Can you make a will for another** person where they are the main beneficiary?

Particularly as people live longer, it is becoming increasingly prevalent that the instructions for someone’s will are provided by a close friend or relative who themselves will be the primary (and in some instance, only) person to benefit under the will.

In order to ensure that the will is not later successfully challenged or held to be invalid, there are a number of critical steps required.

While each situation will depend on the exact circumstances, generally the following steps should be taken:

1. a specialist lawyer should ideally be responsible for preparing the estate planning documentation;
2. to the extent possible, that lawyer should tolerance test the integrity of the instructions being received directly with the will maker and without the intermediary being present;
3. if the lawyer has an ongoing client relationship with the intermediary, then thought should be given to ensuring that the will maker obtains some form of independent legal advice;
4. if there is any concern in relation to the capacity of the will maker (for example, due to age or mental capabilities), specialist medical advice should also be obtained at the time of signing the documentation; and
5. comprehensive meeting notes should be prepared in relation to all interactions on the file, ensuring that they are in a format that could be provided to, for example, a court if the will is ultimately challenged.

** For the trainspotters, the title of today's post is riffed from the Coldplay song 'Another’s arms'.

View here:

The youngest, modern-est**, most beautiful-est ... and 'wealthiest'

Previous posts have considered the distinction between owning an asset as joint tenants compared to tenants in common.

One aspect of the rules in relation to joint tenancy that can arise in tragic circumstances is where two (or more) people die in the same incident, or indeed in unrelated incidents, and it is not possible to determine the order of deaths.

In these circumstances, in all Australian states other than South Australia, there is legislation deeming the deaths to have occurred in order of oldest to youngest. This means the youngest person will be entitled to 100% of the assets formerly owned as joint tenants.

These rules apply where the court determines that the order of death is uncertain (for example, see Re Comfort; Re Tinkler; Equity Trustees Executors & Agency Co Ltd v Cameron [1947] VLR 237).

South Australia also has a unique approach (in Australia) in relation to perpetuity periods, having essentially abolished the rule against perpetuities (which is generally 80 years) and allowing trusts to potentially last indefinitely.

The decision of In the Estate of Graham William Dawson (Deceased) and Teresa Veronica Dawson (Deceased) [2016] SASC 89, arguably best summarises the position in South Australia where multiple joint tenant owners of an asset die.

While acknowledging that the law in this area has essentially been ‘frozen’ for over 100 years, the court held that the existing rules continued to apply because no legislation had been introduced in South Australia changing the position. This meant the assets owned as joint tenants passed undivided into the respective estates for the 2 owners.

Interestingly, again due to legislation in states other than South Australia, companies can also own assets with other parties as a joint tenant.

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

** for the trainspotters, the title today is riffed from the Silverchair song ‘Young modern station’. View hear (sic): 

‘Retro’** witnessing of wills and BDBNs: AKA no one knows you weren’t there, until it is a problem

Witnessing rule

A fundamental aspect to create a valid will, and indeed most binding death benefit nominations, is that there must be two witnesses and they must be present and observe the willmaker sign (and date) the document.

The rule in this regard is inflexible, particularly where a lawyer is involved.

Background

The decision in the case of Lewis v Lewis [2020] NSWSC 1306 is another stark reminder of the legal system’s view of ideas such as backdating, witnessing without witnessing, retro-dating, retro-witnessing and similar ‘near enough is good enough’ strategies.

In particular, one of the key aspects of the case for advisers involved an analysis of the requirements of signing a will validly

Factual matrix

Relevantly in relation to the witnessing aspect, the factual matrix in Lewis involved a son who was a qualified lawyer and prepared a will on behalf of his mother.

Likely realising that if he was one of the witnesses he would be automatically excluded from taking any benefit under the document (see Hill trading as R F Hill & Associates v Van Erp (1997) 188 CLR 159), he arranged for 2 neighbours to be the witnesses.

After handing the will to his mother and explaining the witnesses would be over later in the day the son went out.  When he returned his mother had gone to bed, leaving the will, signed, on a table in the lounge room.

When the witnesses arrived the son told them that his mother had already signed the will and gone to bed and said 'This is not the right way to witness the will but I will have to deal with it at a later stage. Do you mind signing anyway?'. 

