Trustee decision making: will you make the right decision this time?**

The decision in Finch v Telstra Super Pty Ltd [2010] HCA confirms the situations where a decision of a trustee can be reviewed by a court.

In very broad terms, the position that seems to have evolved in this area, is that the exercise of a discretion by a trustee is not subject to review by the courts unless one of the following three factors is present:

1. The trustee does not act in good faith;
2. The trustee does not give real and genuine consideration to the exercise of the discretion and the purposes for which the discretion was granted; or
3. Reasons for the decision are provided by the trustee, but those reasons are unsound.

Furthermore, a trustee's decision cannot be reviewed unless on the material before the trustee it is one that no reasonable trustee could have made.

Given this test, best practice dictates trustees adopt a disciplined and detailed analysis of all possibly relevant issues before reaching a decision and clearly document their considerations.

Thus, as further explained in Scott v National Trust for Places of Historic Interest or Natural Beauty [1998] 2 All ER 705, the matters a trustee should consider may not be limited to simple matters of fact but will, on occasion (indeed, quite often) include taking advice from appropriate experts, whether the experts are lawyers, accountants, actuaries, surveyors, scientists or whomsoever may be relevant.

While documenting all such investigations is critical, it is generally preferable to not formally record the reasons for the final decision as to do so unnecessarily exposes the trustee to a challenge based on having unsound reasons.

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 Smiths song ‘London’.

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Surviving spouses attacking the estate of the first to die: Breaking it down (again)**

Last week's post considered the case of Sarant v Sarant [2020] NSWSC 1686.

The decision expressly also stated that in family provision applications (or testator family maintenance claims) the 'principles' or 'general principles' set down in previous decisions are not intended to be elevated into rules of law, propositions of universal application, or be viewed as a rigid formulae.

In other words, the jurisdiction of the court should not be unduly confined and the discretion should not be constrained, by statements of principle found in aspects of other decisions that are not at the core of the case, or by preconceptions and predispositions.

Ultimately then, decisions of the past do not, and cannot, put any fetters on the discretionary power of the court, which is left largely unfettered. That is, what is provided via previous cases is a guide and should not be used to turn a judge into a tyrant.

With the warning immediately above, the court did however make the following comments in relation to a claim by a spouse, particularly of a marriage of long duration, that it said were useful to remember:

1. A spouse, particularly of a long marriage, has a primary right to be considered by the deceased, but the extent that they should provide for the surviving spouse is to be governed by their needs, both at present, and in the foreseeable future and also the needs of any competing claimants.
2. The capacity of the surviving spouse to provide for those needs must also be considered.
3. The general duty of the deceased to the spouse, to the extent to which their assets permit them to do so, is to ensure that the spouse is secure in the matrimonial home, to ensure that they have an income sufficient to permit them to live in the style to which the spouse is accustomed, and to provide the spouse with a fund to enable them to meet any unforeseen contingencies.
4. Generally speaking, the amount should be sufficient to free the mind of the spouse from any reasonable fear of any insufficiency as they grow older and their health and strength fail (see Permanent Trustee Co Ltd v Fraser (1995) 36 NSWLR 24 and Elliott v Elliott (Court of Appeal (NSW), 24 April 1986, unrep).
5. Concern as to the capacity of the spouse to maintain themselves independently, and autonomously, may also bear upon the notion of what is proper provision (see Richard v AXA Trustees Ltd [2000] VSC 341).
6. Where, after competing factors have been taken into account, it is possible to do so, a spouse ought to be put in a position where they are the master, or mistress, of their own life, and in which, for the remainder of their life, they are not beholden to beneficiaries (see Langtry v Campbell (Supreme Court (NSW), Powell J, 7 March 1991, unrep).
7. Greater weight may be given to the claims of parties who have entered 'a formal and binding commitment to mutual support' (see Marshall v Carruthers; Marshall v Marshall [2002] NSWCA 47, In the Matter of the will of G.G. Sitch (deceased) [2005] VSC 308 and Sellers v Scrivenger [2010] VSC 320).

Thus, in Steinmetz v Shannon [2019] NSWCA 114 the second wife of the willmaker (who had spent the majority of their adult life together) was awarded by the court a legacy of $1.75M, out of an estate of $6.8M otherwise left to the adult children of the willmaker from an earlier relationship. This provision replaced the gift under the will of an indexed annual annuity of $52,000 for the remainder of the surviving wife's lifetime.

