Flying overseas? Better make a will before you go

In my many years of preparing wills, the most common reason for making a will (or updating a will) is because there is an overseas flight imminent.

Despite air travel being one of the safest forms of transport, people see that hopping on a plane as a real motivator to get their will in order.

Any reason that makes a person pay attention to their will is helpful.

If a couple should both die at the same time, whether it be in a plane accident, a car accident or house fire the distribution of the estate where there is no will can be quite surprising.

For most couples, their main asset will be a jointly owned house. Joint ownership means that, upon the death of one owner, the other co-owner automatically becomes the sole owner of the property. If both owners die at the same time then you need to look at the pathologist’s report to decide who lived the longest, even if only for a short period of time. Then the house goes to the next of kin of the person who died last.

Assuming that there are no children, then the beneficiaries are likely to be the parents of the person who died last. The parents of the person who died first would receive no share of the house.

If the pathologist cannot decide who died first, then the oldest person is legally presumed to have died first, and the relatives of the youngest person would inherit the house.

So if a couple dies without a will, it really is a lottery as to where the assets will flow.

The easy solution is to make a will which provides that upon the death of both persons, the estate is divided equally between the two surviving families, and that way it does not matter who dies first as you end up with the same outcome. Of course, you may not want your relatives to inherit the house at all. You may have other choices that are more important to you.

Despite having planned the overseas holiday many months in advance, I am still surprised by the number of people who contact me only a week prior to their trip asking for a will to be made or updated. You should give yourself plenty of time to complete the task and do not wait to contact the lawyer on the same day that you are packing your suitcase!

To make or update your will contact our Will & Powers of Attorney team on 03 5445 1000.

Can you make a will if you do not have testamentary capacity?

It is a fundamental principal that a person must have testamentary capacity to make a valid Will. Basically this means:

• You must understand the nature and effect of making a Will.
• You must be able to recall the nature and extent of your assets.
• You should be able to weigh up all of the factors that the average person would normally bring to mind when considering a Will.
• You must not be suffering from a medical condition which prevents you from considering the above factors.

If there is some doubt about a person’s capacity or that could be an issue it is an excellent idea to obtain a medical report at the time of making the Will. In certain circumstances, the opinion of a specialist medical practitioner such as a neuropsychologist might be appropriate.

Should a person lack the ability to make a valid Will then the Supreme Court has the power to make a Will for that person if it can be satisfied that the proposed Will accurately reflects the likely intentions of the person. Applications to the Supreme Court for approval of a Statutory Will are not common. Statutory Wills can be made for a person who has never had the capacity to make a Will or they can be made for a person who had capacity but through illness or injury, has subsequently lost the ability to make a Will.

The Court will need to consider the wishes of any person who might reasonably be affected of the making of a Court approved Will.

The difficulties around testamentary capacity are a vital reason why you should make a Will when you are fit and healthy.

The possibility of a Supreme Court will is a good reason why those with a loved one who doesn’t have testamentary capacity should seek specific advice about whether such an application is appropriate.

Russell Robertson is Bendigo’s only Accredited Wills and Estate Specialist. If you wish to chat about your will or possible issues with testamentary capacity, please phone Russell on 03 5445 1020 or email r.robertson@ofrm.com.au

How does marriage affect a will?

https://ofrm.com.au/blog/2016/10/10/why-make-a-will-on-separation

When you are excitedly preparing for your wedding, updating your will is often the last thing on your mind. However it is important to understand how putting the ring on the finger will impact your existing will. The key impacts are:

• A Will is normally revoked by you getting married after the will is signed
• There is an exception that if a gift in the Will is in favour of someone who you subsequently marry, then that gift will survive but the rest of the Will is still revoked.
• However your will won’t be revoked if in your will has in it that it was made “in contemplation of the marriage”
• If you are in a domestic relationship (commonly known as a defacto relationship, living together but not married) and there is a chance you will subsequently marry, then you can save the will being revoked upon your marriage by expressly stating in the Will that any subsequent marriage will not revoke the Will

Yes, this is all a bit technical and quite confusing. Best way to avoid this is to make sure you make a new will if you start to live with someone and review your will if you are getting married or have married.

Divorce is different. A divorce does not revoke a Will. However, any gift to a divorced spouse is revoked. The appointment of your spouse as executor is revoked if divorce subsequently occurs unless the provisions in the Will benefit your children.

Don’t wait until you are divorced to think about your Will though. Have a read of this earlier blog I wrote about why you should make a new will when you separate.

Russell Robertson is Bendigo’s only Accredited Wills and Estate Specialist. If you wish to chat about your will or how to make sure you can ensure your funeral arrangements, please phone Russell on 03 5445 1020 or email r.robertson@ofrm.com.au

Who is responsible for payment of the funeral?

When a loved one dies, one of the biggest immediate concerns is the funeral. Funerals are so important to acknowledge the life of the deceased as well as providing a time and place for friends and family to come together in their time of grief.