Court’s view

The approach the son suggested at least somewhat reminiscent of the conduct nab found itself in trouble over for regularly allowing advisers to witness binding death benefit nominations with only one witness in attendance - and a second witness later signing; despite not actually having been present.

During the hearing when the lawyer was questioned as to why he had knowingly procured false attestations, he evidently did not seem especially troubled - and indeed responded by saying he offered the witnesses a choice and that they could always have refused if they were worried.

The court confirmed its view that the lawyer's conduct was completely unsatisfactory and it was grossly improper of him to ask the witnesses to make solemn statements that they had witnessed the willmaker signing the will when in fact they had not.

Furthermore, the attempt to deflect blame on to the witnesses was described as 'positively discreditable'. 

Ultimately, the court concluded that the conduct of the lawyer may have justified referral to the Law Society for consideration of disciplinary action, although gave the lawyer the right to make submissions against this occurring.

Based on the decision in Council of the Law Society of New South Wales v Renfrew [2019] NSWCATOD 63, there is every chance of disciplinary consequences.  In that case a lawyer was the only witness to a will at the time the willmaker signed, and then arranged for a second witness to sign some period of time later (after the willmaker had died), before then attempting to mislead the court on a probate application that both witnesses had in fact been present.  Although there were other issues of concern, this aspect was held to amount to professional misconduct.

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

** for the trainspotters, the title today is riffed from the Silverchair song ‘Insomnia’. 

View here:

https://www.youtube.com/watch?v=BEpqbyl-XFM

PS: the original version of this article appears SMSF Adviser Magazine, see here: https://www.smsfadviser.com/strategy/19394-pre-signing-of-wills-and-bdbns-another-warning

Assessing the validity of a will: the (key factors) to have on your list**

Recent posts have considered some of the key issues in relation to assessing testamentary capacity.

One case often referred to due to its detailed explanation of the key factors the courts take into account when assessing the validity of a will is Bailey v Bailey (1924) 34 CLR 558. As usual if you would like a copy of the case please contact me.

The key factors listed are as follows:

1. The onus of proving that an instrument is the last will of the will maker is with the party propounding it.
2. The court must determine the validity of the will on the balance of the whole of the evidence.
3. The proponent can discharge the onus by establishing a ‘prima facie’ case.
4. A prima facie case is one which, having regard to the circumstances established by the proponent’s testimony, satisfies the Court that the will is the last will of a free and capable will maker.
5. It is the capacity of the will maker’s mind, not body, that is relevant.
6. The quantum of evidence sufficient to establish validity of a will always depends on the circumstances of each case. Relevant factors may include:
1. the simplicity or complexity of the will, its rational or irrational provisions and its exclusion or non-exclusion of beneficiaries;
2. the exclusion of persons naturally having a claim upon the will maker’s estate;
3. extreme age or, sickness of the will maker; and
4. existence of any person having motive and opportunity and exercising undue influence, then taking a substantial benefit under the will.
7. Once the proponent establishes a prima facie case of sound mind, memory and understanding with reference to the particular will, then the onus of proof switches to the party challenging the will.
8. To displace a prima facie case of capacity and due signing, mere proof of serious illness is not sufficient; there must be clear evidence that undue influence was in fact exercised, or that the illness of the will maker so affected their mental faculties as to make them unable to validly dispose of their property.
9. The opinion of witnesses to the signing of the will as to the testamentary capacity of the will maker is usually of little weight on the direct issue, as the court must decide based on the facts, not opinions.
10. Where instructions for a will are given some time before its signing, it is the capacity as at the date of giving the instructions that is most relevant.

** for the trainspotters, the title here is riffed from the Hall & Oates song ‘Your kiss is on my list’.

And another (new) perspective** on assessing testamentary capacity

Recent posts have considered some of the key issues in relation to assessing testamentary capacity.

Another case that provides an informative perspective on the key issues is Carr v Homersham [2018] NSWCA 65. As usual if you would like a copy of the case please contact me.

The decision confirms that there is a presumption of mental competence that arises in relation to any will that is rational on its face and is duly executed.

The presumption is only displaced by circumstances which raise a doubt as to the existence of the deceased's testamentary capacity at the time the will was signed.

