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In July 2023, a tragic boating accident off Sydney Harbour claimed the life of Andrew Findlay, a successful 50-year-old technology entrepreneur. What followed was not just a time of mourning for his family, but the beginning of a complex legal battle over his $13.5 million estate. The high-profile case of Kemp v Findlay [2024] NSWSC 902 serves as a stark reminder of the critical importance of professional Will preparation and the potential pitfalls of informal or do-it-yourself (DIY) Wills, as this article explains.

If you are considering writing a Will or updating your existing Will, consult with our expert Wills and Estate Planning Lawyers to ensure your wishes are honoured.

The Heart of the Dispute

At the centre of the legal storm were two conflicting documents: a formally executed Will from 2015 and an informal, electronic document created in 2019. The initial Will bequeathed Findlay’s entire estate to his ex-partner, Elizabeth Kemp, while the revised document designated his three young children as beneficiaries.

The crux of the matter was that the 2019 document, despite clearly expressing Findlay’s updated wishes, had never been formally executed. It remained an unsigned Microsoft Word file on his computer. This oversight set the stage for a protracted legal battle that would ultimately be decided by the Supreme Court of New South Wales.

The Court’s Decision

In a landmark ruling, Justice Kelly Rees determined that the 2019 electronic document should be accepted as Findlay’s last valid Will, despite its lack of formal execution. The court was satisfied that Findlay had intended the document to operate as his Will without further formalities.

Key factors in this decision included:

• Findlay’s clear communication about the new Will to his cousin (the new executor) via email.
• His statement to his family law solicitor about changing his Will.
• The detailed nature of the 2019 document, which included specific changes to beneficiaries and executors.

Whilst this outcome aligned with Findlay’s apparent intentions, the case highlights the risks and uncertainties associated with informal Wills.

Lessons from Kemp v Findlay

This case offers several crucial lessons for anyone considering their estate planning:

• Regular Will Reviews: Life changes such as separation, divorce, or the birth of children should prompt a review of your Will.
• Clear Communication: Whilst the court considered Findlay’s communications about his new Will, relying on such evidence is risky. It’s far better to have a properly executed Will that clearly documents your wishes.
• Formal Execution Matters: Although the court accepted Findlay’s informal Will, this outcome is not guaranteed. Proper execution provides much greater certainty.
• Complexity Requires Professional Advice: Findlay’s situation, involving a high-value estate and young children, warranted professional legal guidance.

The Pitfalls of DIY Wills

Albeit DIY will kits and online will-making tools may seem convenient and cost-effective, they come with significant risks:

• Improper Execution: As seen in Findlay’s case, failing to properly sign and witness a Will can lead to lengthy and expensive legal disputes.
• Unclear Language: Legal terminology is precise, and DIY Wills often contain ambiguities that can lead to misinterpretation or challenges.
• Failure to Consider All Assets: DIY Wills may not properly account for all assets, especially complex ones like superannuation or business interests.
• Lack of Tailored Advice: Every person’s situation is unique, and DIY solutions can’t provide the personalised advice needed to address individual circumstances.
• Inability to Anticipate Challenges: An experienced lawyer can help structure your estate plan to minimise the risk of challenges or disputes.

The Importance of Professional Will Preparation

Engaging an experienced Wills and Estate Planning Lawyer offers numerous benefits:

• Legal Expertise: A Wills and Estate Planning Lawyer, such as ours ensures your Will complies with all legal requirements and uses precise language to clearly express your intentions.
• Comprehensive Planning: Professional advice considers your entire financial picture, including assets that may not form part of your estate, like superannuation.
• Tax Efficiency: A lawyer can advise on structuring your estate in a tax-effective manner, potentially saving your beneficiaries significant sums.
• Protection Against Challenges: Professional Wills are less likely to be successfully challenged, providing greater security for your intended beneficiaries.
• Regular Reviews: Many lawyers offer regular will review services to ensure your Will remains up-to-date and reflective of your current circumstances.
• Peace of Mind: Knowing your affairs are in order and your loved ones will be provided for can provide immeasurable peace of mind.

The Complexities of Modern Estate Planning

The Kemp v Findlay case also highlights the increasing complexities of modern estate planning. In today’s digital age, with blended families becoming more common and assets often spread across multiple jurisdictions, estate planning requires a nuanced and comprehensive approach.

Digital Assets: A New Frontier

One aspect not directly addressed in the Findlay case, but increasingly relevant, is the management of digital assets. These can include everything from social media accounts and email to cryptocurrency and online businesses. Many people overlook these assets when creating their Wills, but they can have significant sentimental or financial value.

