Skip to main content

Estate Planning

Pt II: Barns v Barns, a Landmark Case on the Topic of Inheritance Contracts

Pt II: Barns v Barns, a Landmark Case on the Topic of Inheritance Contracts

By Estate Planning

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

Pt I: Understanding How Inheritance Contracts Work

Pt I: Understanding How Inheritance Contracts Work

By Estate Planning

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

The Importance of Appointing an Alternative Executor When Making a Will

The Importance of Appointing an Alternative Executor When Making a Will

By Estate Planning

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.

The Importance of Making Binding Nominations of Beneficiaries in a Self-Managed Superannuation Fund

The Importance of Making Binding Nominations of Beneficiaries in a Self-Managed Superannuation Fund

By Estate Planning

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.

What to do When Loss of Mental Capacity Prevents the Making of an Enduring Power of Attorney and Guardianship Appointment?

By Estate Planning

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.

Disputes When a Parent Gives Money to a Child to Buy a Property: Explaining the Presumption of Advancement

Disputes When a Parent Gives Money to a Child to Buy a Property: Explaining the Presumption of Advancement

By Estate Planning

A recent case in the New South Wales Court of Appeal, Koprivnjak v Koprivnjak 2023 NSWCA 2, dealt with the presumption of advancement and the application of this equitable doctrine to a property transaction between a father and a daughter.

The case revolved around a payment of $75,000 made by the father to his daughter for the purchase of a real estate property. To understand the dispute, in which the father said the money given to his daughter was a loan, while she claimed it was a gift, it is first necessary to briefly explain the presumption of advancement doctrine.

The legal concept dates back to 17th century England and presumes that transfers of assets from husbands to wives, male fiancés to female fiancés and from parents to children are gifts, in the absence of any evidence to the contrary. In relation to parents and children, as the Koprivnjak case deals with, the presumption is based on society’s expectation that parents naturally intend to advance their children’s interests and promote their financial wellbeing.

The presumption, however, can be rebutted if sufficient evidence is presented to prove that the transfer was intended as a loan or an investment rather than a gift. In this case, a resulting trust may be presumed where the legal title of the property – in this case in the name of the daughter – does not reflect the contributions to the purchase price, so that the person with legal title holds the property on trust for the person who made the contribution.

The details of the Koprivnjak case

In the case of Koprivnjak, the daughter purchased a rental property in Shoal Bay, NSW for $300,000 in 2011. Her father provided $75,000 to his daughter to assist her in purchasing the property, comprising $15,000 for the deposit and a further $60,000 towards the purchase price. The property was later sold and the proceeds placed in a trust account until the dispute between the estranged family members was resolved.

The father argued that the payment was a loan that gave him a beneficial interest in the property, while the daughter claimed it was a gift. The primary issue before the court was whether the presumption of advancement applied, and if so, whether the father had successfully rebutted it.

The court heard evidence from both parties to determine the true nature of the transaction and considered factors such as the relationship between the father and daughter, the financial circumstances of both parties, and the intention behind the transfer. The court noted that the presumption of advancement applies when a parent provides financial assistance to a child, particularly in cases involving property transactions.

The findings of the court

In the first instance the court rejected the father’s claim the property was held on trust for him by his daughter, finding he failed to discharge his onus of establishing a trust to rebut the presumption of advancement. His loan claim, however, was accepted and an order made that the loan and interest be paid to the father from the sale proceeds, with the remainder to be paid to his daughter.

The father appealed the judgement in relation to the trust argument. His appeal was dismissed with costs, the court of appeal finding in the father’s evidence that he could not prove the intention was for the property to be held on resulting trust, determined at the time of purchasing the property.

Instead, the evidence suggested that the father had intended the payment as a gift, supporting the daughter’s claim. The court emphasised that the presumption of advancement can only be rebutted through clear and compelling evidence that demonstrates a different intention.

The judgement cited the High Court case of Bosanac v Commissioner of Taxation [2022] HCA 34 (‘Bosanac’), whereby the court must look at the objective facts and enquire into the parties’ words or conduct at the time of the transaction (or immediately after the transaction) to determine the parties’ objective intention as to who has beneficial ownership of the property.

Lessons from the case and the need for good legal advice

While the presumption of advancement has been described as ‘anomalous, anachronistic, and discriminatory’ by the Australian Taxation Office (in Bosanac), the ruling in the Koprivnjak case reinforces the significance of the doctrine in property transactions between parents and children. Where parents make substantial financial contributions to their children, these transfers are generally presumed to be gifts. The burden of proving otherwise generally requires strong documentary evidence the parent/s intended the money as a loan giving them a beneficial interest in the property.

If you’re still uncertain about how this legal principle operates and are in a family situation where you’re lending money to a child, or receiving funds from a parent for a property purchase, contact our friendly, professional team at Felicio Law Firm before doing so to avoid any later disputes.

Contesting a Will for Failure to Make Adequate Provision for a Spouse

Contesting a Will for Failure to Make Adequate Provision for a Spouse

By Estate Planning

It’s a sad fact of modern life that two-thirds of marriages in Australia will end in divorce. But that statistic does not necessarily deter people from saying ‘I do’ again with a new partner. In 2016, 12 per cent of marriages in Australia were between couples where both people had previously been married, while a further 16 per cent of marriages involved one spouse who was entering into their second marriage.

The implications of multiple marriages for estate and succession planning are significant. Particularly where a person had children from an earlier marriage (or marriages), ideally that person’s will should be written so as to anticipate a claim on the estate from an ex-spouse.

This article looks at what happens when an ex-spouse makes a family provision application (FPA), which is a claim to the court contesting the terms of their ex-partner’s will because they do not feel adequate provision was made for them from the estate.

