Challenging a will due to the lack of testamentary capacity

A recent post listed the five main ways in which a will can be challenged http://blog.viewlegal.com.au/2016/01/ways-to-contest-will.html.

One of the aspects listed was the ability to challenge a will due to the will maker’s lack of testamentary capacity when signing the document.

As set out in previous posts http://blog.viewlegal.com.au/2013/12/testamentary-capacity-and-elawyer.html, there are a number of critical issues that must be addressed to ensure that a will maker does possess sufficient testamentary capacity to avoid a situation where their will is held to be invalid.

One technique that is being used increasingly in situations where there is some potential concern about testamentary capacity is ensuring that detailed medical evidence is created at the time of drafting and ultimately signing a will. This evidence can include:

1. having a will maker’s regular doctor provide an opinion as to their testamentary capacity on the date of signing the will; 
2. having a specialist medical practitioner assess a will maker, solely with reference to the criteria for testamentary capacity; and 
3. retaining the medical evidence together with a detailed file note by the lawyer who prepared the will.

Ways to contest a will

At least anecdotally, litigation in relation to deceased estates is a growth area of the law.

There are strict rules that relate to the time period following death within which an estate can be challenged.

The easy 'rule of thumb' is that litigation should be commenced within 6 months of the date of death and generally it is impossible for proceedings to commence more than 12 months following the date of death.

The five main mechanisms by which a will may be challenged are:

1. lack of testamentary capacity (i.e. the will maker did not understand the nature and effect of the document they were signing); 
2. contractual obligations (i.e. it can be shown that the will maker entered into an arrangement that overrides the provisions of their last will); 
3. a later, inconsistent, testamentary document (i.e. despite a will receiving probate, a later document is discovered that is inconsistent with what was otherwise understood to be the final will); 
4. undue influence (i.e. the will maker signed a document that they were essentially forced into or misled about its contents); 
5. family provision application (i.e. a person who is within a defined category of relationship with the will maker challenges the provisions of the will on the basis that the will maker failed to make adequate provision for the person’s proper maintenance and support). 

Future posts will explore each of the above concepts.

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Final Post for 2015 and Season's Greetings

With the annual leave season starting in earnest over the next couple of weeks and many advisers taking either extended leave or alternatively taking the opportunity to catch up on things not progressed during the calendar year, last week’s post will be the final one until early 2016.

Similarly, the social media contributions by both the View and Matthew will also largely take a hiatus until the New Year as from today.

Thank you to all of those advisers who have read, and particularly those that have taken the time to provide feedback in relation to posts.

Additional thanks also to those who have purchased the various versions of ‘Inside Stories – the consolidated book of posts’ (see - http://www.amazon.com/Matthew-Burgess/e/B00L5W8TGO/ref=sr_tc_2_0?qid=1413149165&sr=1-2-ent).

The next edition of this book, containing all posts over the last six years, edited to ensure every post is current and organised into chapters for each key area should be available early in 2016.

Very best wishes for Christmas and the New Year period.

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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.

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Are trusts still useful post Spry?

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘Are trusts still useful post Spry?’ at the following link - https://www.youtube.com/watch?v=IjcRGemWHyk

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

Certainly, immediately following Spry, for an extended period, the usefulness of trusts was under the spotlight and there was significant nervousness about how robust they actually were going to be.

The reality has been that this conclusion has been tempered by the combination of firstly the fact that Spry is a bit of an outlier decision and actually driven a lot by factual scenario, which is a relatively strange set of circumstances, and the fact that there have been so many cases since Spry that have respected the integrity of trusts.

Therefore, it is generally accepted that all forms of trusts, particularly testamentary trusts, will remain the vehicle of choice in estate planning context at least for the foreseeable future.

Binding financial agreements and trusts

As set out in earlier posts, and with thanks to the Television Education Network, today’s post addresses the issue of ‘Binding financial agreements and trusts’ at the following link - https://www.youtube.com/watch?v=dS8CjyW0hUY

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

There is no doubt that a properly crafted binding financial agreement or 'BFA' provides the best protection from an asset protection perspective available.

The difficulty is that even despite the changes that the government has brought in to make binding financial agreements more robust, the reality is there is a level of scepticism about just how useful BFAs are actually going to be, because there seem to be so many ways in which they can be unwound on a technicality.

While the general view is that they are the ideal outcome in terms of protecting wealth, the conservative view would always be that steps are taken to complement the BFA and to try and ensure the assets are ultimately quarantined on a relationship breakdown. One obvious example is to implement testamentary discretionary trusts under the estate plan, regardless of whether a BFA is in existence.

Overseas assets and estate planning

Where a will maker has assets both in Australia and overseas, there are a number of specific estate planning steps that should be adopted.

In summary, these include:

1. It is generally preferable to commence the estate planning process in the jurisdiction that the will maker is currently living. 


2. The completed estate planning documents should be signed in the normal way and then provided to a specialist adviser in any other jurisdiction where substantial assets are held. 


3. While initially the will first prepared should apply to all assets worldwide, generally when documentation is implemented in other jurisdictions, each will should be amended so as to only apply to assets in the relevant jurisdiction. 


4. Wherever possible, the signing and witnessing procedure for the jurisdiction to which the will applies should be followed. Alternatively, it will generally be permissible for the will to be signed and witnessed in accordance with the laws of the country where the will maker signs the document and still be valid worldwide. 

The above approach ultimately ensures that the client has:

1. appropriate estate planning documents for each Country in which they retain wealth; and


2. received the necessary succession and tax advice for each asset in each Country.

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