A professional estate planner can help you inventory your digital assets and create a plan for their management or distribution after your death.

Cross-Border Considerations

In our globalised world, it’s not uncommon for individuals to have assets in multiple countries or beneficiaries living overseas. This can create complex legal and tax issues that require specialist knowledge. Professional advice can help navigate these international complexities, potentially involving the creation of multiple wills to cover assets in different countries.

Superannuation: Often Misunderstood

Superannuation is often one of the largest assets people have, yet many don’t realise that it doesn’t automatically form part of their estate. A professional estate planner can help you understand your superannuation arrangements and ensure that your superannuation benefits are distributed according to your wishes.

Blended Families: Balancing Competing Interests

Blended families present unique challenges in estate planning. Balancing the needs and expectations of current partners, ex-partners, and children from different relationships can be extremely complex. Professional advice is crucial in these situations, potentially involving strategies like testamentary trusts or mutual wills.

Business Succession Planning

For business owners like Findlay, estate planning isn’t just about personal assets but also about ensuring smooth business succession. A professionally prepared will can be coordinated with other business succession tools to ensure a smooth transition of business interests after death.

Testamentary Trusts: Advanced Estate Planning

Testamentary trusts can offer significant benefits in terms of asset protection and tax efficiency for beneficiaries. They can be particularly useful for protecting inheritances for vulnerable beneficiaries or providing tax advantages. However, setting up effective testamentary trusts requires careful planning and drafting.

Capacity and Undue Influence

Questions of testamentary capacity and undue influence often arise in Will disputes, particularly those involving informal Wills. When a Will is prepared by a solicitor, they typically assess and document the testator’s capacity, providing valuable evidence if the will is later challenged.

The Role of Executors

Choosing an appropriate executor is a crucial part of the estate planning process. Seeking professional advice can clarify the duties of an executor and assist you in selecting the most suitable individual for the position.

Advanced Healthcare Directives and Powers of Attorney

Comprehensive estate planning goes beyond just preparing for what happens after death. It also involves planning for potential incapacity during your lifetime through documents like advanced healthcare directives and powers of attorney.

How Felicio Law Firm Can Help

Felicio Law Firm specialises in comprehensive estate planning. Our experienced team can:

• Draft a legally sound Will that clearly expresses your wishes.
• Advise on complex issues such as blended families, business succession, and international assets.
• Help you understand and make provisions for assets not covered by your Will, such as superannuation.
• Assist with related documents like powers of attorney and advance care directives.
• Provide regular Will reviews to ensure your estate plan remains current.
• Offer executor support services to assist your chosen executor in administering your estate.

Conclusion

Whilst the Kemp v Findlay case shows that courts may sometimes accept informal Wills, it also demonstrates the stress, cost, and uncertainty that can result from not having a properly executed Will. The small investment in professional Will preparation can save your estate significant costs and your loved ones considerable stress in the long run.

Don’t leave your legacy to chance. Contact our friendly Wills and Estate Planning Lawyers at Felicio Law Firm today to ensure your final wishes are clearly documented and legally enforceable. We will help you navigate the complexities of modern estate planning and protect what matters most.

Legal claims on grandparents’ estates are expected to rise dramatically. Contact our expert wills and estate legal professionals to protect the future of your estate.

Grandparents’ roles have evolved over the years and can sometimes involve financial support or care for their grandchildren. Although this can strengthen bonds, unexpected legal challenges in estate planning may arise in the future. Specifically, grandchildren may contest a grandparent’s will through a family provision claim as observed in Curtis vs Curtis [2023] NSWSC 1164.

Background and Implications of Curtis vs Curtis

The grandchildren of Mr Barry Curtis (the deceased) made claims on his estate on the grounds of dependency based on the Succession Act 2006. In his will, the deceased named his son, Rodney Curtis (the grandchildren’s uncle), as the sole beneficiary. The judge ruled that the grandchildren were indeed partly dependent on the deceased. Consequently, the judge made provisions for the grandchildren’s eligibility to receive 20% of the sale of the deceased’s property.

This case illustrates several important aspects of family provision claims by grandchildren in NSW:

• Grandchildren can be eligible to make a claim if they can demonstrate dependency;
• The court will consider factors beyond just financial dependency;
• The needs of other beneficiaries (in this case, the son) are also taken into account; and
• The court has discretion in determining what constitutes “adequate” provision.

