifts; 
5. while the grandsons lost direct entitlement by the inclusion of the testamentary trusts, they were still ultimately the likely potential beneficiaries via the trust structures; and 
6. the court accepted evidence that the will maker may well have himself implemented testamentary trust provisions, had he not lost capacity. 

Until next week.

Court drafted wills

One of the more fundamental developments in relation to estate planning in recent years has been the introduction in most Australian states of government legislation empowering courts to make wills on behalf of people who otherwise lack the capacity.

There have been an increasing number of cases to go through the courts in this area. The recent Queensland case of Re Matsis; Charalambous v Charalambous & Others [2012] QSC 439 is particularly interesting as it appears to be the first case that allowed a court-ordered will where the primary objective was not because the relevant incapacitated person had no will at all. Rather the situation was that the pre-existing will did not achieve the appropriate asset protection and tax planning objectives of the ultimate beneficiaries.

For those interested in reading a full copy of the decision, a link to the judgment is as follows: http://www.austlii.edu.au/au/cases/qld/QSC/2012/349.html.

The case involved a businessman who had accumulated some millions of dollars of wealth and who had signed an 'interim' will, which did not incorporate any testamentary trusts, sometime before losing capacity to dementia.

On the application of the ultimate beneficiaries, the court allowed them to introduce comprehensive testamentary trust provisions into the will as if they were inserted before the will maker's death.

Next week's post will focus on some of the key aspects that the court took into account before allowing the variation to the will.

Until next week.