Too many times though I have seen funerals add to the stress at such a difficult time. Uncertainty about who gets to decide what happens at the funeral and worry about who pays the cost are common areas of stress.

Decisions about the funeral

In Victoria, the Executor has the right to make decisions about funeral arrangements for the deceased person. Therefore, it is appropriate for the Executor to deal directly with the Funeral Director in making arrangements and the Executor will have signed the Contract directly with the Funeral Director.

Occasionally, at the time of death, the immediate family may not be aware of who is the Executor. In those circumstances, the next of kin is entitled to make funeral arrangements and that person is also liable to pay for the funeral account. Things can become difficult if the Executor considers that the funeral expenses were not reasonable and is not prepared to reimburse from the Estate assets, the actual cost of the funeral.

At present, the Executor also has the final say in relation to the funeral arrangements. As a result of a report produced by the Law Reform Commission, it is likely that new legislation will be passed soon by the Victorian Parliament which will enable anyone to make binding directions for their funeral arrangements and memorial costs.

Payment of the funeral expenses

In some circumstances, there are insufficient assets to pay for the cost of the funeral. In those circumstances, the person who has arranged the funeral is liable to pay the Funeral Director.

Usually, it is not possible to access bank accounts to pay any outstanding debts until a Grant of Probate has been obtained. The grant of probate may take up to two to three months from the date of death. However, there is an arrangement with all of the banks that they will, on production of the Funeral Account, arrange direct payment immediately.

An Executor is entitled to be reimbursed from the Estate assets for their reasonable costs of the funeral and any headstone/plaque.

It is still an excellent idea to pre-arrange your funeral wishes. Ideally, a discussion with a Funeral Director is a good start but leaving written directions that are easy for your Executor and family members to find is very important.

Russell Robertson is Bendigo’s only Accredited Wills and Estate Specialist. If you wish to chat about your will or how to make sure you can ensure your funeral arrangements, please phone Russell on 03 5445 1020 or email r.robertson@ofrm.com.au

Can stepchildren make a claim against an estate?

On 1 January 2015, Victorian Legislation was amended narrowing the potential claimants who could make an Application for further provision from an Estate.

In that legislation, stepchildren are listed as potential eligible persons and a recent decision of the Full Court of the Supreme Court decided that even if there was no marriage, the child of a deceased domestic partner would be treated as a stepchild for the purposes of the legislation.

In case known as Smith –v- Thwaites which was decided by Justice McMillan on 23 June 2017, a stepchild was successful in receiving a greater proportion of the Estate of her stepmother. The stepchild’s father had lived with the deceased for 38 years. Upon the father’s death he left his Estate of approximately $189,000 to the stepmother.

When the stepmother died in 2015, she owned a house in Mt Waverley which was sold for approximately $1.2 million. This property was left to the three children of the stepmother, with the stepdaughter only being left ¼ of the residue of the Estate an amount equating to $38,756.

The stepdaughter sought a ¼ share of the entire Estate. Justice McMillan did not accept that proposition but did award her a further legacy of $100,000 in addition to the $38,756 provision that was contained in the Will.

Justice McMillan gave weight to the consistently expressed wish of the stepmother that her three children should receive the benefit of the Mt Waverley property which had been acquired by her and her late husband.

The decision is an excellent demonstration of the balancing act that a Court must do when weighing up these types of claims.

This is an area of law where each matter is largely decided on the facts and it is difficult to compare one case against another case. Just remember that if you wish to make a claim seeking further provision then this must be commenced within six months from the date of the Grant of Probate.

It is important to obtain advice as early as possible from OFRM's Estates team by calling 03 5445 1000.

I need a small amendment to my Will. Should I make a Codicil or do a new Will?

Once you have made a Will, it is probable that the next time it needs to be updated only a minor amendment is required. One simple option is to make a formal codicil to the Will. This operates to delete and/or insert provisions in the original Will.

“Codicil” is a bit of a funny sounding old fashioned legal word. It is generally defined as “an addition or supplement that explains, modifies or revokes a will or part of one”. The idea of codicils probably hark back to the days before computers when redrafting a previously prepared will meant completely rewriting (in fountain pen!) or retyping the whole will. To save having to do the whole thing again a codicil could be made to alter only the relevant part of a Will.

With modern technology it is now possible to easily create a new will based on your old will and alter the relevant parts.

It is preferable to update the Will rather than make a codicil for reasons including.

• The formal requirements are still necessary including signing the codicil in the presence of two witnesses.
• Most importantly, your beneficiaries do not get the opportunity to see the amendment. All that is left is your final Will. No one will know if there has been a previous document which increased or decreased the provisions for any of the beneficiaries. This can prevent a beneficiary’s feelings from being hurt.
• Drafting a codicil can be messy. Although the change might appear to be simple, it does require the reader to look at two separate documents to understand your wishes. While it is possible to have more than one codicil, it just makes the task for the reader more challenging. Keeping everything together in the one document is more logical.
• There are no savings in the costs of preparing a codicil as compared to updating an existing Will. We always keep electronic copies of Wills and it is straightforward to make amendments. It can be more time-consuming to prepare a codicil then update an existing Will.