What happens to a person’s will when they separate from their partner?

In NSW the legal process for dealing with a dispute about a will is covered in the Succession Act 2006 (‘the Act’). Under section 12 of the Act, when a person gets married their existing will is revoked. Similarly, when a person officially divorces, any bequest to their former spouse in the will is also revoked, as is the appointment of the ex-spouse as an executor, guardian or trustee of the will. The only situation in which this is not the case is when the will-maker includes a statement expressly preserving the bequest to the former spouse, regardless of the divorce.

The eligible people who can contest a deceased person’s will through an FPA is limited – usually their spouse and their children – but in NSW, significantly, this class of persons also includes a testator’s former spouse or de facto partner under section 57. Where a person has been married two or more times, the potential for complex, drawn-out and expensive claims on the will becomes apparent.

How is an ex-spouse’s claim assessed by the court?

FPAs are heard by the Supreme Court of NSW. A number of factors are taken into account to determine whether an ex-spouse or spouses should be adequately provided for from the estate. These considerations include:

  • the nature and duration of the relationship between the ex-spouse and the deceased (including whether they maintained an ongoing relationship after the marriage ended);
  • the obligations and responsibilities owed by the deceased to the ex-spouse;
  • the ex-spouse’s financial resources and needs (for example, whether any other person is legally obligated to support the ex-partner);
  • whether the deceased and the ex-spouse had any children together (and the children’s age and needs);
  • the ex-spouse’s physical, intellectual, or mental capacity;
  • the ex-spouse’s contribution to the deceased’s estate, or their welfare;
  • any benefit the ex-spouse has received from the deceased’s estate during their lifetime; and/or
  • any orders and/or agreements made in family law proceedings.

These factors are considered to determine whether there is any moral claim by the ex-spouse that needs to be provided for.

An ex-spouse’s claim may also be looked on more favourably in the case where the parties failed to come to a property settlement when the relationship ended. In the 2009 NSW case of Scott v Scott, the FPA claimant was entitled to adequate provision from the estate, the court found, because there was no final property settlement when the parties divorced.

By contrast, where a divorcing couple reach a property settlement and then go on to maintain separate financial arrangements in post-married life, the court is less likely to find in favour of an ex-spouse contesting a will based on continuing financial dependence.

In the 2019 case of Stockwell v Beaumont; O’Donnell v Beaumont, an ex-spouse was granted half the estate when she contested the will of her former husband by proving their finances were never fully separated despite the end of the relationship, arguing that she remained financially dependent on the deceased.

Writing a will in blended family situations

In situations where a person has remarried but has children with former partners, the terms of a will are all-important to try and prevent costly court action among family members once the testator has passed.

While a person’s estate will generally be inherited by the testator’s surviving partner and then, when the partner dies, surviving children (including from the earlier marriages), this is not always appropriate for blended families. The children from the earlier relationship/s may not wish to wait until the step-parent dies to inherit from the estate, while the new partner may decide to change their will to benefit others, including favouring only the children from the new relationship. The assets from the estate may also be significantly reduced by the surviving partner, preventing the testator’s children from an inheritance.

Will-makers should consider whether it is better to provide immediate gifts to children from former relationships on the event of their death, or create a testamentary trust, to avoid the possibility of an FPA against the estate. Legal advice should be sought from expert succession lawyers such as Felicio Law Firm.

Time limits and expert advice

An ex-spouse who wishes to make an FPA must do so promptly when their ex-partner passes away – the deadline to file is 12 months after the death.

If you need advice about writing a will to deal with the situation of multiple ex-partners, or need guidance on making an FPA to contest an ex-spouse’s will for provision from the estate, speak with our Erina wills & estates planning lawyers at Felicio Law Firm. We have many years’ experience in helping people makes the right decisions when it comes to their succession plans.

Estate Planning Lawyers Erina & Central Coast

What to do if Someone Close to You Dies?

By Estate Planning

Grief, when someone close to you dies, can take a long time to deal with, and leave most people feeling like they need a break from the normal demands of life for a while.

But when someone close to you dies, there can be a lot to do in order to properly farewell them and finalise their affairs.

From arranging the funeral to fulfilling any wishes in relation to your loved one’s will, the checklist of matters to be attended to can become quite lengthy.

The advice and guidance of legal professionals experienced in what needs to happen after a person dies can be essential in helping you at a time when you may still be grieving, and supporting others who are as well.

What are the main things you need to do after someone close to you dies?

There are a number of priorities to attend to when someone close to you dies.

The most important priority in the first hours and days after your loved one has passed is to contact their doctor, if they died at home, as well as close family and friends, the funeral director (if known), and the executor/s of the will.

Locating your loved one’s personal documents is an important thing to check off soon after the death because they may or may not have left extensive instructions on what they wanted to happen in the event of their death.

These plans might include a pre-paid funeral plan, for example, but it’s also important to locate documents such as birth and marriage certificates, property deeds, life insurance or superannuation policies, bank account details and a will if one was made.

If a funeral director has been nominated by the deceased or arranged by the family, it is their role to officially register the death with the authorities and apply for a death certificate. This will generally need to be completed within 14 days of the death.

If the person had a will, the executor of the will is generally responsible for making funeral arrangements. If the person did not have a will, the responsibility falls to the next of kin, relatives or close friends.

Accounts with banks and utilities such as electricity and water, social security payments such as pensions, memberships of clubs and other organisations, direct debit payments, social media accounts and more need to be cancelled or closed.

Outstanding financial matters, including debts and liabilities, may require loved ones to consult the deceased’s financial adviser if they had one.

Settling the will

Where the deceased made a will, the role of the executor of the will is particularly important.

