Key Practices
-
Will Drafting
-
Testamentary Trusts
-
Personal & Business Succession Planning
-
Powers of Attorney
-
Enduring Guardianship
-
Superannuation Advice & Binding Death Nominations
-
Consideration of Other Trust Structures
-
Tax Implications & Advice
-
Estate Administration & Distribution
-
Will Disputes & Family Provision Claims
Professionals
Insights
MORE >
Private Clients
Why superannuation should be included in your estate planning
Whether it be an industry super fund or self-managed super fund, most Australians will have some form of superannuation. And not surprisingly, this will be one of the biggest assets people will have by the time they reach retirement age, apart from their real estate. Usually, superannuation sits outside the assets of the estate and therefore many of us fail to consider superannuation as part of our Estate Planning. However, all superannuation accounts allow a death benefit nomination (“DBN”), in which the account holder can name a beneficiary in case of death before the vesting date. DBN will be either binding or non-binding. The DBN directs the Trustee of the superannuation fund as to whom the death benefit should be paid out if the superannuation member dies. Non-binding death DBN is just that, non-binding. Most people fail to realise that the Trustees are not in any way bound by a non-binding DBN. A non-binding DBN is only a guide by a member to the Trustees as to how their death benefit should be distributed, but the Trustees are free to exercise their discretion to pay the member’s death benefit to any dependants. Unlike a non-binding DBN, a valid binding DBN (“BDBN”) is binding on the Trustees, and they must follow the direction of a valid BDBN and distribute the death benefit to the named beneficiary in accordance with the BDBN. Superannuation Industry (Supervision) Act 1993 (SIS Act) defines “dependant”, and any nominated beneficiary who falls outside the definition of dependant will invalidate the BDBN. SIS Act defines the dependant as the following: 1. A spouse of member 2. A child of member 3. A person in an interdependency relationship with member SIS Act further states that an interdependency relationship exists where: 1. they have a close personal relationship; and 2. they live together; and 3. one or both of them provides the other with financial support; and 4. one or both of them provides the other with domestic support and personal care. Therefore, if you nominate your siblings or your parents who are not living with you to be your beneficiary then this nomination is invalid. Having an invalid BDBN will mean that you will not have any say on how and to whom your superannuation death benefit will be paid out after your death, and this decision will be left at the full discretion of the Trustees. Considering that your superannuation will possibly be one of your largest assets, this is putting lot of faith in someone you don’t know to have full control over your asset. Ultimately, you are allowing a total stranger to determine how your assets should be distributed after you die. In a recent case, a 68-year-old VIC magistrate, Rodney Higgins, who was earning $324,000 a year was engaged to a 23-year-old court clerk, who suddenly died in a car accident in 2019. Ms Petrie had nominated her mother, who lived a very modest life, as her beneficiary. Ms Petrie’s death benefit amounted to $180,000. After Ms Petrie’s death, Rodney Higgins filed an application to receive Ms Petrie’s death benefit, stating that he was a “dependant” as a de-facto partner of Ms Petrie. Despite Ms Petrie having nominated her mother as her beneficiary, Ms Petrie’s mother did not fall within the definition of dependant under the SIS Act as Ms Petrie did not live with her mother. Ms Petrie’s mother’s pleas for help were ignored, and the Trustees ruled that Ms Petrie’s mother was not a valid beneficiary. The Trustees ultimately paid Ms Petrie’s death benefit to Rodney Higgins, who soon moved back to his former partner of 18 years and to their luxurious waterfront home. The best way to eliminate the risk of these kinds of situations from arising is by nominating your “Estate” or “Legal Personal Representative” as your beneficiary in your BDBN. This legally binds the Trustee to pay the death benefit from your superannuation to your estate, thereby legally including your superannuation to be part of the estate’s assets after you pass away. By allowing your superannuation to be part of your estate, you have the flexibility to distribute your superannuation to absolutely anyone you wish through your Will. However, if your superannuation is not included in your estate, then you are confined to distributing your death benefit to a dependant listed in accordance with the SIS Act. This is further complicated by possible uncertainty as to who will ultimately benefit from your death benefit after you pass away due to the discretionary power of the Trustees. Therefore, including your superannuation as part of your estate planning will reduce uncertainty and alleviate unnecessary stress to your loved ones after you pass away. Disclaimer: The contents of this publication are general in nature and do not constitute legal advice. The information may have been obtained from external sources and we do not guarantee the accuracy or currency of the information at the date of publication or in the future. Please obtain legal advice specific to your circumstances before taking any action on matters discussed in this publication.