Everyone should look at their existing Will every 2 to 3 years and do their own analysis as to whether any changes are required. It is surprising how easy it is to forget the provisions contained in your Will even though the document is only two years old.

When is there a reading of the Will?

No doubt you have all seen the dramatic movie scene when the family are seated before the lawyer who reads out the contents of the Will and then the camera pans to the excited/disappointed/angry faces of the family in turn.

That scene pretty much only happens in Hollywood. It is rare in Australia for there to be a "reading of the will" — these days the contents of a will are much more easily and appropriately distributed by people being provided with a copy of the will. Photocopiers and the internet have changed the way!

Once a willmaker dies, the Will is under the control of the executor. They determine if copies are to be sent to anyone. However section 50 of the Wills Act states that a number of people are entitled to be given a copy of the Will if a request is made:

• any person named or referred to in the Will, whether as a beneficiary or not;
• any person named or referred to in any earlier Will as a beneficiary;
• any spouse of the deceased at the date of death;
• any domestic partner of the deceased
• any parent, guardian or children of the deceased;
• any person who would be entitled to a share of the estate if the deceased person had died without making a Will;
• any parent or guardian of a child referred to in the Will or who would be entitled to a share of the estate if the deceased had died without making a Will; or
• any creditor or other person is a claim at law or in equity against the estate of the deceased and who produces evidence of that claim.

It is sensible for beneficiaries to be given a copy of the will, even prior to them asking. Doing this often avoids the angst caused by uncertainty and speculation. There is a natural curiosity when a person dies as to what provision they have made in their Will. Keeping secrets might change curiosity into frustration and anger.

Once the probate application has been filed, any member of the public can obtain a copy of the Will upon providing payment of the search fee.

Given that so many people might possibly read the Will after death has occurred, is a reminder that great care should be taken when making any comments that are justification of decisions made. You should consider explanations where it is appropriate. It is best to avoid words that are merely intended to hurt or offend.

It is a good idea for you to look at your current will in light of the matters discussed above. If you think that your will needs more explanation given the potential audience you should contact one of our Will & Powers of Attorney team on 03 5445 1000 to discuss further.

Who is your domestic partner - young adults and superannuation

Last time I wrote about the connection between superannuation and wills, I said that if you do not have a binding death benefit nomination for your superannuation it will go to your spouse which may be a 'domestic partner'. Today I’ll explain further what that means.

Who is my domestic partner?

If you are living with a person (whether of the opposite or same sex) on a permanent domestic basis in the one shared residence then you are probably in a domestic relationship. Marriages are easy to identify - a religious or civil ceremony has occurred. Domestic relationships are not so easy to identify and are certainly difficult to define as having started on a particular date. The commencement of a domestic relationship is more like osmosis. It happens organically over a period of time. A couple might be able to state that three months ago they were not in a domestic relationship, and although they acknowledge that they are in a domestic relationship now, they cannot identify one particular date over the last three months which swings the opinion from two solitary lives to a domestic relationship. For the purposes of superannuation there is no minimum time limit that the domestic relationship must exist in order to qualify for the benefit.

A couple of examples

Jason is 25 years old, in full-time employment, still lives at home, but has a female friend Kylie. They have been in a close relationship for three years. Jason does not have a Will. He has $10,000 accumulated in his superannuation fund plus an insurance death benefit of $250,000. No binding nominations been made. Should Jason die at this point, the superannuation fund is likely to pay the benefit to his parents because he was in an interdependent relationship with them, or they might pay to his estate. Without a will Jason’s parents are his next of kin and will be entitled to his entire estate.

Six months later Jason has moved out of home and is sharing a house with Kylie. They have been in the house for nearly 6 months when Jason dies suddenly. The superannuation will be paid to Kylie as his domestic partner. His estate, because he did not have a Will, will again go to his parents as the next of kin. Kylie only qualifies as the next of kin for his estate if they have been together for two years as a couple.

Let’s suppose Kylie and Jason separate after a few months of sharing the house and Kylie moves out. Nicole then moves into the spare bedroom and shares the rent. Six months later, Jason is still unattached, but he and Nicole have taken advantage of the moment as consenting adults from time to time. Is it friends with benefits? Is it a more modern version of the domestic relationship? Or is it none of these? This time Jason has completed a binding death nomination naming his estate as the beneficiary so the nature of the relationship does not matter.

It is so important to make a binding death benefit nomination, particularly as a young adult. Of course, you should make a Will as well. For advice on this and other will related matters contact the Will & Powers of Attorney team on 03 5445 1000.

You are kidding - my super goes where? Young adults and superannuation

Most people between the age of 18 and 30 years have no idea what happens to their superannuation if they die. And who could blame them as the rules and procedures can appear to be very mysterious indeed. Many assume that upon their death superannuation and any insurance it provides is part of the estate for distribution to beneficiaries in accordance with their Will. That is not the case and unless they are tied together with a binding death nomination to the estate superannuation is treated separately.