The court specifically confirmed:

1. A key issue is how freedom of testamentary disposition is to be factored into an assessment of whether the provision made by a willmaker is adequate for the proper maintenance, education or advancement in life of a claimant.
2. The determination of the adequacy of the provision of a claimant is a matter for the court and it is to be determined as at the time the court is considering the application, rather than as at the time the willmaker made the will - this point alone may provide a reason for interference.
3. The rules the court apply should not be confined by notions of 'reluctance to interfere with freedom' of willmaking (see Slack v Rogan [2013] NSWSC 522).
4. In applying the rules, a court may consider what the outcome would have been under a matrimonial property adjustment under the Family Law Act. This is because, although the regimes are not identical, there is a substantial overlap.
5. Furthermore, there is neither social sense nor legal logic in parallel regimes that would have the consequence that a surviving spouse of a relationship which endures is left worse off than would have been the case had there been a separation immediately before death. That is, it should be assumed that the community expects a willmaker to provide for their spouse financially in a manner that is no less than the entitlement that would have arisen on a matrimonial property adjustment.

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

** for the trainspotters, the title today is riffed from the Tears for Fears tune ‘Break it down again’.

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Spouses challenging each other's wills: Everything she (or he) wants**

Last week's post considered the right of a current surviving spouse to challenge a deceased estate (often referred to as family provision or testator family maintenance applications) on the first of the couple to die.

The case of Sarant v Sarant [2020] NSWSC 1686, provides an instructive iteration on this theme in a situation where the couple had been separated, living in the same house, for 4 years before the wife's death.

Other key aspects of the factual matrix included:

1. The main asset of the estate was a 50% share of the house the couple lived in, which was owned as tenants in common at the date of death, due to a unilateral severance of the joint tenancy by the wife prior to death.
2. The marriage between the couple was 44 years in length before their separation.
3. The couple did not divorce and there may have been some level of reconciliation close to the time of the wife's death.
4. The wife's will gave her estate to the 2 daughter's of the marriage, who the husband was estranged from.

In a very detailed judgment the husband was awarded the wife's 50% interest in the house, adjusted by the need for him to make a payment to the estate and also provide a charge over the property to his daughters entitling them to 30% of the sale price on ultimate disposal.

The court also confirmed:

1. The court expects legal representatives to give real consideration to the merits of the other party’s case and provide reasoned submissions on what is, or what is not, “adequate and proper provision in all the circumstances of the case” when asked.
2. The duty to the court of a legal representative requires them, where necessary, to restrain the unreasonable enthusiasms of the party represented, which, ultimately, is in the party’s best interest and is more likely to ensure that a just result is reached sooner and with less expense (see Thomas v SMP (International) Pty Ltd [2010] NSWSC 822).
3. The impact of unfulfilled promises or disappointed expectations may sometimes be relevant when a family provision claim reaches the stage that the moral duty of the deceased is under consideration (see Re Stojanovska; Stojevski v Stojevski [2020] VSC 702).
4. As a rule, when arrangements are made between close relations, for example, between husband and wife, there is a presumption against an intention of creating any legal relationship. This is not a presumption of law, but of fact. It derives from family members generally intending to rely solely on family ties of mutual trust and affection. There may, however, be circumstances in which the presumption, like all other presumptions of fact, can be rebutted (see Jones v Padavatton [1968] EWCA Civ 4 and Balfour v Balfour [1919] 2 KB 571).
5. The inadequacy of provision is assessed at the time when the court is considering the application, however, considerable weight should be given to the assessment of a capable willmaker, who has given due consideration to the claims on their estate (see Sgro v Thompson [2017] NSWCA 326).
6. The court’s discretion in making an order is not untrammelled, or to be exercised according to idiosyncratic notions of what is thought to be fair, or in such a way as to transgress, unnecessarily, upon the deceased’s freedom of will making (see Pontifical Society for the Propagation of the Faith v Scales and McKenzie v Topp [2004] VSC 90).
7. The bond of matrimony gives rise to a testamentary obligation, which can not be assumed comes to an end on the parties separating without them being divorced, at least where there has been no conduct by the applicant disentitling provision (see Kalmar v Kalmar [2006] NSWSC 437).
8. Where a spouse is elderly, generally they should not be given a large capital sum, because this may result in a substantial benefit passing to their chosen beneficiaries, which is contrary to the wishes of the deceased (see White v Barron [1980] HCA 14), although the fact that the provision of a capital asset to the spouse may, incidentally, enable them, in due course, to pass that asset contrary to the deceased’s wishes, is not determinative of the propriety of such a provision (see Worladge v Doddridge (1957) 97 CLR 1).

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 Wham! song 'Everything she wants'

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Spouses challenging each other's estates (that is, when the music's over**)

Previous View posts have considered various aspects of the right for someone to challenge a deceased estate (often referred to as family provision or testator family maintenance applications).

Another important aspect of the issues in this regard is the ability of a (then current) life spouse to challenge an estate of the first of the couple to die.