Private Clients
Peter Brock and the three Wills
Most Australians who are car enthusiasts will know Peter Geoffrey Brock (“Peter”), also known as the King of the Mountain, was one of Australia’s most successful motor racing drivers. His life was cut short on 8 September 2006 when his car skidded off the road during a competition rally in Western Australia. Peter drafted three Wills during his life. His first Will was properly drafted by his solicitor and executed in 1984 (“the 1984 Will”). His second Will was an informal Will, which Peter prepared himself using a Will Kit in 2003 (“the 2003 Will”). The final Will was also prepared by using a Will Kit in 2006 (“the 2006 Will”). Two months after drafting the 2006 Will, Peter died from his accident. Peter was married twice during his life but did not have any children from any of these two marriages. Later, from late 1976 to March 2005, he was in a de-facto relationship with Beverley Brock (“Beverley”) and they had two children together. However, Beverley also had one child of her own from her former relationship. The de-facto relationship with Beverley ended when Peter moved out of their home in March 2005. When Peter died in 2006, he was living with and was engaged to Julie Anne Bamford (“Julie”). Although Peter had been living with Julie from 2005, he had been in an intimate relationship with Julie Anne Bamford for about 15 years at that time. The 1984 Will, prepared by his solicitor, was validly executed. The 1984 Will left a small gift to his parents and his children, including Beverly’s child, and the rest of his estate went to Beverley, giving Beverley the right to reside at their family home and after Beverley’s death the residue was to go to his two children. The 2003 Will was drafted from a Will Kit and in front of Beverley and Peter’s secretary, Sandra Williams (“Sandra”). Peter filled out the Will kit writing out his own details, revoking the earlier will, appointing the executor and providing funeral directions. However, he left blank the parts of the Will Kit which gave direction on how his assets were to be distributed. Peter told Beverley that he trusted her completely and said that she can complete the rest of the Will Kit. Peter then signed the half-completed Will Kit as the testator and Sandra signed the Will Kit as a witness to the Will, but Beverley did not sign the Will as the second witness or fill out the rest of the Will Kit. The 2006 Will was another Will Kit which was filled out by Danees Christine Denman (“Danees”), a personal secretary of Peter, under Peter’s direction. However, this Will Kit was never signed by Peter. When Peter passed away in 2007, the matter of Estate of Peter Geoffrey Brock went before the Supreme Court of Victoria to determine which Will, if any, was the last Will of Peter. In Victoria, and similarly in NSW, in order to have a valid Will there are a number of formal requirements which must be satisfied: 1. The Will must be in writing; 2. The Will must be signed by the testator; 3. The testator must have intended to execute the Will; 4. The signature must be witnessed by at least two witnesses; and 5. At least two witnesses must then attest and sign the Will in the presence of the testator. Out the three Wills, the Court stated that the 1984 Will was the only Will which satisfied these formal requirements. However, under the Wills Act 1997 (VIC) and the Succession Act 2006 (NSW), the Court has the discretionary power to dispense with the requirements for formal execution of Will, if the Court is satisfied that a document purports to state the testamentary intention of the deceased person. However, the Court did caution that “[n]otwithstanding the remedial nature of the section, care must nevertheless be taken to ensure that the statutory formalities enshrined in the Act are not unduly relegated in importance.” After reviewing all the evidence that was before the Court, the Court concluded that the 2003 Will, although failing to meet the formal requirements of the Will as it was not executed properly, was a document purported to state the testamentary intention of Peter. The Court therefore accepted it as being the last Will of Peter. This meant that the 2003 Will validly revoked the 1984 Will, although it was silent on how his assets were to be distributed. Peter knew he had to update his Will as his life circumstances changed and he clearly attempted to do so. However, without proper legal guidance, Peter’s efforts in updating his Will did the complete opposite of what he was trying to achieve. The 2003 Will failed to give direction on how his assets were to be distributed and he effectively died without a proper Will. This led to an 8 year long costly legal battle among his surviving family because they could not agree on how his assets were to be distributed. There is a lesson we can learn from this case: 1. Always seek proper legal advice when drafting or updating your Will to ensure they meet the legal requirements to be a valid Will; and 2. When your life circumstances change, your Will should always be updated to reflect this in your Will. [Disclaimer] The contents posted are general legal information, not legal advice, and the author and publisher have no legal responsibility for the contents. Each post is based on the law that was in force at the time of writing. Please consult a lawyer directly for accurate legal advice.