How much am I worth?

The contribution from employers will increase over time, but usually the most significant portion will be the insurance death benefit if available. It could be anywhere between $30,000–$300,000 or more.

Where does it go?

Upon your death your superannuation will be paid out in the following manner:

1. in accordance with your binding death benefit nomination, or
2. if no nomination has been made:
   • to your spouse (includes a married spouse or domestic partner – or both if you have a particularly complex life)
   • your children
   • to a person that you are in an interdependent relationship with
   • or, if none of the above apply, then to your estate

If you have a binding death benefit nomination it will go to the person you nominate. Most people do not make binding nominations when they join their fund, because it is simply additional and confusing paperwork. But a lot of people put in a non-binding nomination, which will be merely persuasive for the Trustee if you die. And there is a good reason for this. If you nominated mum to be the beneficiary when you joined your fund at 18, it is unlikely that you would still want her to be the beneficiary when you are 30, married and have a child.

Why does this matter?

You have greater flexibility concerning wishes in a Will then you have with a binding death benefit nomination (and no flexibility at all for your super if there is no nomination in place). For example you cannot direct your superannuation fund to pay your benefit to a charity. But if you make a binding nomination in favour of your estate, your Will can make gifts to charities or to other persons who would not otherwise qualify to receive a superannuation benefit.

What should I do?

The solution is not rocket science; you just have to take action. Speak with one of our lawyers who will assist you to structure your affairs to meet whatever outcome you desire. They will answer any questions you have about how to direct your superannuation to where you want it to go.

For the next article on this topic read Who is your domestic partner - young adults and superannuation

When is the right time to make a will?

Most people never know when they might die and consequently a Will should be made as early as possible in your lifetime.

Make your first Will before turning 30 and then update it when a change is necessary. Most people will make between 2 to 4 Wills during their lifetime. There are a number of things that can influence when is the right time for you to make your Will.

You need time. Occasionally it is necessary to obtain more information from your superannuation fund, complete a title search, check trust deeds, liaise with an accountant or financial advisor or seek feedback from family and friends. Some Wills can be completed in a day, but other Wills might require several weeks to collate all of the necessary information.

You need knowledge. There are lots of tricks and tips about Wills that are good lawyer can tell you. You need to know this information so that you can apply it to your own circumstances make the Will that best suits you.

You need to be in the right frame of mind. Making a will when you are angry, hurt, depressed or otherwise unhappy with life is usually not a good idea. A Will should not be used as a mass weapon of destruction to hurt people that have upset you. A Will should be used to make life easier for those that behind and to reward people that are important to you.

I can tell you the wrong time to make a Will. When you are dying and literally have days to live is not the best time to make a Will, although some people have no alternative because they have never made a Will or the Will that was made 20 years ago is so horribly out of date. If you are lying in a hospital bed, your mind can be distracted by pain, anguish, and the sheer miserableness of your own condition. When making a Will, you need to weigh up many matters and your memory needs to be in good shape and you do need a reasonable level of emotional energy. You can make a good Will if you are dying or very unwell, but at another time the task would have been easier.

The best thing you can do is consider making a Will now by making an appointment to see one of our wills lawyers by calling 03 5445 1000. It's best to get the ball rolling.

Penny wise and pound foolish - why you should not make your own will

Making your own will is simply a bad idea. Making no will is even worse, but many people are lulled into a false sense of security when they use a will kit. I have seen many will kits over the years and the success rate for effective completion is less than 50%. Now that is not a very good outcome when you are trying to protect assets that might be worth hundreds of thousands of dollars.

The main difficulty is that the information contained in the will kits are of a general nature and consequently the knowledge that is passed to you becomes quite superficial. There are many legal issues that are relevant when preparing a will and it is simply not possible for an untrained person to be aware of these matters when making their own.

An experienced lawyer can draw to your attention many issues that may not have been considered usually there are numerous options and solutions to the issues that should be considered in a will, but if you don’t know about them, then your beneficiaries might be disadvantaged.

But even if you feel that you have covered all of the relevant issues, do you have the skills to complete the form? The kits sometimes provide suggested phrases, but it can be very difficult to know what phrase should be used in your situation. The language can be unusual and sometimes difficult to interpret. I saw a will recently where a mother had intended to leave all of her assets to her own children, but the will actually left everything to the children of her husband. It was a classic “cut and paste” of a legal paragraph and it had been written by a family member who was trying to be helpful, but simply made the matter worse.

The number one problem with making your own will is that you cannot see the errors that have been made. Usually the first time that a lawyer gets to look at the home-made will is, sadly, after the person has died. Sometimes the errors can be corrected, but usually it does create tension and on a number of occasions, the errors made in the will have substantially added to the cost of administering the estate.

Another advantage of seeking specific advice is to ensure that your will and superannuation together lead to the best outcome. Most people do not realise that their superannuation is not necessarily going to be covered by their will. But with the advent of binding death benefit nominations it is possible to control the payout of your superannuation and you can still do it through your will. A lawyer is simply the best way to ensure that your beneficiaries receive their proper entitlement.