Among many other responsibilities, an executor has time limits to observe in executing the will, so that beneficiaries have a clear picture of what they might receive from the estate of the deceased.

In the situation where persons or organisations hold assets that are part of your loved one’s estate but will not release them, such as banks or retirement villages, for example, the executor applies to the Supreme Court for probate.

A grant of probate is the legal document that authorises the executor to manage the deceased’s estate according to the provisions of the will. It is the Court’s recognition that the will is legally valid and that you are the person authorised to deal with the estate.

Where your loved one’s will was valid and you are applying to administer its terms but are not the executor, you will have to apply for a grant of letters of administration of the will.

In cases where a person failed to make a will, a loved one may need to apply for a grant of letters of administration on intestacy.

How Felicio Law Firm can help

The services of expert legal professionals with years of experience in wills and estates can make the process of sorting through the affairs of a recently deceased loved one a lot easier and stress-free.

Felicio Law Firm brings a compassionate and understanding approach to helping clients through a trying time when a loved one dies.

We can help you check off the necessary things to do at this difficult time and understand the most important priorities.

Call us Wills & Estate Planning Lawyers Central Coast today for an appointment.

Will & Estate Planning Lawyer Erina & Central Coast

How is Disposal of an Asset Treated When You Want to Claim the Age Pension

By Estate Planning

Those who wish to receive the age pension in Australia must first submit to both an income and assets test.

These tests determine the amount the applicant will receive, with the test that provides for the lowest pension amount preferred.

The income test will consider any income a person receives from employment, pensions, annuities, investments and salary packaging. The assets test is the market value of things such as investment properties, caravans, cars and boats, and business assets.

The family home is not counted as an asset of a person applying for the pension who lives in the house. But a pension entitlement can be affected if that person decides to sell the house.

On selling the home, the proceeds of the sale are exempt for up to 12 months if they are used to buy, build or renovate another home.

But the proceeds are ‘deemed’ in the income test and assessed as income from financial assets, which could affect a pension entitlement.

There are also rules regarding the addition of granny flats to a property, and retirement village costs, in terms of the pension.

What happens if you dispose of an asset

Disposing of an asset when you are receiving an age pension is governed by what is known as ‘gifting and deprivation’ rules.

These rules apply to prevent a person from reducing their assets or income to either qualify for or increase their age pension entitlements.

Some people may also want to reduce their assessable assets to qualify for a part pension.

The term gifting is used to describe the disposal (or deprivation) of assets or income where the person doing so receives no financial consideration in return.

Gifting might include selling a residential property to a child for a discounted value, providing money to a child for a wedding, paying a grandchild’s education costs, or repaying a loan for a child in the position of a guarantor.

Limits are imposed on this practice because Centrelink views it as a person owning combined assets before they were gifted that were worth more than what they are now.

As a result, a person is allowed to gift assets or income of $10,000 in one financial year, or $30,000 over five financial years (but not more than $10,000 in a single financial year).

Any amount over these amounts is considered a ‘deprived’ asset and counted as an asset in the assets test, and subject to deeming in the income test, for a period of five years after the excess gift was made.

If the gifter receives financial consideration for the asset during the five-year period, or it’s returned, its value is no longer assessed as a deprived asset.

What are the implications of disposing of an asset?

It’s important for a person who disposes of assets to qualify or increase their pension entitlement to pay proper consideration to their current and future needs.

Will they need the asset to pay for means-tested aged care in a retirement home in the future, for example?

A person’s assets and income are means-tested in working out what they need to pay for aged care accommodation and care costs, including gifted assets. If assessed as deprived, gifts given within five years of a resident moving into residential aged care can result in the resident having to pay more for aged and care costs.

Residing with children, including granny flats

A common situation is for an elderly person to transfer the title of their house to a child and come to an agreement with them about continuing to reside there, either in the house or a purpose-built ‘granny’ flat on the property.

The title transfer and/or the costs of building the flat are not generally assessed as a gift unless it could have been anticipated at the time of the transfer that the elderly parent would need aged care within five years. In this case, the arrangement could be assessed as a gift and then considered to be a deprived asset. If this is the case, the parent’s pension entitlement could be affected.

Centrelink maintains rules in this regard, including that the parent paid a ‘reasonable amount’ for the value of the asset transferred. If it appears the parent transferred more than the value of the granny flat right, the asset’s value may be considered deprived and their pension entitlement could be reduced.

In addition:

  • the parent being provided with accommodation and/or care cannot own the property;
  • the home in which the accommodation is provided must be the parent’s principal home.

A problem can arise where the relationship of the adult child and their partner ends through divorce or separation, and the house needs to be sold. Can the person who originally gifted the property be left homeless?

Ideally, this situation is addressed in an enforceable written agreement before it comes to pass. Some options include:

  • selling the property with the parent’s residential arrangement as a condition of sale;
  • transfer the parent’s life tenancy or interest to another property, or;
  • compensate the parent financially for losing the granny flat interest.

The final option may have ramifications for the parent’s age pension entitlement.

Consult specialists in this area, Felicio Law Firm

The issues addressed in this post can be complex. At Felicio Law Firm we have lots of experience interpreting gifting and deprivation rules for clients to conform with Centrelink’s rules.

Whether you’re approaching pension age, or are concerned about the effect on your pension of disposing of an asset, call us Erina lawyers today for an initial consultation.

Erina & Central Coast Will & Estate Planning Lawyer

What Do You Need to Know About Retirement Village Agreements

By Estate Planning

Advances in medicine, technology and lifestyle choices meaning Australians are living longer.