Dependency Under Family Provision Claims

In most states, grandchildren can contest wills if they can prove that, at some point, they were financially dependent on their grandparents. However, in NSW, these family provision claims may find support from certain conditions of section 59 of the Succession Act.

Key provisions related to grandchildren’s claims of dependency in NSW

1. Eligibility: Grandchildren must demonstrate that they were dependent on their deceased grandparent at the time of their death or at some earlier time.
2. Dependency Requirement: Partial or full reliance on the deceased at any one time for their upbringing, education, or career growth. Nonetheless, dependency extends beyond financial matters and includes emotional or physical support.
3. Nature of the Claim: The treatment for grandchildren is similar to those for other eligible applicants, such as children or spouses. However, the grandchildren must establish their need for provision from the deceased’s estate based on factors such as:

• financial circumstances
• the size of the estate
• their relationship with the deceased.

4. Consideration of Other Beneficiaries: The court will consider the claims of all potential beneficiaries. It will also determine if there is adequate provision for the proper maintenance, education, or advancement in life of the grandchild.
5. Time Limit: Within 12 months of the deceased’s death, unless the court grants an extension of time.

Strategies for Protecting Estate Your Estate from Future Dependency Claims

Seek Professional Advice

Protecting your estate from potential dependency claims by grandchildren requires a multifaceted approach. Given the complexity of estate law and its variations across states, consulting experienced estate planning lawyers such as ours is vital to protecting your estate from future claims.

Have a Clear and Detailed Will Drafting

The foundation of protecting your estate lies in a well-drafted will:

• Explicit statements: Clearly state your intentions regarding each potential beneficiary, including grandchildren. If you’re excluding someone, explain why.
• Detailed asset allocation: Provide a clear breakdown of how your assets should be distributed.
• Use of a “no-contest” clause: While not enforceable in all jurisdictions, this clause can discourage frivolous claims.
• Regular updates: Review and update your will regularly, especially after significant life events or changes in family dynamics.

Consider using Trusts

Trusts can be powerful tools in estate planning, offering both flexibility and protection:

• Discretionary trusts allow trustees to determine how and when to distribute assets, potentially reducing the grounds for a dependency claim.
• Testamentary trusts are created upon your death, and can provide ongoing support to beneficiaries while maintaining control over asset distribution.
• Special purpose trusts can be set up for specific purposes, such as education or healthcare, potentially satisfying moral obligations without creating dependency.

Our team of estate planning lawyers may guide you in determining which trust is best for you if you are considering this option.

Maintain Clear Records

Thorough documentation can be crucial in defending against future claims:

• Financial records: Keep detailed records of any financial support provided to grandchildren.
• Communication records: Document discussions about estate planning with family members.
• Reasons for decisions: Record your reasoning behind estate planning decisions, especially if you’re treating beneficiaries unequally.

Review and Updates your Will

• Estate planning is not a one-time event. Review your estate plan annually or after major life events like births, deaths, marriages, or divorces in the family.

Address Potential Dependency During Your Lifetime

Take steps to reduce the likelihood of dependency claims:

• Encourage financial independence: Support grandchildren in developing skills and careers that lead to financial independence.
• Set clear expectations: Communicate clearly about any support you provide and its limitations.
• Gradual reduction of support: If you’ve been providing significant support, consider gradually reducing it over time.

Family Agreements

Consider formalising family arrangements:

• Financial agreements: Document any financial support provided to grandchildren, clearly stating the terms and duration.
• Family provision agreements: In some jurisdictions, you can create legally binding agreements that limit future claims.

Mediation and Communication

• Open communication about your estate plans during family meetings can prevent misunderstandings and potential disputes. If conflicts arise, consult a lawyer before they escalate to legal claims.

Need more information? Consult our empathic team

The dynamics of modern families are changing, including the roles grandparents have on their grandchildren’s lives. Navigating the intricacies of the law to protect your estate can be daunting at first but we are here to help you. Our team of experts will guide you in exploring strategies that are beyond the coverage of this article.

While it’s natural to want to support your grandchildren, ensuring that your wishes are respected is equally important. Consult one of our lawyers to preserve your legacy and provide for your family in the way you intend.

When is the best time to write a Will?

The quick answer is, “As soon as you can!” In New South Wales, anyone over the age of 18 and under special circumstances, even those below 18 could make a Will regardless of the size of their assets. Although having no Will could spell complications in the future, an estimated 12 million Australians don’t have a Will.

If you don’t have a Will yet, contact our expert Wills and Estate Planning Lawyers today to ensure that your wishes are respected.