Why make a will on separation

So, your relationship has ended. Why should you now update your will?

• If you have children it is extremely important to make a new will.

• If you are married and do not have a will, even though you might be separated, your spouse will automatically receive all of your personal chattels, plus the first $100,000 of your estate. If your estate exceeds $100,000 then your spouse will receive one third of the excess and your children will receive two thirds of the excess.

  • However if you make a will, then your assets are distributed in accordance with your wishes.

• If you do not have a will and if you are not married, but separate and have children, then all of your assets will pass to your children, but the person entitled to administer your estate will be the parent of your child or children.
  • This default position might be acceptable, but it is also quite likely that you would rather that other people can be in charge of looking after the funds for your children until they reach an appropriate age.

• Although you might not consider that you have many assets, it is quite surprising when you actually attempt to list the value of the items that you own.

  • If you have a will, then it is usually very easy for your executor to administer your estate, particularly if the estate is small. If there is no will, then the costs of administering your estate become far more expensive and, of course, the statutory formula for distribution of your estate may not be ideal.

• If you have superannuation, you probably need to ensure that your superannuation benefit is not paid to your estranged spouse. Separation does not make your spouse ineligible to claim your superannuation benefit. You should make a binding death benefit nomination with your superannuation fund and you should also make new provision in your will.

• For a lot of people, the idea of having to make a will is challenging, particularly if there are other stressful issues in your life. However, after talking to an experienced lawyer, most people can create a will which accurately reflects their wishes and, in most cases, is relatively straightforward. A lot of people are then extremely relieved to have that important issue resolved.

• You might think you are better to delay making a will until your family law property settlement is finalised. Our experience is that you are better to make a new will soon after separating and update it, if required, when your property settlement is finalised

Most people put off making a will, because they are waiting for an event which will prompt them to complete the task. Entering into a relationship would be a good time to make a will. Ending a relationship is absolutely the best time to make a new will or update an existing will.

Death and the Internet

If you die then your Will leaves your assets to your beneficiaries. But what happens to all of your online and digital accounts such as Facebook, iTunes, Twitter, Amazon...?

First, you must look at the terms and conditions in relation to each account. As a lawyer, I should tell everyone to read the Terms and Conditions before they tick the agreement box, but I don't read them myself. Life is too short to waste reading jargon that is impossible to understand and takes an endless amount of time to do so.

However there is a common theme running through most online accounts. The organisation gives you the right to use the account during your lifetime, but upon your death there are no ownership rights that pass to your next of kin or beneficiaries in a Will. In other words, it is a right to use and not a right to own.

If you have an Apple iTunes account, then you are given a licence to listen to the songs that you have purchased. Unlike the purchase of a CD at a shop, there is nothing physical for you to own. You merely have the right to listen to the music held on your account. While you are alive, you cannot transfer control of your iTunes account to another person to use. The right to listen to the music is personal to yourself¹. Upon your death, there is no legal entitlement to listen to the iTunes music that can be passed on to anyone else.

Similarly, Facebook allows you permission to operate your account, but Facebook owns and controls the site. Upon death, Facebook have the ability to memorialise an account which prevents anyone from logging into the account and, obviously, no new friends can be accepted. Depending upon the settings of the account, friends can share the memories on the memorialised timeline. Facebook have indicated that they will delete the account of a deceased person if requested by family members.

The storage of passwords and other sensitive information on the internet is very important. Keeping in mind that your Executor may not have the right or ability to access accounts after your death without the password, perhaps it is a good idea to keep copies of any information on a separate storage device and kept in a safe location.

The internet has evolved at a very rapid pace. But the issues around the internet and death have evolved much more slowly and I am sure that there will be a lot more on this over the next few years.

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1. Apple's Family Sharing does allow for limited sharing amongst family members.↩

Donating to charity through your will

Australians are very generous people and in time of need, rally around to support worthwhile causes. Organisations like Royal Children’s Hospital, Salvation Army and Red Cross, to name but a few, are well supported by the public with donations.

You might think that it follows, that Australians are extremely generous in making gifts through their wills to charities. This is not true. I have made thousands of wills over more than 30 years as a lawyer but it is my belief that less than 2 percent of those wills contained any charitable gifts. This does not indicate that people are being mean spirited in their wills, it is simply that they are, understandably, focused upon their own immediate family members.

If everyone gave 1 percent of their estate to charities, then this would probably result in charitable gifts increasing 20 fold. The remaining 99 percent that was available for family or friends would still represent a very generous provision for them.

Is there a charity that you feel is deserving of 1 percent of your estate?

When drafting gifts for charities in a will it is important to accurately describe the charity that is to benefit. Good wills also make provision for an alternate charity in the unlikely event that the designated charity no longer exists. There are similarities between charities and it is important to identify the precise charity that you have in mind. You can tag the gift with a specific purpose or you can leave the funds to the charity to be applied for their general charitable purposes.