As a result, the proportion of the population aged 65 or over has increased and is forecast to continue to increase. In 2017 3.8 million Australians, or 15 per cent of the population, were aged 65 or over.

One of the implications of this trend is the growth in aged care facilities such as nursing homes, residential retirement villages and over-55 ‘lifestyle communities’.

There are different types of agreement covering these facilities, as well as different legislative rules. We’ll provide an outline of each below but if you need more information or guidance when considering an agreement, contact Central Coast & Erina Lawyers at Felicio Law Firm. We have a proud track record advising our clients in this area.

Retirement village agreements

All retirement village contracts in NSW are regulated under the Retirement Villages Act (NSW) 1999 (‘the Act’).

Before a person can move into a retirement village, a written contract must exist with the village operator unless the prospective resident is moving in with an existing resident, or is signing a residential tenancy agreement under the residential tenancy laws.

A contract with a village can encompass a residence contract or a service contract, or a combination of both. Prospective residents must be given a copy of their proposed contract at least 14 days before signing it and a cooling-off period generally applies allowing a person time to back out of the contract.

The standard contract in the Retirement Village Regulation 2017 and applying to contracts agreed to after 1 October 2013 sets out the details of each party’s rights and obligations, including costs, services, facilities, alterations and additions, repairs and maintenance, and sharing of capital gains.

Additional terms can be added to the contract provided they do not contradict the standard terms, the legislation or any other law.

Certain documents must be attached to the contract including a copy of the disclosure statement provided to the resident; the residence condition report; details on the village’s services and facilities, and the village rules (if any).

A standard form is not required if the resident is signing a sale of land contract where the person buys a strata or community scheme unit, or an agreement to buy company title shares. A service contract, however, is still required.

Key types of retirement village contracts include:

Loan and licence arrangements: The resident pays an initial contribution in the form of an interest-free loan, or a non-refundable deposit that is deemed part of the loan.

This contract provides entitlement for the resident to reside at the village along with termination provisions. If the loan agreement is in combination with another type of contract such as a licence or a lease, it should make reference to the entitlement to reside in that document.

Under this agreement, recurrent charges will be payable on a fortnightly or monthly basis.

Leasehold arrangements: A resident enters into lease with the village operator/owner. The resident becomes a registered interest holder where they enter into a long-term lease that includes a provision that entitles the person to at least 50% of any capital gain.

Depending on its terms, the lease may provide for entitlement to the whole, or a share, of the capital gain to the lease-holder, as well as be liable for the whole (or a share) of the capital loss upon the sale of the interest.

Strata and community schemes: The resident becomes the registered proprietor of a lot within the strata or community scheme via a contract for sale.

In this situation the resident becomes a member of the owners’ corporation or association and so must pay strata/community levies.

The owners’ corporation is also responsible for maintenance of common property.

The resident will generally also sign a service contract with the retirement village operator, including detailing the Ingoing Contribution, the requirement to pay departure fees and whether a capital gain/loss on the lot is shared with the operator.

Rental arrangements: This arrangement looks like a normal tenancy arrangement, including payment of a bond, but with no Ingoing Contribution or departure fees.

Company title schemes: The prospective resident purchases shares in the company which is the registered proprietor of the retirement village. These shares provide the right to reside on one of the premises. A services contract is generally required providing for when departure fees are payable. A bond to the company may also be possible, refundable upon the sale of the shares.

Over-50s lifestyle communities

These types of communities are governed by similar provisions to retirement villages though more closely resemble tenancy agreements.

Covered by the Residential Parks Act 1988, there are applicable rules for the conduct of operators and residents, contractual cooling-off periods, maintenance of grounds and facilities, and terms about departures.

A key distinction with this type of establishment is that residents own the building and pay rent on the site hosting the building. This means they are stamp duty exempt and the resident may also be able to apply for rent assistance.

Nursing homes

Nursing home agreements apply to those who are reaching the stage where they need to live close to emergency and constant care.

There are a number of agreements related to nursing homes, and sometimes they are combined into one.

The resident agreement details the services and level of care to be provided as well as its cost. It also provides details on supporting the resident as needs change, as well as exit arrangements and how to move to another aged care home.

The accommodation agreement covers the type of room to be provided, any other conditions on the accommodation and the cost. This includes a means assessment to work out whether the resident may be eligible for government assistance with the costs of nursing home care. The agreement will also outline options for payment, from regular rent to lump sum payment.

Discuss your needs with us

In any of the agreements outlined above, independent legal advice should be sought before entering into one to ensure you are fully aware of your rights and responsibilities.

At Felicio Law Firm we regularly advice people on these important life decisions. Choosing the right residential option for your later years is not only a large financial commitment but a decision you want to make without stress or complication.

Estate Planning Lawyers Central Coast can help you achieve that outcome with considered, understanding legal guidance.

Central Coast & Erina Lawyers

The Vital Importance of Making a Will

By Estate Planning

The thought of making an important legal document such as a Will can be one of those ‘life tasks’ people like to put off, but there are many very compelling reasons for resisting that impulse.

In this article, we’ll provide some more detail on the most important reasons for making a Will. Perhaps the most important, when all is said and done, is that a Will is an expression of your final wishes. For your loved ones, it is usually relied on as a clear ‘guide’ for them to follow to ensure that your estate is distributed as you wished it to be.

Your Will generally provides guidance on what you wish to happen with: land, houses or commercial property that you own; money held in bank accounts and term deposits; shares; other investments; personal belongings; life insurance policies, and; employment entitlements (but not always superannuation).

If you fail to make a Will before your death, the state may become responsible for distributing your estate under the intestacy laws and any wishes you had for how this should be done during your lifetime are likely not to be honoured.