Relevantly, the existence of an 'insane delusion' under which the deceased laboured does not of itself preclude a finding of testamentary capacity if the delusion had no effect upon the will. Helpfully, the case confirms the key factors that are relevant in this regard as follows:

1. It is insufficient to demonstrate the absence of testamentary capacity to prove that the deceased acted on a material mistaken belief in making their will.
2. Instead, for a mistaken belief to rise to the level of a 'delusion' which affects the validity of the will, there must at least be a high degree of irrationality in the belief.
3. Ordinarily, evidence will be required that there has been an attempt to reason the deceased out of the belief, such that the deceased's adherence to it suggests that the deceased has a mental disorder or deficiency precluding the deceased from comprehending and appreciating 'the claims to which they ought to give effect'.
4. Generally, the circumstances must be such that it can be inferred that the deceased was wedded to a mistaken belief, irrespective of its truth. If that is not the case, the belief is likely to be no more than a mistaken view, the holding of which cannot be inferred to reflect on the deceased's mental competence.

Applying the above principles to the factual matrix of the case it was held:

1. A mere mistaken belief is not sufficient to invalidate a will. Instead, there must be an element of irrationality such that an inference can be drawn that the deceased has adhered to the belief regardless of evidence demonstrating its falsity.
2. If the mistaken belief is one that the Court can infer the deceased could have been reasoned out of by the presentation of evidence of its falsity, its origin in a mental deficiency will not be able to be inferred.
3. The fact that the deceased suffered from dementia, was not inconsistent with her retaining testamentary capacity at the relevant time. While it was clear that the deceased's memory difficulties were at least in part reflective of that disorder, there was no evidence indicating that the existence dementia impacted on the deceased's mistaken belief that was in issue in the case. 

** for the trainspotters, the title here is riffed from the Panic at the Disco song ‘New Perspective’.

Assessing Testamentary Capacity: A further (+ deeper)** lesson

Last week’s post considered some of the key issues in relation to assessing testamentary capacity.

A case that provides an interesting further insight into the issues that should be considered is Roche v Roche & Anor [2017] SASC 8. As usual if you would like a copy of the case please contact me.

Relevantly, the decision confirms that, as with many other 19th century common law principles governing the legal effect of mental illness, the statements in Banks v Goodfellow (see the links in last week’s post that provide a summary of this case) no longer fully reflect modern medical knowledge.

That is, it is now recognised that there are a broad range of cognitive, emotional and mental dysfunctions, the effects of which are difficult to identify precisely or delineate from the exercise of ones ‘natural faculties’ and the reasoning capacity of a ‘sound’ mind.

What this means in a practical sense is that the rules as to assessing testamentary capacity must recognise and allow for the natural decline in cognitive functioning and mental state due to old age.

While the rules in the Banks decision therefore still provide a useful starting point, the courts also acknowledge that many wills are made by people of advanced years.

In these situations, slowness, illness, feebleness and eccentricity will sometimes be apparent. However, the presence of these factors is not ordinarily sufficient, if proved, to disentitle a will maker of the right to dispose of their property by will.

** for the trainspotters, a classic song from The Church album ‘Further, Deeper’, namely ‘Miami’.

Case Study: Assessing** Testamentary Capacity

Earlier posts have examined the 12 general rules that should be used when assessing the testamentary capacity of a will maker, as usual, please let me know if you would like access to this content.

The decision of Ruskey-Fleming v Cook [2013] QSC 142 provides an interesting further example of the issues that should be considered and as usual if you would like a copy of the case please contact me.

The case involved an application to court by Ms Ruskey-Fleming (the will maker's daughter) to confirm the validity of the deceased’s 2007 will. The deceased’s son claimed that his father did not have testamentary capacity to execute the 2007 will and that an earlier document, made in 2000, should be treated as the last will.

Importantly, the 2007 will made greater provision for the daughter compared to the 2000 will.

The court reaffirmed the test outlined in Banks v Goodfellow (1870) LR 5 QB 549 as the starting point for assessing testamentary capacity. It was also confirmed that this test needs to be adapted to reflect modern life, particularly in relation to how financial affairs are now managed.

It was held that a will maker does not need to know the details and value of every single asset they own in order to prove that they have testamentary capacity, particularly where share portfolios are involved. What is important is that the will maker is aware generally of their assets and value.