Most charities will have a very informative website and they will be able to provide you with lots of inspiration on ways a charitable gift will assist them.

Love them or leave them (out of your will)

If you haven’t spoken to your child for a long time do you cut them out of the Will or tell them that you still care?

It is a sad fact of life that relationships between a parent and child are not always smooth and harmonious. Sometimes these difficulties can arise from genuinely difficult and irreconcilable situations.

More often the reasons for the breakdown in the relationship are obvious, but the difference is capable of being repaired.

Do you exclude the child from your Will?

So, what should someone do with their Will if there has been a breakdown in the relationship with their child?

The starting point is that any person is entitled to make a Will and leave their assets as they wish.

There is a legal obligation to make adequate and proper provision for the maintenance and support of a child, but there can be justifiable grounds for excluding a child. This is a very complex area of law and there are literally hundreds of cases that could be digested. With this area of law being recently amended, there probably will be uncertainty about what is proper provision, until the Supreme Court has decided new cases under the new legislation.

Death brings with it the extinguishment of all hope of ever resuming the relationship with a child. What you say and do during your lifetime as well as what you say and do in your Will can have a profound impact on those people left behind.

Imagine the following two options:

1. In your Will you make no provision for a particular child as you have not had contact with them for some time and the conversations that did occur were emotionally charged and unpleasant. Your Will makes the comment that your child has abandoned you and you are hurt in the extreme by their rejection. You state that you believe you have no obligation to make any provision for that child.

2. Your Will states that while you have not had any contact with your child for some time you nevertheless love them dearly and deeply regret the period of silence between you. You further state that you only want the best for your child and that as they go forward into the future they carry the knowledge, that whatever arguments or harsh words that were exchanged, your still loved them as your child.

It doesn’t take much to imagine the two quite stark alternative situations that would arise. Reconciliation may, sadly, not occur during your lifetime but in your Will you have the ability to control what is really the final conversation between you and your child.

When it comes time to make your Will it is important to carefully think about this difficult relationship. Making you Will is an ideal time to “take stock” of your life and consider not only the legacy you want to leave but whether you want to make any changes in your relationship now.

Sadly, usually when dealing with fights over estates, I have seen far too many occasions when people have used their will as their way to “have the final word” or give a child “payback”.

I have also seen the opposite. Where people have reflected at the time of making their Will and used that time as an opportunity to patch up differences. Discussing these difficult issues with your lawyer at the time of making your Will can not only increase the likelihood that your Will will be something that is unlikely to be challenged but also provide an opportunity to think about a different way forward.

None of us like to face our own mortality, however using the time to make your Will as a time to think about this may be an invaluable step and bring great peace to you and your family.

Wills — When equal is not equal!

Frequently I am preparing Wills for people who have a number of children spread over a relatively wide period of time. Usually the desire to leave the assets equally between the children seems straight forward and appropriate. But is it?

Assuming that there are two children; Jason 18 years and Kylie 12 years. Jason has just finished Year 12 and Kylie has just finished Grade 6. Further assuming that there is a pool of assets totalling $500,000, an equal split would result in funds of $250,000 to each child. But this is not an equal result for Jason and Kylie as Jason will have had the advantage of a further six years of education and maintenance during that period of time as compared to his younger sister. Consequently a division of the assets in the Will in equal shares is not an equal result for Kylie.

A simple, but effective approach, is to create a separate Education and Maintenance Fund for Kylie. If Kylie went to a Government run Secondary School, then her educational costs would be at the lower end, but could easily amount to $2,000 to $5,000 per annum. General living costs might be in the range of $10,000 to $15,000 per annum, but could be more. Therefore if an allowance of $20,000 per annum was made in an Education and Maintenance Fund, you would end up with this result:

• Education and Maintenance Fund for Kylie - $120,000
• Half share of residue for Jason - $190,000
• Half share of residue for Kylie - $190,000

If Kylie was attending a Private School then the fees would be much higher and the provision in the Education and Maintenance Fund can be amended accordingly.

There would usually be a provision that the Education and Maintenance Fund would be managed by the Executors until Kylie has completed her Secondary or Tertiary education. The other funds would probably also be held on Trust until Jason and Kylie have either attained 18, 21 or 25 years, depending upon your preference.

It is impossible to obtain perfection with this method, but it does produce a much fairer result for Kylie than a straightforward equal division of the Estate.

Setting the age of inheritance

When making a gift to a child in a Will it is rarely appropriate to give the gift to the child outright before they reach adulthood. Many people prefer the gift to be held by the Executors until the child has reached 18, 21 or 25 years. Usually the larger the gift, you might want a higher age before the child has complete access to the funds.

In all but the most unusual circumstances, a provision is included in the Will which allows the Executors to pay some, or even the entire amount to the child before they reach the nominated age, if the Executors feel that the payment is for the education, maintenance or other benefit of the child. Clearly the choice of Executors is extremely important and you should choose people who would reflect your own standards and beliefs. If funds are being held for a child, it is my strong preference that at least two Executors are chosen and that they are not from the same household.