If you have questions about making a Will, contact us at  Felicio Law Firm today. We have experienced Wills and Estates lawyers who take a caring and compassionate approach to the queries and concerns of our clients.

The best reasons for making a Will

Perhaps the primary reason for making a Will during your lifetime is to ensure you do not die intestate (without a Will).

To do so means your worldly possessions will be distributed by an administrator under the state’s intestacy laws, and not take into account what you wished to happen with your estate.

When you make a Will, you appoint a trusted person as the executor of the document, entrusting them to distribute your assets to beneficiaries, resolve your debts and order your affairs according to the instructions you left in the Will.

One thing an administrator is likely to do is to distribute your assets equally between your children. But for a variety of reasons, many people do not wish this to be the case. One of their children may have personally cared for them in their later years and the Will-maker believes they deserve more from the estate. One child may have been professionally successful and less needy of an inheritance. One may be going through or has gone through, a divorce, where the ex-partner may have a claim on the inheritance as part of a property settlement.

Perhaps you would like to specifically look after your grandchildren in your Will. This may not occur if you die intestate because your estate will generally be distributed between a surviving spouse and your children, rather than the next generation.

Similarly, stepchildren are not generally recognised as beneficiaries under intestacy laws. They can become so under a valid Will.

Many people would like to leave something in their estate to a charity, or a lifelong friend. Again, without a Will, this is unlikely to happen under the laws of intestacy.

A further reason to make a Will even before you reach mature years is that the document allows you to name a guardian for minor children. No one knows what the future holds. In the event of your sudden death, or that of both you and your partner, it may be left to a court to decide which people are best placed to take responsibility for your infant children, and these may not be the people you preferred.

The importance of a Will in blended families

In modern society more and more people need their Will to address the fact they have had more than one family during their lifetime.

You may divorce and remarry. You may divorce and your ex-partner remarries or forms a new de facto relationship. There may be children from the original relationship but not the subsequent one, yet the surviving spouse may be able to bypass their children when they receive and pass on your assets to the new spouse (and their beneficiaries).

There are a number of ways a Will can deal with these situations but you should first consult an expert legal professional. There may be a ‘mutual Wills’ agreement whereby both spouses agree not to change their Will when one of them dies, allowing the children from the relationship to enforce the agreement in court should a surviving spouse decide to change his or her Will.

Another solution is to grant a right of residence to each other to live in their share of the family home for life, with each other’s share returning to the other once one of them dies.

Making a valid Will

In the digital age, there are many free and DIY will kits offered online. It’s very easy, however, for a legal document such as a Will to be adjudged invalid if it is not done correctly. An invalid Will means your wishes can, again, be overridden by intestacy laws.

In general, a Will must be in writing, whether handwritten, typed or printed, signed by the testator (the Will-maker) and witnessed by two other people who also sign the Will.

Ideally, a Will should be reviewed and, if necessary, updated every three to five years. This way it can best reflect any changes in your life circumstances, most particularly changing family arrangements. Once you start earning income, it’s never too early to consider making a Will.

If you have questions or concerns about making a Will, contact Central Coast & Erina Lawyers specialists Felicio Law firm today.

Central Coast Estate Planning Lawyers

Who Should Consider a Testamentary Trust?

By Estate Planning

Testamentary trusts are established through a person’s will and come into effect on the death of the testator (the will-maker). Such trusts give the deceased a larger degree of control over what happens to their estate, as well as offering both protection of assets and income tax advantages for the testator’s beneficiaries.

A testamentary trust may include only a portion of assets from the deceased’s estate or the entire estate. A person may also create multiple trusts through the testamentary document, with each making provision for different beneficiaries. The nominated trustee then distributes the assets to beneficiaries under the terms of the trust.

Here we’ll explain in some more detail about who a testamentary trust is most appropriate for, but if you have questions about whether one is advisable in your circumstances you should call wills and estates’ specialists Felicio Law Firm for an informal chat.

Why make a testamentary trust?

The key benefits of testamentary trusts are their suitability for protecting assets and their ability to reduce tax paid by beneficiaries from income earned on their inheritance.

Two common types of testamentary trust are ‘discretionary’ – in which the trustee has the discretion to distribute capital and/or income to beneficiaries nominated in the will – and ‘protective’, established in situations where the beneficiary/beneficiaries are unable to manage their own affairs due to age, disability, addiction or profligate ways.

Asset protection: Discretionary testamentary trusts are often created in situations where one or more of the beneficiaries are exposed to some sort of risk, such as bankruptcy. A testator may also create a trust to exercise control over a wayward beneficiary, such as one who is wasteful with money or has other problems requiring access to finance.

This is because assets and income held within a trust are not generally accessible by creditors who may be trying to recover funds from a nominated beneficiary.

To be specific, a testamentary trust offers asset protection in situations where a beneficiary:

  • is in a precarious financial situation, such as insolvency;
  • works in a high-risk environment such as trading in equities, or has other potential exposure to liability in their work;
  • is in the midst of a divorce or has a complicated family situation, including remarriage, step-children, etc.

Tax advantages: The other key benefit of a testamentary trust is that when a beneficiary inherits within a will, that inheritance will be taxed at their personal marginal tax rate. Through the trust structure, however, the income and or assets can be split and distributed to a partner on a lower tax rate, to adult children or grandchildren who may fall under the tax-free threshold, or to minor children or grandchildren to reduce overall tax liability.

It should be noted, however, that tax on undistributed income in the trust will be taxed at the highest marginal tax rate.

Capital gains tax: Where a property is part of an inheritance through a will, a testamentary trust is a means by which capital gains tax payable on the property can be minimised. When property is inherited through a will, capital gains tax is generally payable either two years after Probate of the will, if the deceased lived in that property, or when the property is sold, if it was an investment property.

