Trust deed without a power to vary: you'd better run, run, run** to court

Posts over recent weeks have considered the issues about varying a trust that has no, or an inadequate, power to vary.

An iteration on the theme is set out in the decision of Budumu Pty Ltd [2021] NSWSC 522.

In this case a power to vary was granted under the trust instrument, however it was only able to be relied on during the life time of 2 named (primary) beneficiaries; both of whom had died by the time the variation was required.

Court approval was therefore needed, and granted, in order to ensure the trust avoided the land tax surcharge in relation to foreign beneficiaries.

A further example is provided in the decision of Casibond Pty Ltd: In the matter of George Tsivis Family Trust [2021] NSWSC 320. In this case, a trust deed had no formal power of variation, however did have the following provision:

'(The Trustee may) generally, determine all matters as to which any doubt, difficulty or question arises in relation to the Trust Fund and every such determination shall bind all parties interested in the Trust, but nothing in this sub-clause shall prevent the Trustee or any person interested in the Trust Fund from applying to the Court.'

This provision was held to be insufficient to allow the trustee to avoid the application of the foreign beneficiary surcharge, however again the court approved steps allowing the desired outcome.

As usual, please make contact if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the Hunters and Collectors song 'Run, Run, Run'.

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Easy** - Court criteria for statutory wills

Last week’s post provided a summary of the key evidentiary issues in relation to any application for a court ordered will.

Even if each of the issues flagged last week can be adequately addressed, the court still retains complete discretion as to whether it will approve an application.

The key issues that a court must be satisfied about before allowing a statutory will to be created are as follows:

1. anyone who may have a potential interest in the estate must have the opportunity to address the court;
2. the person applying for the court ordered will must be deemed by the court to be the most appropriate person; and
3. the court must be satisfied that it is appropriate in all the circumstances to approve the will. This invariably means that the court must be satisfied that the proposed will is reflective of what the will maker would have made if they had the required capacity.

In the context of the above, the decision in the (arguably aptly named) case of Wills v NSW Trustee [2022] NSWSC 1098 is relevant.

The main asset in this case was a property at North Bondi, valued at more than $7M. The sole owner had lost capacity and had no relatives and no will; meaning on death her estate would pass to the State Government under the intestacy rules.

A neighbour at North Bondi (named Wills) brought an application for a statutory or court ordered will for the entire estate to pass to Wills, which was rejected with the court confirming:

1. There was evidence to support the sole owner had a preparedness to die intestate even if that meant that 'the Government' took the benefit of her estate.
2. Furthermore, there was insufficient evidence to support a conclusion that the proposed statutory will was one that was reasonably likely to have been made, if the sole owner were to have had capacity (see GAU v GAV [2016] 1 Qd R 1 and Re K’s Statutory Will (2017) 96 NSWLR 69).
3. An informal will (a concept explored in other View posts) produced by Wills (that gave the entire estate to her) did not assist the court in the application for a statutory will, particularly given that it was prepared and signed in circumstances sufficiently 'suspicious' to require proof that the sole owner 'knew and approved' the contents of it. A point reinforced by the fact that Wills was the sole owner's guardian and provided care and assistance and therefore owed fiduciary duties.
4. Ultimately, Wills' application for a court ordered will was not in any material way for the benefit, and in the interests, of the sole owner. Rather it was an attempt to legitimise the informal will; with the veracity of that document held by the court to be best tested following the death of the sole owner, assuming a court application was then made for the informal will to be admitted to probate.

As usual, please contact me if you would like access to any of the content mentioned in this post.


** For the trainspotters, the title of today's post is riffed from the Hunters and Collectors song 'Easy'.

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Dear Judge: Do you see what I see** - how to get a statutory will

In some circumstances, a person who does not have testamentary capacity can have a court make a will for them.

Before embarking on a court application, there are a number of issues that need to be addressed including:

1. confirmation that the will maker lacks the required capacity;
2. a complete summary of the reasons for the application, together with details of all wealth of the will maker;
3. a comprehensive draft of the intended court ordered will;
4. details of any previous estate planning exercises the will maker was involved in, together with evidence about their intentions historically and what their probable intentions would be currently (but for the fact that they lack capacity); and
5. all details of the wider factual matrix, including whether there is any realistic prospect that someone may look to challenge the deceased estate.

Assuming all of the above issues can be addressed, the court will only approve an application in relatively limited circumstances.

Next week’s post will list out the exact steps the court applies in this regard.

As usual, please contact me if you would like access to any of the content mentioned in this post.

** For the trainspotters, the title of today's post is riffed from the Hunters and Collectors song 'Do you see what I see?'.

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