The court found that the testator did not have testamentary capacity in relation to the 2007 will as he:

1. suffered from confusion and disorientation over a lengthy period of time which was evident from medical records and MMSE test results;
2. could not correctly answer the solicitor’s questions in relation to the number and identity of his children and grandchildren;
3. was not aware if he had previously executed an enduring power of attorney;
4. was not able to provide the solicitor with details about his assets and their value; and
5. could not provide a reason for why he was changing his will – which would favour the daughter over the son.

** for the trainspotters, the title here is riffed from the No Doubt song ‘Artificial Sweetener’.

Cloudbusting** - Incapacity and invalid wills – a 101 reminder

Last week, we had to look at a relatively interesting question concerning a series of wills that had been made by someone who died recently.

Due to evidence on the death certificate, the validity of the most recently will has been called into question because of a lack of capacity (namely, long term dementia).

There are a number of things that may happen from here, however in very broad terms, if the most recent will is held to be invalid, then the will made immediately before the most recent will is the one likely to be submitted to probate.

If that immediately preceding will is also shown to be invalid because of a lack of capacity, then the court is required to keep going back through previously made wills until they find one that does not fail on the basis of the incapacity issues.

The above approach assumes of course that the previous wills can be accessed, and the court can ultimately satisfy itself that a valid will was made at a time when capacity was not in doubt.

If the court is unable to satisfy itself, the default position is that the intestacy rules apply.

** for the trainspotters, the title here is riffed from the Kate Bush song ‘Cloudbusting’

Over (it)** insurance and buy sell arrangements

There were a number of enquiries following last week’s post, and in summary, the answer to a number of these queries was that before implementing the kind of strategy explored, care should always be taken to make sure that all of the commercial, legal and transaction cost issues are properly considered.

One question that is also worth exploring further is the appropriate quantum of insurance cover in this type of situations.

Obviously, while we do an extensive amount of work in this area, we do not actually provide insurance product solutions, and instead work with specialists in this area to help clients get appropriate strategies implemented.

The advice that we often give however is that for a variety of reasons, we prefer that wherever possible the parties involved look to maximise the level of insurance cover able to be obtained.

Obviously, this approach is subject to specialist advice in these circumstances and the ability for the clients to commercially justify the insurance premium, however some of the practical advantages with this approach that we see include:

1. It reduces the need to uplift the quantum of insurance cover as circumstances change.
2. It reduces the risk that in the future appropriate levels of cover may not be able to be accessed (due to health reasons).
3. It guards against the risk that the underlying assets involved increases more rapidly than insurance protection is able to be updated.
4. If structured appropriately, the excess insurance can also be used to facilitate other non-business succession objectives.

** for the trainspotters, the title here is riffed from the Dinosaur Jnr song ‘Over it’.

Why contracts beat (it) ** wills

During the week, in the context of reviewing a buy-sell deed, we had to provide advice about whether the terms of the buy-sell deed would overrule the provisions of one of the partner’s wills.

While there were a number of factors that may potentially impact on the answer to this question, in very simple terms, contractual arrangements will always override the provisions of a will.

As the buy-sell deed was crafted on the basis of option agreements, then the position was therefore that they would override any inconsistent provision of the will.

In the context of the buy-sell arrangement here, there were two individual partners who had implemented buy-sell arrangements.

For a combination of reasons, the parties agreed to implement wills whereby they would each gift their respective partnership interest to their co-partner on death.

The agreement to make these gifts however was predicated on the assumption that the exiting partner’s estate would receive insurance proceeds at least equal to (if not greater than) the market value of their partnership interests.

Option agreements were still put in place however to cover the partners against a range of risks, including:

1.  a partner changing their will;
2. the will of an exiting partner being challenged; and
3. the insurance proceeds received being inadequate as compared to the market value at the date of death.

** for the trainspotters, the title here is riffed from the Michael Jackson song ‘Beat it’.

Full names in wills – do the right thing**

Over the last few days, we have had some difficulties in progressing with the administration of an estate for a client where the deceased will did not set out his full name.

Although it sounds like a very pedantic issue, the courts are reluctant to allow wills to be granted probate unless there is complete certainty around a person’s name.

Some of the issues that need to be considered in this regard include:

1) If there is a nickname that someone uses all the time, this should ideally be mentioned in the will.