Where the property is held within a testamentary trust, the capital gains tax payable can be spread out to minimise the overall liability similar to the method by which beneficiaries’ income tax can be dealt with through the trust.

Talk to the specialists

Felicio Law Firm are experts in wills and estates. Our friendly team can help guide you through the benefits and any drawbacks in the creation of a testamentary trust. We’ll listen to your story and make a judgement on whether the testamentary trust structure suits your circumstances or not, and provide clear, timely and relevant advice on your best course of action.

Call our Erina lawyers team today on (02) 4365 4249.

Power of Attorney

How to Defend an Application to Review a Power of Attorney or Guardianship Appointment at NCAT (NSW)

By Estate Planning

Australians live longer than ever before. Hopefully this means we can enjoy full and satisfying lives, but it also means many of us continue to live to a time after we’ve lost the mental capacity to make decisions for ourselves due to dementia or other illnesses of old age.

This fact has made the apppointment of Enduring Power of Attorney (EPOA) and enduring guardianship more significant legal decisions. An EPOA authorises one or more persons, a licensed trustee company, or the NSW Trustee and Guardian (the attorney), to act on behalf of the principal – the person with impaired decision-making capacity – by managing their personal financial and legal affairs.

An enduring guardian can make personal and lifestyle decisions on behalf of the principal, such as where they live and what sort of medical treatment they receive, when the appointer lacks capacity to make these decisions for themselves.

The trust and responsibility involved in these roles means those holding such positions can be closely scrutinised by other family members and beneficiaries of the person with impaired decision-making capacity. The EPOA, in particular, is not only responsible for acting in the best interests of the principal, but also those people who rely on the principal during his or her lifetime, as well as their beneficiaries once they die. Where a financial loss to the principal or his or her estate is sustained as a result of a decision by the EPOA, their appointment can be challenged.

In NSW the Guardianship Division of the NSW Civil and Administrative Tribunal (NCAT) is empowered to resolve disputes or concerns in respect of an incapacitated person’s guardianship or financial matters, including determining applications for the appointment of guardians and/or enduring powers of attorney, as well as reviewing these appointments.

This article will focus on what you should do if your appointment as an EPOA or enduring guardian is the subject of an NCAT review application.

The NCAT review process

The role of NCAT’s Guardianship Division is to protect and promote the rights and welfare of adults with impaired decision making capacity.

EPOA: When someone believes an EPOA is not acting in the best interests of a person who has lost capacity, they can make an application to NCAT to review the appointment under the Powers of Attorney Act 2003. NCAT accepts the request for a review if it believes it’s in the best interests of the person who made the EPOA.

As a result of a review, NCAT can vary or revoke the EPOA. It can remove an attorney from office or appoint a substitute attorney. Under its power of review, NCAT can require an attorney to provide accounts and information.

One reason an EPOA may be declared invalid, in whole or part, is because a person did not have the mental capacity to make a valid EPOA at or during a specified time. NCAT has the power to make this declaration about a person.

In some circumstances, NCAT may treat the application for review as an application for financial management and make a financial management order which suspends the operation of an EPOA for the duration of the Tribunal’s order.

To apply to the Court or NCAT for a review of the operation of a person’s EPOA, you must have legal standing. Those with standing include the principal (if they have mental capacity), a guardian or enduring guardian of the principal, and any other person who, in the opinion of the Court or NCAT, has “a proper interest in the proceedings or a genuine concern for the welfare of the principal”.

Guardianship: An enduring guardian is different to an EPOA in that they are appointed with specific powers to make important medical decisions for the principal (such as whether they should undergo an operation, or receive a certain drug), as well as decisions about living arrangements (assisted living, nursing home, etc.).

As with EPOAs, NCAT has the power to review the appointment of a guardian on its own motion, or at the request of anyone with a genuine concern for the welfare of the person. NCAT can revoke the appointment or confirm it. It may also change the functions in the appointment or make a guardianship/financial management order.

It should be noted that NCAT requires evidence that the person for whom the guardian is appointed has a decision-making disability and that disability results in the person being partially or wholly, incapable of managing themselves.

How to defend an NCAT review of your appointment as EPOA or enduring guardian

Both EPOAs and enduring guardians have important responsibilities and need to be aware of the time, stress and weight of those responsibilities before they agree to the appointment.

An EPOA has fiduciary duties and obligations to the principal which they can become liable for should they breach. The document creating the EPOA will set out these duties and obligations, as well as when the power becomes operative. If the EPOA begins when the principal loses mental capacity, the attorney should obtain a letter from the principal’s doctor or an appropriate specialist confirming that the principal has lost mental capacity and is unable to manage their own financial and legal affairs. This can be invaluable if there is a later request to review your appointment by NCAT.

An EPOA should always obtain appropriate advice about difficult or complex issues regarding the principal’s affairs. If an attorney decides to sell an asset of the principal, for example, he or she should first check with the principal’s legal representative to make sure the asset was not the subject of a direct gift in the principal’s will. This is a common cause of applications to review an EPOA to NCAT by beneficiaries of the will.

An attorney should be aware that under section 38 of the Powers of Attorney Act 2003 (NSW), they may apply to the Court or NCAT for advice or direction “on any matter relating to the scope of the attorney’s appointment or the exercise of any function by the attorney”. By doing so they may prevent those with standing having grounds to request a review by NCAT of their appointment.

An enduring guardian must act within the bounds of the Guardianship Act 1987 (NSW) in order to avoid grounds for review of their role by NCAT. This requires the guardian to keep the welfare and interest of the person they are acting for paramount; ensure the person’s freedom to decide and act for themselves is restricted as little as possible; take into account their views and encourage them to be self-reliant and live a normal life.

