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Taking Control

 

Powers of Attorney and appointments of a guardian are important tools in the event of mental or legal incapacity during a person’s lifetime.  This incapacity may be caused by injury or illness.  If a person loses the capacity to make decisions regarding their financial and lifestyle matters, and they have previously made a Power of Attorney and appointed a guardian, they will almost certainly have greater assurance that those matters will be dealt with as they would have wished.  However, without those appointments in place, decisions regarding property, medical treatment, accommodation and lifestyle may pass to a person whom they would not otherwise have chosen to make such decisions, or such control may even need to be determined by a State Tribunal.

 

 

When appointing an attorney under Power of Attorney, or a guardian under an Appointment of Enduring Guardian, it is essential to appoint someone who can be trusted and who respects the person’s wishes.  More than one person may be appointed, although it is important to ensure that the decision makers are able to reach a consensus in making decisions, and also that they are able to perform the role into the future.  The attorney might not need to act under the Power of Attorney for many years and it is important that his or her health is adequate to carry out the tasks at the appropriate time.

 

 

 

Gifts Given During Lifetime

 

 

Some people prefer to give gifts to dependants or other persons during their lifetime, rather than leaving those gifts in their Will.  They may do this for the satisfaction of helping out their children or other family members, or they may wish to dispose of some assets for family law, social security tax or bankruptcy reasons.

To proceed with the disposal of property, one needs to consider the implications for stamp duty, capital gains tax, and possibly the foregoing of superannuation and other income tax concessions which are available on death.  In addition, anti-avoidance provisions of the Family Law Act, Social Security, Tax and Bankruptcy Acts may make gifting strategies during a person’s lifetime vulnerable.

 

 

 

Family Provision Legislation

 

 

This legislation is significant as it imposes real restrictions on the freedom of a person to dispose of their assets in their Will, where provision for family members is considered inadequate. An otherwise valid Will may be granted probate, but may then be subject to alternative orders of the Supreme Court if a claim under family provision legislation is successful.  Essentially, the legislation gives the Court powers to make an order for further provision out of the estate of a deceased person if the provisions of the deceased’s Will, or the intestacy laws of the relevant state, fail to make adequate provision for the proper maintenance and support of an eligible person.  In New South Wales, those people who can make a family provision claim are a spouse (including de facto spouse), a person living in a domestic relationship with the deceased (including a member of a same-sex couple), a child of the deceased, a former spouse of the deceased, and other dependent persons (eg a financial dependant) who is a grandchild or a step child who was a member of the same household . The question of whether a person is entitled to further provision than is provided by the Will of the deceased has traditionally been summarized as a question whether the deceased breached his or her moral duty to make proper and adequate provision for the applicant.  The Court will take into account the following factors:

 

• the applicant’s financial position

 

• the size and nature of the deceased estate

 

• the relationship between the applicant and the deceased

 

• the relationship between the deceased and other persons who had legitimate claims upon him.

  

 

In certain circumstances, in New South Wales, the Court can also order that certain assets over which the deceased had control during his lifetime, and which have passed to another person on his death, can be clawed back (even if it has already been distributed), if the deceased either transferred those assets, or failed to secure those assets for his estate when he could have done so, (eg by failure to sever a joint tenancy, failure to change beneficiary under life policy).  In New South Wales, strategies to manage claims are likely to be ineffective unless they involve outright disposition of property, and take place more than three years before death.  Family Provision legislation claims in New South Wales must be commenced within 18 months of the date of death of a deceased person, although this may be extended if sufficient cause is shown.  Some alternative ways of holding assets to ensure that the assets pass to the desired beneficiary are:

 

• joint tenancies with the beneficiary

 

• trusts created for the beneficiary during the lifetime of a person

 

• use of superannuation and binding death benefit nominations directly in favour of beneficiaries

 

• life insurance owned or on statutory trust for the beneficiary; and

 

• outright gifts to the beneficiary.

 

Family provision legislation is a challenge to the testamentary intentions of the Testator and an analysis of the types of persons eligible to make a claim, and the strength of the testator’s responsibility to provide for them, should be considered when a Will is made.

 

 

 

Intestacy

 

 

A person will die intestate where he or she has left no effective Will to dispose of his or her estate, or has left a Will that does not dispose of a part of the property of an estate.  An estate can be wholly or partly intestate.  An intestate estate will be total if the deceased dies without having executed a valid Will, or has made a Will which was signed under duress, coercion, or undue influence, or if the Testator lacked testamentary capacity (ie was not fully aware of what he or she was signing). A partial intestacy only affects the property not disposed of by the Will.  This may occur if the Will does not dispose of all of the property of the Testator, or the Will is not properly executed, or a particular bequest or gift made by the Will is invalid, or a beneficiary has predeceased the Testator.  Another reason for a partial intestacy is by the operation of the doctrine of forfeiture, which prevents a person named as a beneficiary in a Will from receiving an interest in the estate of a deceased person if they are criminally responsible for his or her death.

 

Where a person dies intestate, or leaves a Will which does not nominate an Executor, or where the Executor appointed under a Will is unwilling or unable to act due to ill health, etc, then the distribution of the deceased’s estate will depend on a person applying for Letters of Administration from the Supreme Court to administer the estate in accordance with the statutory rules. Those rules also set out who is to inherit an estate in the absence of an effective Will, and vary, depending on which relatives the deceased leaves.

 

Presently, in New South Wales:

 

•  If the deceased is survived by a spouse but no children, the spouse receives the whole estate after the payment of any liabilities.  This applies regardless of whether the deceased also left other relatives. 'Spouse' for the purposes of the intestacy rules, includes a de facto spouse.

 

•  If the deceased is survived by a spouse and children, the spouse receives the household chattels, the first $200,000.00 and  one half of the residue.  The remainder of the residue is held on statutory trust for the deceased’s children.

 

•  If the deceased left children but no spouse, the entire estate is held for the children.

 

•  If the deceased left no spouse and no children, then the estate passes to the surviving parents.

 

•  Where no parents survive, then to brothers and sisters; or if none, grandparents; or if none, uncles and aunts.  If a person dies intestate leaving absolutely no relatives outlined in the intestacy rules, the whole estate will pass to the Crown.

 

 

Therefore, it is very important to ensure that a person has a Will that has been properly prepared and validly executed.


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