The Importance of Making a Will

A Will is a legal instrument that specifies the distribution of your assets after your death. Without a Will, your estate will be subject to intestacy laws, which may not align with your wishes and could lead to disputes among your loved ones. For example, if you have remarried and have children from a previous relationship, the laws of intestacy might result in your former family receiving a larger share of your estate than you intended.

Estate planning is not just about deciding who gets what; it also involves navigating complex issues such as tax, superannuation, and Centrelink benefits, which vary across Australian states. Moreover, with an increasing number of Australians living longer, re-partnering later in life, and having children or assets overseas, the need for careful estate planning has never been more pressing.

Common Mistakes to Avoid When Making a Will

Failing to Update Your Will Regularly

That writing a Will is a once-in-a-lifetime event is a common misconception. Life is constantly changing, and your Will should reflect those changes, such as when you remarry or acquire new assets.

Failing to update your Will can lead to serious consequences. If your Will does not account for your current family structure or financial situation, it could lead to disputes among your beneficiaries or even result in an unintended distribution of your assets. It is recommended to review your Will at least every three to five years or whenever a significant life event occurs. This ensures that your Will aligns with your current wishes and circumstances.

Not Clearly Identifying Beneficiaries and Assets

Another common mistake is not clearly identifying beneficiaries and assets in your Will. Ambiguity in the wording of your Will can lead to confusion and disputes among your beneficiaries. For example, if you have children from different relationships, failing to specify how your assets should be divided could lead to a situation where one group of children receives more than you intended.

To avoid this, be as specific as possible when naming beneficiaries and identifying the assets they are to receive. Clearly state who gets what, and consider the tax implications and potential disputes that might arise from your decisions. Additionally, it is crucial to name alternative beneficiaries in case your primary beneficiary predeceases you or is unable to inherit.

Overlooking the Appointment of a Guardian for Minor Children

If you have minor children, appointing a guardian in your Will is crucial. Without a nominated guardian, the court will decide who will care for your children if you pass away before they reach the age of 18. This decision may not align with your wishes or your children’s best interests, potentially leading to a lengthy and emotionally taxing court process.

When choosing a guardian, consider factors such as the person’s ability to care for your children, their relationship with your children, and their willingness to take on this responsibility. It is also important to discuss your decision with the person you intend to appoint as a guardian to ensure they are willing and able to fulfil this role.

Ignoring the Impact of Taxes, Superannuation, and Debts on Your Estate

Failing to consider the impact of taxes, superannuation, and debts when drafting a Will can have significant consequences for your estate and beneficiaries. In Australia, while there’s no inheritance tax, capital gains tax and income tax can still apply, potentially reducing the assets available for distribution. Moreover, all debts must be cleared before any assets can be distributed. However, this might involve selling off estate assets, sometimes at a loss, leaving beneficiaries with much less than anticipated. To avoid this, proper tax planning and debt management are essential.

Superannuation is another critical element often overlooked in estate planning. If your superannuation fund is notified too soon of your death, it could lead to the immediate cessation of pension payments, causing significant financial strain on your dependents. Furthermore, superannuation benefits don’t automatically form part of your estate and can be distributed differently if not properly managed. To prevent these issues, it’s important to have a binding nomination for your superannuation beneficiaries and to carefully coordinate the timing of notifications with your executor to avoid unnecessary financial disruptions.

Another common misconception is the belief that an enduring power of attorney (EPA) remains active after death. In reality, the EPA’s authority ends when the donor dies, at which point the executor of the Will takes over the management of the estate. Misunderstanding this transition can lead to delays in estate administration and potential legal challenges. To ensure a smooth process, it’s crucial to clearly define the roles of your EPA and executor in your estate planning documents and prepare your executor to take over seamlessly upon your passing.

Attempting to DIY Your Will

With the availability of DIY Will kits and online templates, many people attempt to draft their own wills without seeking legal advice. While this may seem like a cost-effective solution, it can lead to significant issues down the road. To be considered valid, Wills must adhere to specific requirements. A poorly drafted Will can result in parts of your estate being distributed according to intestacy laws, rather than your wishes.

One of the most common problems with DIY Wills is the use of incorrect or unclear language. Legal terminology is precise, and even a small mistake can lead to unintended consequences. For example, if your Will contains ambiguous language, it may be open to interpretation, leading to disputes among your beneficiaries.

Another issue with DIY Wills is the failure to consider complex estate planning needs. If you have a blended family, own a business, or have significant assets, your estate planning needs are likely to be more complex than what a DIY Will can address. In these situations, it is crucial to seek legal advice to ensure that your Will adequately addresses your unique circumstances. Consult with one of our team today!