NCAT does not supervise enduring guardians and only acts where a concerned person makes an application, or information is received which leads to a review of the appointment.

Other than the requirements mentioned above, to avoid grounds for review an enduring guardian should ensure their appointment is made in writing and signed by both the appointer and the intended guardian in front of a designated legal authority. In carrying out their duties, the guardian also needs to pay due regard to any specific guidance or Advance Care Directives (ACDs) made by the appointer.

How our legal advice can help

If you act as an EPOA or enduring guardian for someone and your appointment is the subject of a review by an NCAT, you should contact Felicio Law Firm today. We have wide experience advocating for people before government bodies such as NCAT.

Similarly, if you need more information on the right way to appoint an EPOA or an enduring guardian, give our friendly team a call.

We’ll provide guidance and keep you fully informed throughout the process of defending your performance in the role and protecting your rights. At Felicio we take a considerate and collaborative approach to our relationship with our clients. Contact us Erina family lawyers today on (02) 4365 4249.

Discretionary Trust

What are the Benefits of a Discretionary Trust?

By Estate Planning

Whether as a business structure or as part of estate planning, there are a number of advantages to setting up a discretionary trust, sometimes also called a ‘family trust’.

This article will provide some detail on the benefits – as well as some of the things to be cautious of – in creating a discretionary trust. Trusts can be a complex area of the law so it’s a wise course of action to seek the advice of an experienced legal expert if you wish to establish a discretionary trust.

The key advantages for estate planning

The main reason a person will set up a discretionary trust as part of their estate planning is the control it provides them in determining who and how much the beneficiaries of the trust will receive from the trust’s property and assets.

A discretionary trust will often hold shares and other investments. Money earnt on these investments is held in the trust and you, as the trustee, has the discretion about how the money is distributed to beneficiaries such as your immediate family members.

It’s important to note that the beneficiaries are a defined class of people who do not have a right to the assets of the trust but merely a right to be considered when the trustee decides to exercise their discretionary power to distribute income from the trust.

The second key advantage of a discretionary or family trust is that it can provide tax advantages. If as trustee you are earning an income that places you in a high income tax bracket, but your beneficiaries in the trust are in lower tax brackets, or even under the tax-free threshold, you can minimise the tax burden on income from investments by distributing trust income to those beneficiaries, who will be taxed at the lower rate.

A further strength of a discretionary trust is asset protection. In estate planning this can prove important where, for example, a beneficiary of the trust becomes bankrupt. In normal circumstances where a person passes on assets in a will to their adult child and that child is bankrupt, the assets will become available in the bankruptcy proceedings. But in the case of a discretionary trust, assets within the trust will be protected from the proceedings and any other creditors. The trustee can distribute to the bankrupt beneficiary once the bankruptcy period has expired.

Capital gains tax

A further benefit of a discretionary trust is that if an asset of the trust is disposed after a year within the trust, a 50% discount applies to any capital gains tax owing. This discount also flows through to beneficiaries on distribution of the proceeds.

Discretionary trusts as a business structure

A discretionary or family trust is a particularly popular means to structure a small business in Australia. The key advantages outlined above, including control, asset protection and tax advantages, equally apply.

Additionally, so long as the trust deed is correctly structured, small business capital gains tax concessions are also available in this structure. The benefits of limited liability are also available if the trustee is a corporate entity. The trust structure also makes it easier to admit new beneficiaries without the trustee losing control.

It’s important to also note some common disadvantages of this structure. Investors can be harder to attract when a trust structure is used and a bank, for example, is uncertain of the terms of the trust deed. Losses from the business are trapped in the trust, as only profits can be distributed, and property held in a discretionary trust is not able to take advantage of the tax-free threshold for land tax. There can also be a restriction on who can be distributed to if you need to make a family trust election, required where the trust wishes to claim losses from prior years, or imputation credits on franked dividends received.

Speak with Felicio Law Firm

At Felicio Law Firm we have many years of experience advising clients on the benefits of setting up a discretionary trust. We can take you step-by-step through more detail on the general points raised in this article and put your mind at ease about whether this is the right structure for your circumstances.

Contact us Central Coast Estate Planning Lawyers today on (02) 4365 4249 for an initial consultation.

Binding and Non-binding Nominations in Life Insurance and Superannuation Funds

Binding and Non-binding Nominations in Life Insurance and Superannuation Funds

By Estate Planning

Estate planning has two primary goals. One is to protect yourself and your family in the event of unexpected illness or injury. The other is to ensure your loved ones are provided for after you die. Traditionally, having a valid will and naming beneficiaries through super fund providers have been key to achieving those objectives. However, experts now say that may not guarantee certain assets are allocated as per your wishes.

Keep reading to learn when binding and non-binding nominations in life insurance and superannuation funds may also be necessary.

What are binding nominations?

These are written instructions letting your superannuation fund trustee know who should receive your benefit when you die.

They play an important part in estate planning for two reasons. The first is that superannuation benefits are not legally classified as part of your overall estate. Therefore, your will, which ordinarily determines how the assets from your estate are allocated, does not apply to these benefits.

The second is that should there be a dispute among your family members after your death, the person or people you named as a beneficiary of your superannuation fund may be prevented from receiving the benefit, or it could be allocated to unintended recipients. By making a binding death benefit nomination, you eliminate the possibility of costly, unpleasant delays associated with any such dispute. This is because a trustee is legally obligated to follow your instructions.

You should also be aware that a valid binding death benefit nomination does not take effect until a super fund trustee receives and accepts it. It remains in effect for three years from the day it is initially signed, last changed or verified.