2) Ideally, the name in the will should exactly match government records (for example, on the birth certificate or marriage certificate for the will maker, and thus in turn, what the death certificate will state).

3) To the extent there is any inconsistency between government records, this should ideally be explained or clarified in the will itself.

4) If the government records do not match the will and this is known at the time of lodging probate, look to explain the inconsistencies proactively with the court when making the application.

** for the trainspotters the title of the post today is riffed from the late 1980’s and ‘Redhead Kingpin’

Guardianship appointment under wills – another application of The Vibe **

Last week, an adviser (on behalf of a client) questioned how binding the nomination of a guardian under a will for infant children is likely to be.

The simple answer is that in a practical sense our experience is that the nomination of a guardian is almost always followed. Arguably however this experience is nothing more than reliance on the well known legal principle ‘The Vibe’.

The strict legal answer is that the courts retain the final and absolute authority to determine who the guardian of an infant child should be with their only responsibility to determine what is in the best interest of the child.

Obviously, in a situation where both parents have died and there is a nomination of a guardian under their wills, the courts will normally put a significant amount of weight on this nomination. Despite the court’s inherent power, it is somewhat unusual to have a situation where the nomination under the will is not followed.

** for the trainspotters Dennis Denuto and his vibe legal principle need no introduction

myprosperity and View Legal partner to offer automated estate planning services

myprosperity, Australia’s leading personal wealth portal, is partnering with Australian estate planning firm, View Legal to provide free, standard wills.

A personal wealth portal, myprosperity is a white-label desktop and mobile app that advisers and accountants can enable for their clients. The platform provides a consolidated, real-time view of a client’s entire financial world, thanks to live integrations with leading financial services providers.

When enabled by an adviser, myprosperity’s estate planning functionality will allow a client to generate a standard View Legal will and automatically populate the relevant data from their personal wealth portal, including all their assets and liabilities. This legally binding will is then stored on myprosperity, delivering greater utility through the portal.

Chris Ridd, CEO of myprosperity, said of the partnership “It’s estimated that nearly 50% of Australians will die without a will, and our own data shows that over 70% of myprosperity clients do not have an up-to-date will. Yet predictions say $2.4 trillion in wealth will be passed on over the next three decades.”

Ridd continued “View Legal are recognised experts in estate planning and their standard will is miles ahead of any equivalent that can be found commercially. By leveraging their expertise to provide a standard, pre-populated will, we’re helping our clients to achieve peace of mind and taking our first step towards redefining estate planning.”

Matthew Burgess, Founder of View Legal, said “Estate planning and wills especially haven’t changed much in the last hundred years. View Legal has a history of leveraging technology to solve complex legal issues like estate planning. Together with our technology partner, NowInfinity we’ve designed a technology solution that will break down some of the traditional barriers of entry that have resulted in so many Australians not having a valid will. To be able to share this journey with myprosperity is exceptionally exciting for us.”

About myprosperity
myprosperity is a cloud-based personal wealth platform that makes it easy for accountants and advisers to help their clients get their financial world – sorted. Available on desktop and as a mobile app, myprosperity is a whitelabel wealth portal that boasts live data feeds and digital doc signing, as well as budgeting, cashflow and goal setting tools for an integrated all-in-one approach to personal finance. Founded in 2011, the company is now the leading personal wealth platform in Australia, with over 550 adviser partners and 23,000 end users.

About NowInfinity & View Legal
NowInfinity is a leading financial technology company providing a raft of solutions for accountants, bookkeepers, financial planners, and lawyers. In collaboration with View Legal, NowInfinity can cover the myriad legal solutions required across all aspects of financial advice, compliance and structuring. The outcome of this relationship is a cost-effective proposition that empowers accountants, financial advisers and other advice practitioners to transform their client relationships, deliver better service, client centric outcomes – all the while saving time and money.

View Legal is built around the disruptive mantra of being a law firm that friends would choose. To achieve this vision, View Legal has fundamentally and radically revolutionised access to quality legal advice, in the highly specialised areas of structuring, tax, trusts, asset protection, business sales, estate and succession planning. Using technology as an enabler, View Legal has taken each of the tenets of the traditional delivery model – and turned them on their heads.