Conclusion

Making a Will is one of the most important things you can do to protect your loved ones and ensure that your wishes are honoured after your death. However, it is equally important to avoid common mistakes that can undermine the effectiveness of your Will.

Consult with one of our friendly and experienced Estate Planning Lawyers today to ensure your Will is thorough and secure.

Talk to us today to start writing a tailored estate plan that meets your unique needs.

A landmark decision on the topic of inheritance contracts or deed of mutual wills occurred in the case of Barns v Barns (2003) 196 ALR 65, in which the High Court ruling provided crucial guidance on the enforceability and interpretation of such agreements.

Background of the case

The Barns v Barns case centred around a dispute between siblings over the distribution of their late parents’ estates. In 1958, John and Ida Barns had entered into a deed of mutual wills, agreeing on the disposition of their combined assets after their deaths. The agreement stipulated that upon the death of the surviving spouse, their remaining estate would be divided equally among their four children.

However, after Ida Barns’ death in 1984, John Barns altered his will, effectively disinheriting one of his sons, Michael. This deviation from the terms of the mutual wills agreement sparked a legal battle between Michael and his siblings, ultimately leading to the case being heard by the High Court of Australia.

The implications of the court’s ruling

In a landmark decision, the High Court upheld the validity and enforceability of the deed of mutual wills between John and Ida Barns. The court ruled that the agreement created a binding obligation on the surviving spouse, John Barns, to distribute the remaining estate in accordance with the terms of the mutual wills.

The ruling established several significant principles that have had far-reaching implications for inheritance contracts and deeds of mutual wills in Australia.

Enforceability of inheritance contracts: The Barns v Barns case affirmed that inheritance contracts, including deeds of mutual wills, are legally enforceable agreements, provided they meet the necessary contractual requirements. This recognition has strengthened the legal standing of such agreements and provided greater certainty for individuals seeking to secure their legacy through this type of testamentary will.

Strict interpretation of contract terms: The High Court emphasized the importance of strictly interpreting the terms of inheritance contracts, upholding the intention of the parties at the time the agreement was made. This principle has underscored the need for clear and unambiguous drafting of these agreements to ensure that the parties’ wishes are accurately reflected and can be enforced as intended.

Limitations on unilateral revocation: A key aspect of the ruling was the court’s determination that, once a deed of mutual wills is in place, the surviving party cannot unilaterally revoke or alter the agreed-upon terms without the consent of the other party or their beneficiaries. This principle has served to protect the interests of beneficiaries and prevent unilateral deviations from the original agreement.

Equitable remedies for breach: The Barns v Barns case also highlighted the availability of equitable remedies, such as constructive trusts, in cases where a party breaches the terms of an inheritance contract. This provision has empowered beneficiaries to seek appropriate remedies and ensure that the agreed-upon distribution of assets is upheld.

Contact expert legal professionals when estate planning

The Barns v Barns decision reinforces the importance of seeking professional legal advice when drafting inheritance contracts or deeds of mutual wills to ensure they are properly constructed and comply with all legal requirements.

It’s also important that such a contract or deed – as with any type of will – be periodically reviewed and if necessary, updated to reflect any changes in circumstances or intentions. Failure to do so may result in unintended consequences or legal challenges, a reminder that when creating such an important legal document, careful consideration, expert legal advice and meticulous drafting is essential. Contact Felicio Law Firm if you need more information on this important topic today.

To read part I: Understanding How Inheritance Contracts Work

In Australia, individuals have the freedom to distribute their assets as they see fit through their wills. However, there are situations where couples or families may wish to establish a legally binding agreement regarding the collective distribution of their estates, ensuring that their wishes are respected and their legacy is preserved. This is where inheritance contracts, also known as deeds of mutual wills, come into play.

What are inheritance contracts or deeds of mutual wills?

An inheritance contract, or a deed of mutual wills, is a legal agreement between two or more parties, typically spouses or partners, that outlines the distribution of their combined estates after their deaths. It is a binding contract that ensures that the terms of their wills cannot be changed or revoked without the consent of all parties involved.

These contracts can take various forms, such as:

Joint will: In this arrangement, both parties create a single will that outlines the distribution of their combined assets after their deaths.

Mutual wills: Each party creates a separate will, but they agree not to revoke or alter the provisions concerning the distribution of their estates without the consent of the other party.

Hybrid: This approach combines elements of both joint and mutual wills, where certain parts of the will are mutually binding, while other sections can be changed independently.