In relatively modern times, the decision in Luciano v Rosenblum (1985) 2 NSWLR 65 was often quoted as summarising the position of the surviving spouse as follows:

'… as a broad general rule, and in the absence of special circumstances, the duty of a willmaker to his widow is, to the extent to which his assets permit him to do so, to ensure that she is secure in her home, to ensure that she has an income sufficient to permit her to live in the style to which she is accustomed, and to provide her with a fund to enable her to meet any unforeseen contingencies'.

The later decision of Neale v Neale [2015] NSWCA 206 also confirmed generally the correctness of the above approach. However, in the context of a dispute between a second spouse and children of the first relationship of the willmaker, the court also confirmed that the 'rule' should be considered with the following qualifications:

1. The Luciano case involved only some of the estate passing to the spouse, whereas here the entire estate was in fact left to the second wife, and it was the adult children of the first relationship seeking further provision.
2. It is unhelpful, and sometimes misleading, to adopt the value laden language of a different age and culture (in this context, 1985 is a long time ago; as too the challenge mentioned by the court by 'deserving widows' as perceived by 'middle class morality' presented by Eliza Doolittle’s father in Bernard Shaw’s Pygmalion).
3. To describe a party as a 'deserving widow' is to express a conclusion which will reflect fact-specific findings; it is not to state a freestanding criterion.
4. Any references to the Luciano case confirming 'a broad general rule', qualified only by 'the absence of special circumstances', that cause the assumption of an independent standard, are inconsistent with the exercise of discretion required of the court by the legislation in this area.
5. Any such general rule would involve a conclusion reflecting only part of the statutory exercise imposed on the courts in this area.
6. That is, the court must consider a widow’s circumstances balanced against the circumstances, needs and moral claims of the claimants and other beneficiaries.
7. Ultimately then, to treat the Luciano case as establishing a legal principle, or a standard, runs the risk of deflecting the court from the full exercise of its functions.

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

** for the trainspotters, the title today is riffed from a song by the Doors being ‘When the Music's Over'.

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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’, see:

Being stuck** with ’fixed’ testamentary trust wills

Previous View posts have touched on the concept of a basic form ‘fixed’ testamentary trust where the assets are required to pass directly to infant beneficiaries on them attaining a certain age (often 18).

One issue that advisers need to be aware of in this area however is that even where, on the face of the document, the age at which an infant beneficiary might appear to be entitled is over 18 (for example if the age of 25 is nominated) there can be situations that as soon as the relevant beneficiaries reach the age of majority (18) they can legally require the assets be transferred to them.

In other words, even though the will may mention that entitlements are not to be taken until the age of 25, a beneficiary may be able to force a trustee to distribute assets to them on them turning 18 years of age.

The rules in relation to this issue can be complex, however essentially there are cases that support the argument that if there is no contingent requirement that needs to be satisfied by the beneficiary then they will be able to force the distribution of the assets to them.

** For the trainspotters, the title of today's post is riffed from the Ned’s Atomic Dustbin song ‘Stuck’.

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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, see:

Shooting down** the difficulties with ‘fixed’ testamentary trust wills

As mentioned in last week’s post, it is possible to gain access to the excepted trust income provisions under the Tax Act where a will provides for the assets to be held on trust for infant children until they reach a certain age.

It is important to note however that, as compared a comprehensive testamentary discretionary trust, there can be a number of difficulties with the more basic approach including:

1. The assets of the trust will normally pass absolutely to the child beneficiaries on them attaining a certain age. Often this age will automatically be 18.
2. There is no real flexibility in terms of distributions of income or capital at any point during the structure. This can cause a number of difficulties particularly in relation to asset protection and tax planning.
3. The structure is very inflexible in terms of future estate and succession planning objectives and requires that the child beneficiaries implement comprehensive estate plans for themselves as soon as they gain entitlement to the assets.

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 Stone Roses song ‘Shoot you down’.

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Shining a light** on ‘fixed’ Testamentary trust wills

‘Simple’ or ‘I love you’ wills are normally a relatively straightforward document and traditionally provide for assets to be gifted directly to a surviving spouse and then if not to the children of the relationship on them reaching a certain age (e.g. 18, 21 or 25).

One issue that often comes up in relation to this type of will is whether the ‘excepted trust income provisions’ under the Tax Act can be accessed. These provisions allow children to be taxed at adult rates for income distributed to them via a deceased estate.

In very broad terms, the excepted trust income provisions can only be accessed via this type of will during the period that the infant children of the deceased (and, in particular, not grandchildren) remain under the age of 18.

Next week’s post will explore some of the difficulties with this type of will as compared to more comprehensive testamentary trust arrangements.

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 Rolling Stones song ‘Shine a light’.

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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'.

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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’. 

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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’