To learn more about this exciting collaborative arrangement as well as how myprosperity can assist you in creating lifelong engagement with your clients, be sure to attend the free myprosperity 2018 Roadshow commencing on 30th May, which will include more details about the estate planning product launch.

Media Contacts
Alice Chauvel, Marketing Manager, myprosperity - alice.chauvel@myprosperity.com.au; 0416 798 205
Tracy Williams, COO, NowInfinity – tracy@nowinfinity.com.au; 0437 647 937

What happens to assets in the estate if a person dies without a will?

A previous post has looked at what happens to assets in the estate if a person dies without a will (see - http://blog.viewlegal.com.au/2011/11/how-do-intestacy-rules-work.html).

If a person dies without a will, the law says that their assets will be distributed to their family, as determined by a set formula (the ‘intestacy’ rules). The set formula is different in every Australian jurisdiction. There are a range of issues which will determine which jurisdiction’s rules will apply.

The intestacy rules will also apply where a person dies without a valid will in relation to all of their assets. In this regard, it can in fact be possible to die ‘partially intestate’. This simply means that there are assets in a person’s estate that are not validly dealt with under the will in place at a person’s death.

The following summary gives a broad example of the way in which the intestacy rules often work. If a person dies leaving:

1. their spouse, but no children: their spouse receives everything; 


2. their spouse and children: their spouse receives the first $150,000 and one half of the balance of the estate if there is one child, or one third of the balance if there is more than one child. The Testator’s children share the balance between them;


3. children but no spouse: their children receive a share each, but only if 18 years of age or married;


4. no spouse or children: the person’s parents will share the estate (if both are alive then equally);


5. no spouse, no children and no parents: their siblings share equally.

A spouse includes a legal and de facto spouse.

The amount received by each person will depend on the value of the estate and whether any other beneficiaries are entitled to the assets of the testator.

If the person does not have any family members who qualify, then the assets may pass to the government.

It is necessary that someone apply to the court to be appointed as the administrator, to ensure that the person’s estate is properly administered. This normally adds time and significant extra costs to the administration of the estate. If the testator has young children and a guardian is needed, an application to the court may also have to be made.

Image credit: Mathias Pastwa cc

Tax equalisation provisions

One issue that comes up from time to time in estate planning exercises is the use of 'tax equalisation' provisions in wills.

Generally speaking, the approach is to seek to ensure that the after tax benefit received by each beneficiary is equal.

For a myriad of reasons, this style of clause is rarely appropriate, for example:

1. often a client will only want to take into account the tax position in relation to a particular asset (for example, superannuation). This can lead to significant imbalances in relation to other assets in the estate – most classically, a family home which, like superannuation, can often be received tax free by a beneficiary;


2. while there are embedded tax attributes in relation to certain assets, there can also be embedded tax attributes with the recipient – for example, if a beneficiary is a non resident at the date they receive the asset, this can trigger a completely different tax outcome as compared to a beneficiary who is an Australian resident;


3. where assets are to pass via a testamentary trust, this can cause a wide range of potential tax differentials, many of which may be unknown for a significant period of time;


4. similarly, to the extent that there are assets held in related entities (for example, family trusts or private companies), there may be a wide range of potential tax ramifications which again may be unknown for a significant period of time;


5. the calculations in relation to the net position of each beneficiary can potentially be limitless – for example, additional payments made to one beneficiary to compensate for the fact that they received assets that may have a latent tax liability may themselves cause a further tax liability, which then would trigger a further payment, which of itself would cause a further tax liability; and


6. most clauses in this area are also crafted with reference to precise tax provisions at a particular moment in time – invariably those tax rules will have changed by the time the will actually comes into effect.

In light of the above difficulties, it is therefore normally preferable to simply set out directions in the memorandum of directions to the trustees of the estate to ensure that they seek specialist advice at the point of administering the will to ensure that the optimal legitimate tax outcome is achieved for the estate (and therefore the underlying beneficiaries) as a whole.

Image credit: 401(K) 2012 cc

Age of entitlement

Following last week's post some questions were raised about at what age a person can be entitled to receive benefits under a will.