Legal requirements for inheritance contracts

To ensure the validity and enforceability of an inheritance contract in Australia, several legal requirements must be met:

Contractual capacity: All parties involved must have the mental capacity to enter into a legally binding contract. This includes being of sound mind and understanding the nature and implications of the agreement.

Formalities: Inheritance contracts must be in writing and properly executed, often requiring the involvement of legal professionals and witnesses.

Consideration: In contract law, there must be some form of consideration exchanged between the parties. In the context of inheritance contracts, the mutual agreement to distribute estates in a particular manner is typically considered sufficient consideration.

Compliance with the Succession Act: The terms of the inheritance contract must comply with the relevant succession laws and regulations in the state or territory where the agreement is made.

Benefits of inheritance contracts

Inheritance contracts are favoured in particular by long-term married couples or de facto partners and families seeking to secure their legacy. Significantly these agreements provide certainty and stability regarding the distribution of assets, preventing potential disputes or challenges to the will after the death of the parties involved.

By establishing a binding agreement, inheritance contracts can help protect vulnerable individuals from undue influence or coercion regarding their estate planning decisions. By clearly outlining the distribution of assets, inheritance contracts can help avoid the common occurrence where family members who are beneficiaries of the will disagree or argue once the testator or testators pass and the estate is distributed.

In some cases, inheritance contracts can also be used as part of a comprehensive estate planning strategy to minimise potential tax liabilities.

Limitations and considerations

Depending on the specific terms of the agreement, the ability to revoke or vary the inheritance contract may be limited or subject to strict conditions. The agreement not to revoke, without notice to either party to the contract, has been implied by Australian courts from the circumstances of the making of a mutual will, and is a key element of such contracts.

Australian law also requires adequate provision for certain dependants, such as spouses, children, and other eligible persons. Inheritance contracts must comply with these legal obligations.

As circumstances change – including the couple separating, or a decision by one party to dispose of assets within the estate during their lifetime, or a change to the specified beneficiaries – inheritance contracts may need to be reviewed and updated to ensure they remain relevant and aligned with the parties’ wishes.

Speak with our experienced wills and estate legal professionals

Due to the complex legal nature of these contracts or deeds of mutual wills, guidance from experienced estate planning professionals such as our team at Felicio Law Firm is highly recommended. Our experts can ensure the agreement is properly drafted and meets all legal requirements.

To read part II: Barns v Barns, a Landmark Case on the Topic of Inheritance Contracts

Creating a will is an important and foresightful act to ensures one’s assets are distributed according to their wishes after their passing. When a person drafts a will, selecting an executor is one of the most crucial decisions they make as this person or persons are entrusted with the responsibility of distributing assets to beneficiaries and ensuring a smooth transition of the estate. An executor is often a close family member, friend, or legal professional whom the testator deems trustworthy and reliable.

Life, however, is inherently unpredictable. An appointed executor’s ability to fulfil their role may be hindered by any number of circumstances, including their own passing or losing their legal capacity to carry out their duties. Under succession laws, where the executor is also a beneficiary of the will, they must survive 30 days after the passing of the testator in order to receive any disposition of property in the will.

These rare but not unheard of situations establish the wisdom of a testator appointing an alternative executor, who can carry out the original executor’s duties. If the alternative, or substitute executor is called on to act, they are bound by the same legal responsibilities and fiduciary duties as the original executor.

In some situations, however, where an executor is also the sole beneficiary, a clause in the will may provide for other beneficiaries to become executors in the event the original executor is unable to perform the role. But if the original executor remains alive they are unable to become executors. We’re look more at this situation and how alternative executors are appointed in this article.

Why appoint an alternative executor

Appointing an alternative executor has a number of advantages. Firstly, it acts as a safeguard, ensuring that the testator’s intentions are carried out in a timely manner when the appointed executor is unable to carry out their duties. Timely distribution of the estate is essential to meet legal obligations and provide beneficiaries with the resources they need, particularly once probate of the will has been granted.

Appointment of an alternative executor can also be important in preventing or mitigating legal challenges. In situations where the original executor faces legal disputes or is unable to perform their duties due to litigation, the alternative executor can step in and try to minimise the risk of contested probate.

There are also obvious disadvantages to the appointment of an alternative executor, including where there is disagreement or significant difference between the original and alternative executors on interpretation of the testator’s intentions. An alternative executor may also introduce more complexity in decision-making, particularly if there are differing perspectives on asset distribution or estate management. This potentially complicated situation underscores the importance of selecting individuals who share a common understanding of the testator’s wishes.