Why do people prefer 25 years?

More and more people prefer that the beneficiary reaches 25 years before having total access to the money. The majority of young people will complete, not only secondary schooling, but go on to complete a tertiary course. The vast majority of tertiary courses are at least four years. This means that a University graduate is likely to be 22 or 23 years old.

Many people hold the belief that it is not until you are working full time and are fully supporting yourself from your own income, that you truly develop a sense of the value of money. Having to budget for payment of accommodation, food, utilities, car and transport, health insurance, etc is a great learning opportunity. The vast majority of our grandparents left school at 15 years and commenced employment receiving less than the adult wage. A large chunk was retained by their own parents for board and your grandparents had to be rather thrifty with the balance remaining. By the time your grandparents reached 21 years, they had been managing their own funds for five or six years.

Is 30 years or higher appropriate?

Occasionally it is appropriate to place a higher age upon the child receiving the money. But you must be careful that this restriction does not become unreasonable. The role of the Executors in managing the money for infant children is an onerous and very important task. Looking after money until the child reaches 21 years is very different to looking after those funds for a further nine years until the child reaches 30. You must ask yourself is the potential beneficiary going to change their behaviour substantially between the ages of 25 to 30 years.

A number of clients have been well aware that the child will be financially very comfortable during early adulthood and there is no need for funds to be made available before 30 years.

Very occasionally I have clients who wish the benefit for a child to be held until the child reaches 35 or 40 years. The reasons have to be carefully examined. I have never met anyone yet who can persuade me that an age restriction higher than 40 years is ever appropriate. If the question is simply about when the child will be mature enough to manage the funds independently, then an age restriction is the best method to use. If there are other concerns about the child’s ability to manage the money then Protective Trusts should be used and this is a different and more complex topic.

Supercharge your will with a Discretionary Testamentary Trust

A normal Will provides a gift to a beneficiary without any conditions. However, a Discretionary Testamentary Trust (“DTT”) has the effect of supercharging the gift. The main advantages are listed below.

Taxation

The primary beneficiary can divide the income earned by the DTT between family members and themselves. The big advantage is that children under 18 are taxed at the same rate as an ordinary adult. This special rule applies to trust distributions from a Deceased Estate. Where children receive trust distributions from a traditional Family Discretionary Trust, they can only earn $416 per annum tax free and the excess is taxed at the highest rate. But distributions from a DTT to a child are taxed at the ordinary adult rate of $18,200 tax free and then at the normal marginal rates.

Protection from Creditors

As the primary beneficiary does not, strictly speaking, own the assets contained in the DTT, this means that the inheritance is not at risk of being claimed by a creditor, should the primary beneficiary become bankrupt or otherwise have claims made by creditors. The primary beneficiary can use the DTT assets to pay creditors if they wish to do so, but they cannot be compelled to use those assets.

Protection from Relationship Breakdown

The Family Court can take into account the assets contained in the DTT if there is a marriage breakdown, but inheritances are treated slightly differently from normal assets accumulated during the life of the relationship. There is definitely an advantage if the inheritance is quarantined from the general community assets of the parties. However, the best way to protect an inheritance is for the primary beneficiary to enter into a Binding Financial Agreement which complies with the provisions of the Family Law Act. The agreement would state that upon separation, the other party can make no claim against the inheritance contained in the DTT.

Encouragement to Save and Accumulate

Because of the advantages listed above, there is a real incentive to save and accumulate the inheritance provided through the DTT. Most parents are comfortable that their child will be able to make sensible decisions with any inheritance, but most would like the inheritance to be accumulated, if possible rather than being spent immediately on activities or assets which will not produce a long term benefit. Funds in a DTT have some similarity to superannuation. Both offer taxation benefits and protection from creditors. The real benefit from both funds derives from accumulation and strategic planning for the use of the funds.

With superannuation there are restrictions upon withdrawing the funds unless you have reached retirement age. With a DTT, there is no restriction upon withdrawing the funds, but you cannot add other funds to a DTT and still obtain the special income splitting advantage with children under 18. Consequently, from a practical point of view, you would not want to add any additional funds to a DTT other than funds sourced solely from the inheritance. Income can be accumulated within the DTT.

How is a DTT implemented?

The Will incorporates the terms and conditions for DTT and these can be tailored to suit the individual needs of each person. Once the Will has been made, the DTT sits in a dormant position in the Will and becomes active upon the death of the Will maker. It is important to note that the beneficiary is usually not compelled to take the inheritance through the DTT. There is no stamp duty payable upon the creation of a DTT (which is in contrast to the stamp duty of $200 which is normally payable upon a traditional Family Discretionary Trust). The beneficiary is obliged to keep separate records for the DTT and each year an individual tax return for the DTT must be prepared, which indicates what income has been allocated to beneficiaries. This is a very straight forward tax return for most situations.

Why do it at all?