The issues in this regard are a little more complex, however broadly:

1. If a specific entitlement under a will passes to anyone under the age of 18, the trustee of the will effectively holds it for them on a bare trust until their 18th birthday. 
2. If an age is nominated in the will for a beneficiary to receive their entitlement, it will be held on trust until that age, unless the will is not drafted correctly (there are some complex issues that can apply in this regard). If the will is not drafted correctly, then regardless of the age nominated, the beneficiary can get access to the gift on their 18th birthday. 
3. Generally, none of the above rules are applicable where the asset passes to a testamentary trust – in this instance, the assets normally remain indefinitely within the trust structure, regardless of the age of the beneficiaries. 

Until next week.

Age of majority

Last week an interesting issue arose with the child of a client who was about to travel overseas on an exchange. 

The child was a part time employee and member of a superannuation fund. Under the superannuation fund, they were automatically entitled to a life insurance policy which gave a payout of $200,000 on death. The fund required that any payout be made to the legal representative of a deceased member.

The parents of the child felt that it would be prudent to ensure that on receipt of these insurance proceeds the estate would be able to administer them easily – the obvious answer in this regard was the creation of a will.

Unfortunately, in these circumstances, no will is able to be made because in order to make a will, the individual involved must be 18 years of age.

The only substantive exception to this rule is if the will maker, being under the age of 18 years, has lawfully married.

Until next week.

Segregating assets via multiple TDTs

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘Segregating assets via multiple TDTs’ at the following link - http://youtu.be/9_dgi85kC0s

As usual, a transcript of the presentation for those that cannot (or choose not) to view the presentation is below –

TDTs or testamentary discretionary trusts have historically been considered almost immune from anything in relation to wider asset protection issues, simply because they're set up under the will of the will maker.

What we've seen over time however is that what has been a fairly traditional approach in terms of having very passive assets sit inside the trust has gradually expanded. It’s not unusual to have business run through a testamentary trust or a partnership interest through a testamentary trust. In any of those scenarios, all of the normal principles that apply to asset protection and limited liability equally apply to testamentary discretionary trusts.

As there's no extra protection provided by the testamentary trust, basic structuring issues such as utilising a corporate trustee to provide limited liability for the structure, or more importantly, ideally, using separate special purpose vehicles to undertake each uniquely risky business activity is strongly preferred.

Until next week.

What are the exceptions to the assets of a testamentary trust being protected?

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘What are the exceptions to the assets of a testamentary trust being protected?’ at the following link - http://youtu.be/BzC3jFYyWp4



As usual, a transcript of the presentation for those that cannot (or choose not) to view the presentation is below –

The main exception that comes up in a practical sense is primarily for tax reasons where distributions have gone down to an at risk beneficiary out of the trust and then those amounts remain unpaid, so they become an unpaid present entitlement or they become a credit loan on the balance sheet of that trust.

In that scenario, obviously, if the at risk beneficiary gets into strife and a trustee in bankruptcy is appointed, even though the asset is ultimately inside the trust, that trust has the obligation to repay the debt and the asset effectively comes out sideways in that scenario.

There are however a myriad of other reasons that trusts can be at risk. Some of the obvious ones include where the at risk beneficiary fulfils a really important role in the trust, whether that be an individual trustee, a director of a corporate trustee, a shareholder of a corporate trustee, or perhaps most relevantly, where the at risk beneficiary fulfils the role of an appointor.

Until next week.

DVD wills

While not as quickly as other areas of the community, the legal industry is starting to embrace technology changes.

One case that highlights the point is Mellino v Wnuk & Ors [2013] QSC336. As usual, a link to the full decision can be found here. [http://archive.sclqld.org.au/qjudgment/2013/QSC13-336.pdf#!]

In summary, the critical aspects of this case are as follows:

1. a deceased man, who had committed suicide, had made a DVD shortly before his death;
2. on the physical copy of DVD, the man had written 'my will';
3. the content on the DVD also, in a very informal way, explained the intention that the recording was to operate as a will on death;
4. the court decided that each of the main requirements from a succession law perspective had been satisfied and therefore the DVD could operate as the deceased’s last will;
5. the three main tests in this regard were as follows:
1. the DVD was considered to be a 'document';
2. the clear intention of the document was that it articulated the deceased's testamentary intentions; and
3. the DVD adequately dealt with all property owned by the deceased at the date of his death.

Until next week.