What to do when the original executor can’t perform the role

A person making a will is strongly advised to obtain written agreement from their nominees as executor before including them in the will, and also regularly check on them once named to ensure they are willing and able to administer the estate.

Many people will name more than one executor so that in cases where an executor dies before the will is administered, another executor assumes responsibility. If there is no ‘back-up’ executor named, an application may be made to the Supreme Court by another beneficiary or even a creditor to be appointed as administrator of the estate.

If an executor is unable to perform their duties for reasons including ill health, unsound mind or prolonged absence (among others), and no substitute executor is named, beneficiaries or other interested parties can apply to the Supreme Court to have the executor ‘passed over’ – meaning they are removed before they have the chance to act in the role.

The Court considers what is necessary for the due and proper administration of the estate and the interests of its beneficiaries. It will also consider whether the executor is temporarily or permanently incapacitated. A limited order may be made appointing someone to act on the executor’s behalf while they are incapacitated or, if the incapacity is permanent, appoint someone to take over permanently as executor.

Importance of appointing the right person as executor and regularly reviewing a will

The issues discussed in this article reinforce the importance of appointing a person who is willing and able to perform the duties of executor in your will. Equally important is regularly reviewing the document to ensure the appointment remains realistic and actionable. Spouses often appoint each other their executors (and sole beneficiaries) and then forget about the document. Years pass and the testator dies and the spouse is unable to perform the duties due to lack of capacity but no alternative executor was appointed. This situation can potentially lead to the testator’s wishes for their estate not being carried out.

If you need guidance on this issue, please contact our wills and estate experts at Felicio Law Firm today for timely advice on how to ensure you have all bases covered when it comes to your will.

Self-Managed Superannuation Funds (SMSFs) have become an increasingly popular choice for Australians seeking to take control of their retirement savings, offering flexibility and autonomy about which type of investments they want to make, including property, shares, and other assets.

SMSFs also offer other advantages including tax benefits, lower fees and charges, and more estate planning options when it comes to the transference of wealth from one generation to the next.

An important aspect of that last advantage is the making of binding death benefit nominations (BDBN) of beneficiaries, determining a person’s superannuation benefits are distributed upon their death. A BDBN is particularly important in safeguarding assets when estates are disputed by beneficiaries.

Why binding death benefit nominations are important

A BDBN is a legally binding document that directs the trustee of a person’s SMSF on how to distribute the deceased member’s superannuation benefits. A BDBN can specify who the beneficiaries are and the proportion of benefits each beneficiary is entitled to receive. In the absence of such a nomination, the trustee of the SMSF has discretion on how the funds are distributed, often leading to dispute. In the context of a contested estate, BDBNs provide:

• Clarity and certainty about how the deceased member’s superannuation benefits will be distributed, ensuring their final wishes are respected as to who receives distributions from the fund.
• Pre-empting costly and time-consuming legal challenges by specifying the intended beneficiaries and the distribution of assets. When beneficiaries are already defined in the nomination, it becomes more difficult for disgruntled family members to contest the distribution.
• Protection of vulnerable beneficiaries, such as children or dependent family members. A BDBN safeguards these interests by legally obligating the trustee to follow the member’s instructions. This is particularly crucial when there are concerns about vulnerable beneficiaries being left without support.
• Tax efficiency for beneficiaries, with the BDBN allowing them to plan for the most tax-effective distribution and help preserve the wealth for their loved ones.
• Simplicity in estate planning by clearly outlining the distribution of superannuation benefits’, reducing the burden on the executor or trustee and allowing for smoother administration of the rest of the estate.

Things to consider when making a BDBN

In most cases it’s important to specify the BDBN is ‘non-lapsing’, as opposed to lapsing. A lapsing BDBN can expire after three years and, if not updated, means the trustee of the SMSF can choose how and to whom the super benefits are distributed. This is problematic if there is a dispute among beneficiaries with various claims on the fund. For this reason it’s essential to regularly review and update BDBNs to ensure they reflect changing circumstances, such as the birth of new family members or the dissolution of a marriage.

BDBNs must also meet certain legal requirements to be considered valid, which is why consulting experienced estate planning lawyers when making one is highly advisable. Witnesses to a BDBN must be over the age of 18 and not be the designated death benefit nominee. The BDBN is also only valid once received by the trustee. It is also part of Australian superannuation law that only dependants of the deceased – being a de facto partner or spouse of the deceased, a child or anyone in an interdependent relationship with the deceased – is eligible to inherit their superannuation death benefits.