The parent has worked very hard to accumulate assets. A DTT gives the child the best opportunity to make use of those assets. Not only will it benefit the child, but it also gives the opportunity to benefit grandchildren, should they occur, and can even be used for successive generations (up to a maximum of 80 years from the date of death).

Wills — What information is needed?

I find that a lot of people put off the task of making a Will because they feel that they have not completely resolved in their own mind what they want to do and how they wish to achieve those objectives. But the best approach is to gather information and ideas and put them before an experienced Wills lawyer who can then suggest ideas and options and prepare the Will accordingly.

Having prepared more than 5,000 wills over 30 years; I have been able to resolve plans for just about every situation that could possibly arise. For even the most complex situation, there is a solution. Many clients are often surprised that after a detailed conversation, a workable solution could be agreed upon relatively quickly. If you go to a specialist Doctor, you would expect that they would be able to diagnose and treat your condition, no matter how unusual. A specialist lawyer is no different.

Your questions will be most easily answered if you can come prepared with the information listed below.

The Basics

A list of assets should be prepared. Ownership variations should be noted. Some assets might be owned jointly with other persons. There may be family trusts, private companies, superannuation funds and unusual investments.

The approximate value of the assets should be noted.

Specific Gifts

It is not uncommon to make a specific gift of an item to a particular beneficiary. This usually involves an item of strong sentimental value, although it might also have monetary value as well. It usually is an item that is unlikely to be converted into cash. For example jewellery, War medals, family heirlooms, etc. If a mother has three daughters, but only one engagement ring, then a decision should be made as to which person is to inherit the engagement ring. A direction that the daughters can sort it out between themselves is simply passing a problem onto the next generation. The Will could provide for gifts of other important items to the other two daughters who do not receive the engagement ring.

However, for most people, their assets represent a monetary value which can be divided between various beneficiaries. An attempt to nominate every asset to a particular beneficiary is rarely a good approach.

Executors

Executors have the task of carrying out your wishes. Generally, beneficiaries in the Will can often be the most appropriate persons to be Executors as well. Care must be given about choosing the right person. Often two executors are best, particularly if assets are being held on trust for infant children.

Provision for Infant Children

It is common to leave a gift to infant children on trust until the child reaches a particular age. You can nominate the age and 18, 21 or 25 years are common choices. When the child reaches the specified age, they receive the inheritance without restriction. Until they reach the nominated age, a Will would normally provide that the Executors could pay some of the money toward the education, maintenance or general benefit of the child. Consequently, the choice of Executors is important. Where monies are being held on trust for children, I think there are advantages if there is more than one Executor.

Taxation

While death duties were abolished many years ago, there can be a variety of taxation issues that can be relevant when preparing a Will. Shares and property will be subject to CGT if acquired after 20 September 1985. The principal residence is exempt. Awareness of the taxation issues is important so that you are able to assess the underlying net value of an asset.

Superannuation

This very important area is full of important rules (and governments have been altering these rules from time to time – and no doubt will continue to do so). A summary barely does nay justice to this issue, but these issues are always important:

• How many funds do you have? Is consolidation a good idea?

• What is the accumulated balance?

• Is there any insurance death benefit payable?

• Is there a binding death nomination, and if not, should one be made?

• There are important tax concessions depending upon who receives the benefit.

The next step

Once you have been able to gather as much of the above information make an appointment to see your lawyer who can advise you of the options available to you. Don’t try to solve all of your plans before you see the lawyer – let the lawyer complete that task. Focus on the big picture issues and let the lawyer can work out the details.

Who got the house?

Last week the Supreme Court of Victoria handed down a decision which reinforced the vital need that you make sure you get your will done right.

In the matter, the deceased, a Marietje Stuckey, had attempted to change her will when she was terminally ill in hospital. The change she wanted to make was to leave her house to her sister rather than be divided between her two sons.

As Ms Stuckey was very ill and in hospital, she attempted to make the change by making an attempt at a codicil (or update) to her previous will. The codicil was one page, on a printed page of nursing notes from the hospital. The codicil had not been signed by Ms Stuckey or any witnesses. The evidence the court considered included a was a videorecording made on a phone of Ms Stuckey reading the words on the document as she sat "in her hospital bed, propped up in a sitting position".

It is possible for a court to find a document that does not fulfil all of the strict criteria for an effective will — being signed by the willmaker, being witnessed by two adult independent witnesses and so on — to be an "informal will" and the estate distributed in accordance with that will. In the judgement in this case, Her Honour Kate McMillan found that this document did not amount to an "informal will" and that the original will stands. This means the sister does not receive the house and instead it is shared between the sons.

So, what are the lessons from this case?

1. When faced with a terminal illness, you should turn your mind to reviewing your will urgently — this situation would have been avoided if changes to the will had been sorted sooner
2. Make sure your will is prepared by a lawyer as they will arrange for it to be signed in the way that ensures it is valid
3. Even modern technology like videoing is no substitute for a properly signed and witnessed will
4. Avoid codicils