Private Clients
Death of K-pop star, Goo Hara, reminds us the importance of having a valid Will
Anyone who is familiar with K-Pop news would have heard about the death of K-Pop singer Goo Hara, former member of Korean girl group Kara. Following her death, the sad childhood of the singer came into light due to a legal claim brought forward by the singer’s mother under the Korean Inheritance law. It was reported that Goo Hara’s mum abandoned her and her older brother when Goo Hara was only eight years old and never cared for them or contacted them since the abandonment. It was reported that Goo Hara’s mother subsequently gave up her legal parental and custodial rights in relation to Goo Hara and her brother in 2006. Young Goo Hara was subsequently cared for by her older brother and her grandparents while her father was mostly away to work on construction sites in order to support the children financially. Goo Hara was 28 when she died and having never been married, she did not have any surviving spouse or any children. Under the Korean Inheritance Law, if you die without a valid will then the estate of the deceased will be distributed in the following order: Children (or grandchildren) Parents (or grandparents) Siblings Relative within the four degree of collateral consanguinity And if there is more than one person standing in the same rank then they share the estate equally. Since the death of Goo Hara, Goo Hara’s father has given his share of Goo Hara’s estate to Goo Hara’s brother stating that he always felt guilty not being there for the children to support them emotionally as he was away from home working to support the family financially and the children had to rely on each other during his absence. Currently, the singer’s mother has appointed a lawyer and filed a legal proceeding to claim her half share of the singer’s estate as the mother of the singer under the Korean Inheritance Law. The singer’s brother stated he is upset that the person who caused so much pain in his sister’s life now stands to benefit from her death and he vowed to defend his sister’s estate. You may think there is injustice being served here if the Korean legal system grants Goo Kara’s mother a share of the singer’s estate. But as the Korean Inheritance Law currently stands, unless there is a different way of defining a ‘mother‘ under the Korean Inheritance Law to exclude a mother who may have been absent from fulfilling a mother’s role during the deceased’s life, the Court must grant the mother the one half share of the singer’s estate. Similarly in NSW, when a person dies without a valid will in place, Succession Act 2006 (NSW) will determine how the deceased’s estate will be distributed. In NSW, distribution of the estate will generally go first to the surviving spouse, and if there is no surviving spouse then in the following order: Children Parents Brothers and sisters Grandparents Aunts and uncles Cousins The law does not take into account the type of relationship you had with your family members when distributing your estate after you die. The only thing the Court will consider is how you are legally related to the deceased. There are many similar cases in NSW. Recently there was a case in which a father, who was abusive and had a history of domestic violence, was issued with Apprehensive Violence Order (AVO) to prevent him from approaching the son in order to ensure the child’s safety. Soon after the Court’s AVO order, when the child was still very young, the mother divorced the child’s father and moved to Sydney. The child grew up and by the time the child reached his late twenties, having worked hard, he had accumulated wealth of his own. He maintained a close relationship with his mother, but did not have any form of relationship with his father. His father never contacted the family, and they lived separate lives. Later the child, still in his twenties, died suddenly from an accident. At the time of his death he was not married and did not have any children. The child, who was still young, never thought about having his estate planning in place and consequently did not have a valid will at the time of his death. The mother, in order to finalise her son’s estate, filed documents to the Court to be the administrator and the sole beneficiary of her son’s estate. The Court informed the mother that when a person dies without a will then law determines as to who the beneficiaries of the estate are. And in accordance with the Succession Act 2006 (NSW), as the deceased is not survived by a spouse or children, next in line to receive the deceased estate were the parents of the deceased. Therefore, both the father and the mother had to share equally in the late son’s estate. The mother was devastated by the fact that the father who was abusive to her son, who took no part in raising him and lived his life as a stranger to her son during her son’s life now stood to benefit from her son’s death. However, the law is clear on this matter. The distribution of the estate of an intestate must be in accordance with the law, and the law states that when a person dies and is not survived by any spouse or children then it is the parents of the deceased who are next in line to share in the estate of the deceased. The law does not look into the kind of relationship the parents had with the child. The fact that one is the parent of the child is the only qualification that is needed under the Succession Act. Every family has a different story and different relationship that is unique for that family. However, the law does not take any of these factors into account when it comes to distributing the estate of a deceased person who died without a valid will. The only way you can have certainty and control over what happens after you die is through having a valid will in place. Many will agree and recognise the importance of having a valid will in place, but for most this is easily pushed down to the bottom of their ‘to do’ list. However, as we currently experience a period of uncertainty and have more time to spend at home during this Coronavirus pandemic, maybe it is time to give some thought to estate planning to preclude some uncertainty and heartache for your family.