The importance of legal advice

Superannuation can be a complex area, with different rules about how benefits are distributed on the death of the member compared with distributions from their will. By specifying the beneficiaries and distribution of assets through a BDBN, SMSF members can ensure their superannuation benefits go to the beneficiaries they intended.

Seeking the assistance of very experienced estate planners like our team at Felicio Law Firm can help you clarify the issues involved and make a valid BDBN to give you peace of mind about how your important superannuation asset will be dealt with once you die.

Australia’s society is aging as medical science and improvements in diet and lifestyle allow Australian to live longer than they ever did before. But this development comes with a range of challenges – to government budgets, policy-making and aged care – to name a few.

At a more personal level, more people are living to an age where their mental capacity diminishes to the point where they can no longer make informed decisions about their personal, financial, or health matters. This is an important reality to acknowledge in areas such as estate planning and the topic addressed in this article, making an enduring power of attorney (EPOA) or guardianship appointment, with a focus on how solicitors and medical professionals determine mental capacity and the role of the NSW Civil and Administrative Tribunal (NCAT).

Understanding and determining mental capacity

Mental capacity refers to an individual’s ability to make decisions and understand the consequences of those decisions. When a person’s mental capacity declines due to factors such as aging, illness, or cognitive impairment, they may no longer be able to manage their affairs effectively.

In cases of suspected loss of mental capacity, medical professionals play a crucial role in assessing an individual’s cognitive abilities. This assessment typically involves a thorough evaluation of the person’s mental and physical health, including cognitive testing and psychological assessments. A medical diagnosis and evaluation is valuable and essential evidence in determining whether an individual still has capacity to make decisions.

Solicitors, too, are often involved in the process of determining mental capacity, especially when it pertains to legal matters like creating an EPOA or guardianship appointment. While no-one expects a solicitor to have expertise in assessing a client’s mental capacity, they can make a ‘legal’ assessment of the person’s capacity through their dealings with the individual to evaluate their understanding of the legal documents and the implications of their decisions.

The Law Society of NSW recommends solicitors can:

• Make a preliminary assessment of mental capacity – looking for warning signs or ‘red flags’ using basic questioning and observation of the client.
• If doubts arise, seeking a clinical consultation or formal evaluation of the client’s mental capacity by a clinician with expertise in cognitive capacity assessment.
• Making a final legal judgment about mental capacity for the particular decision or transaction.

Role of mental capacity in creating an EPOA and guardianship appointment

An EPOA is a legal document that allows an individual (the principal) to appoint someone (the attorney) to manage their financial and legal affairs when they are unable to do so themselves. It is crucial that the principal has the requisite mental capacity when creating this important document to avoid potential later legal repercussions.

A guardianship appointment differs from an EPOA in that it relates to designating a ‘guardian’ who can make decisions regarding an individual’s health and lifestyle when they no longer have capacity to do so. Choices about care accommodation, healthcare, medical procedures and other personal matters become the responsibility of the appointed guardian.

Role and process of NCAT in EPOA and guardianship matters

When an individual loses mental capacity and has not previously established an EPOA or guardianship, it can create a challenging situation for family members and caregivers who may disagree about the best way to protect the person’s wellbeing and interests. In such cases, NCAT can step in to address the person’s needs and make decisions on their behalf.

NCAT is a legal authority in NSW that specializes in resolving disputes and making decisions related to guardianship, financial management, and other civil and administrative matters. When mental capacity is lacking, and no prior legal arrangements exist, a family member, friend, or concerned party may apply to NCAT for orders regarding the appointment of a guardian or financial manager for the person who has lost capacity.

NCAT will carefully consider all relevant evidence, including medical assessments and input from family members and healthcare providers, to determine the person’s best interests. If necessary, NCAT may appoint a guardian to make decisions related to the person’s healthcare, accommodation, and lifestyle. Additionally, a financial manager may be appointed to handle their financial affairs. NCAT may also review an existing EPOA or guardianship appointment.

NCAT also has the power to regularly review its decisions to ensure that the appointed guardian or financial manager continues to act in the person’s best interests.

Talk to our expert team

The loss of mental capacity is a challenging and sensitive issue for both the individual and their family, with significant legal and personal implications. It’s crucial to consult with legal professionals with experience in elder law and estate planning where an individual with diminished capacity needs to make an EPOA or guardianship appointment, or an application to NCAT is required.

The process of engaging medical professionals to assess capacity, or navigating the requirements of an NCAT application, can be stressful and time-consuming. Contact our friendly and approachable team today if any of the information in this article raises questions or concerns.