Private Clients
Conditions of inheritance
Q: Recently, my mother passed away. Her will stated that, in addition to part of the mother's deposit, the house she owned would be handed over to me, but the condition of the inheritance was that I would "be baptised and become a Christian". During her life, my mother was a devout Christian, but I am not interested in any religion. Are these bequest conditions legally binding? A: In short, it is likely that such conditions of inheritance will be legally acceptable. In particular, if the will specifies how the inheritance will be treated in the case that you do not satisfy the conditions, it will be more likely that such conditions are legally binding. Therefore, you need to examine your mother's will in detail. In principle, "freedom of will" is recognised in Australia so that a testator can freely decide who and how his or her estate will be inherited. Generally, if the conditions of an inheritance are 1) clear, 2) achievable, and 3) not contrary to public policy, the condition of the inheritance is considered valid. There is a case held in 2014 before the NSW Supreme Court in 2014, Carolyn Margaret Hicken v Robyn Patricia Carroll & Ors (No2), in which the court discussed the validity of a condition that an heir needs to be baptized by the Catholic Church within three months of the death of his father. The heir of course claimed that the above conditions were invalid. In particular, he argued that the condition was "inconsistent with public policy" because "it is religious discrimination, which creates discord within the family and also infringes universal human rights and freedom concepts". In response, the court ruled that "the condition does not force the heir to change his or her religion, and they are not contrary to public policy". In other words, the heir had the choice of converting and receiving an inheritance or keeping his or her own religion. In addition, it was held that the condition was clear and achievable. One of the major factors that led to such a decision was that the will specified who would inherit if the heir failed to meet the condition. In the current matter, it will be determined that the mother's inheritance conditions do not oblige her child to be converted. However, even if he or she is unable to fulfil the conditions, and thereby the estate is to be inherited by others, it does not mean that the child cannot inherit anything. According to the Family Provision regime stipulated in the Succession Act 2006 (NSW), regardless of the content of the will, children of the deceased can claim inheritance rights for a part of heritage. Further details about the inheritance claim on Family Provision will be explained in the later article.
Private Clients
Executor's power / Funeral and burial method
Q: Recently my father passed away. My father's old friend is acting as an executor based on the will. Yesterday I had a quarrel in relation to what to do with my father's grave. I told him that my father mentioned a cremation, but he insisted that it would be best to bury him near the divorced mother's graveyard. The will is silent about funeral and burial methods. In this case, do I have any legal right? A: In general, the will of the deceased specifies the deceased's funeral and burial methods or requires the bereaved family to determine such methods. However, in rare cases, there are some situations in which the bereaved families fail to reach an agreement. If a will exists, the executor, in principle, has the right to decide on funeral and burial. It may seem surprising that the method of burial cannot be determined by words of the deceased, even if the deceased had written instructions in the will. The NSW Supreme Court set out the principles of funeral and burial in the case of Smith v Tamworth City Council held in 1997. Some of the key principles are summarized below. If the executor is designated in the will, the executor has the authority to manage the deceased's funeral and burial. The executor has no legal obligation to follow the instructions given in the will regarding the funeral and burial of the deceased. In the absence of a will, a person in the highest inheritance rank in accordance with the will has the same authority as the executor. If two or more persons have the same authority, the decision will be made in consideration of who can carry out the burial without delay. Anyone who has the authority to manage the burial is expected to consult with other stakeholders (e.g. surviving families and relatives) but has no legal obligation to do so. Even if it is not legally binding, it is necessary to convey your wishes to others around you, and to clearly write them in your will as well.
Private Clients
Wills and Family Provision
Q: I have three children, and I am going to write a will that leaves my second son with no heritage. However, I heard that there is a Family Provision regime in Australia, similar to the Japanese mortgage system, and it may not be possible to remove the inheritance of a child no matter how the will is drafted. How can I avoid these possibilities? A: The Family Provision states that "even if the will does not specify the right to inheritance, the deceased’s children and dependents have the right to inherit part of the estate." However, unlike the Japanese mortgage system, there is no clear distribution ratio, so it is necessary to determine what distribution is appropriate based on individual situations. In this regard, if an agreement is not reached at the consultation stage, the case would be brought before the court. In determining the Family Provision, the court takes into account various factors such as individual circumstances and common sense. Most of all, the Family Provision claim is likely to be accepted if the distribution of heritage described in the will is determined to be fair and equitable. In this regard, the reason why you do not want to leave an inheritance to the second son will be important. For instance, if you have reasons such as "I gave my second son a lot of money for my business" and "I gave him a down payment to buy a house,"the right of the second son to request the Family Provision is thought to be weaker. If there is such a reason, it is recommended that the reason be stated in a will or a separate sheet, and that it be preserved securely. In addition, the smaller the total estates, the less likely the court will be to recognize Family Provision claims. On the other hand, it is also possible to give the property to other children prematurely. However, it should be noted that non-cash gifts may give rise to a tax issue (including stamp duty). Also, when deciding how to distribute the Family Provision, prenatal gifts may be taken into account. Life insurance at the time of death is not a legacy and will be passed on to the designated recipient separately from the inheritance process. Also, for superannuation, if you specify the recipient, the designated person can receive it without it becoming part of the inheritance. You can take advantage of these, but as with prenatal gifts, they can also be factored into the Family Provision distribution. Ultimately, it is impossible to completely remove heirs who have Family Provision rights without objectively just and fair reasons.