You can change or withdraw this type of nomination whenever you like. To change it, you must complete a new nomination form and submit it to the trustee. You must also notify the trustee in writing if you want to withdraw it. On a similar note, you must provide written notice to the trustee if you want to extend the nomination. This must be done before the expiry date.

It should also be noted that some funds that also accept non-lapsing binding nominations and so the nomination doesn’t need to be updated every three years. Often a characteristic of government super funds, the non-lapsing binding death nomination may only be made if permitted by the trust deed and with the active consent of the trustee.

A binding nomination is only valid if:

  • It favours one or more of your dependants and/or your legal personal representative.
  • Any dependant nominated must still be your dependant at the date of your death.
  • The distribution of your benefits must be clearly specified.
  • All of your benefits must be allocated. The entire nomination will be invalid otherwise.
  • It is signed and dated by you before two (2) witnesses, both of whom are over the age of 18 years and not named as beneficiaries.
  • It includes a declaration signed and dated by each witness indicating that you signed and dated the nomination in their  presence.

What are non-binding nominations?

This type of nomination simply verifies how you would prefer to have your death benefit paid out.

While it must be taken into consideration, super fund trustees are not legally obligated to follow your instructions. Instead, they maintain full discretion as to distribution of applicable benefits, in accordance with the trust deed and superannuation law.

Unlike a binding nomination, a non-binding nomination remains in place indefinitely  and only requires updating when your situation changes.

Who can you nominate?

If you are making a binding nomination, you may only name the following as beneficiaries:

  • The executor of your will (for the purposes of  distributing it according to your wishes);
  • the administrator of your estate (for the same purpose);
  • your husband or wife;
  • your child (or your spouse’s child) of any age, including an adopted child, foster child, ward or child as classified in Family Law legislation;
  • anyone living with you who met the criteria for an interdependent relationship at the date of your death; and
  • any other person as determined to be financially dependent on you at the date  of your death.

On the other hand, non-binding nominations can be made to:

  • The executor of your will or administrator of your estate (for the purposes detailed above);
  • anyone classified as your dependant in accordance with superannuation law.

In summary

No one wants to think about the inevitable. But the reality is, we will all die some day. By putting a comprehensive strategy in place now, we can ensure that our families are fully provided for when that day comes.

At Felicio Law Firm, our Central Coast estate planning lawyers are always available to help you craft a plan best suited to your situation. To learn if making binding or non-binding nominations for your superannuation or life insurance funds are viable options for you, contact us today on (02) 4365 4249.

estate planning queensland

What to do When a Loved One Dies in Queensland, What are the Next Steps?

By Estate Planning

There can be a surprisingly long checklist of things to do when a loved one dies, particularly if they were elderly and lived a full life.

From sorting out their outstanding financial matters, be it bank accounts or government pensions, to cancelling utilities and closing social media accounts, it can be a time-consuming process to ensure your loved one’s affairs are finalised to reflect their passing.

One of the most important considerations, of course, is making sure their wishes are carried out in regard to their estate through the terms of their will, provided they made one. This is where the services of a legal professional with a background in wills and estates can prove invaluable in saving you time and stress.

What to do in the event of a loved one’s death

Many government agencies provide a checklist for people to follow as a guide in organising the affairs of a loved one once they pass. The Queensland government provides one here.

In the first 24 hours after death, this includes the basics of contacting a doctor (if they died at home), contacting family and friends, the preferred funeral director, and the executor/s of the will.

It’s important then to locate your loved one’s personal documents in order to ensure that any instructions they left are accurately carried out. This may include, for example, a pre-paid funeral plan, but also encompass documents such as birth and marriage certificates, property deeds, life insurance or superannuation policies, bank account details and their will.

Thereafter it remains to contact all of those agencies your loved one had regular interaction with, such as Centrelink, Medicare, their local council, their utility providers, phone and internet providers, clubs and professional associations, and anyone else you think needs to know that they are deceased.

If you’ve engaged a funeral director, they will officially register the death with the Queensland government and apply for a death certificate, which must be done within 14 days of your relative’s passing. You can also undertake these tasks yourself if you choose to make the funeral arrangements for your loved one, though it’s recommended you contact the government to ensure you follow the correct procedure.

Wills and probate

If you’re named as executor of your loved one’s will, you are responsible for carrying out its terms.

In some circumstances, such as when certain people or organisations holding assets that are part of your loved one’s estate will not release them, you may have to apply to the Supreme Court for probate. A grant of probate is the Court’s recognition that the will is legally valid and that you are the person authorised to deal with the estate.

It may be the case that you require other types of grants, too. Where your loved one’s will was valid and you are applying to administer its terms but are not the executor, you will have to apply for a grant of letters of administration of the will. In cases where your loved one failed to make a will, you may need to apply for a grant of letters of administration on intestacy.

The importance of legal guidance

Wills, estates, probate and intestacy can be a complicated area of law. Experienced, specialist legal advice will help smooth your path if the responsibility of any of these areas falls on you once a loved one dies.

Felicio Law Firm has many years of experience helping people sort through the numerous issues you can face when a loved one dies. We can make the process easier by acting both with compassion and efficiency to help you through a difficult time. Call us today on (02) 4365 4249.

waiting girl in room

What Happens if You Die Without a Will in New South Wales?

By Estate Planning

It’s estimated up to 50% of people in NSW either don’t have a will or don’t have a valid will, meaning that should they die unexpectedly, they will be considered intestate and their estates distributed to surviving family members under the rules of the Succession Act 2006 (NSW).

This is not ideal. Most people would like to know that whatever they leave behind after their death – property, shares, heirlooms and other assets – will be distributed to loved ones in accordance with their wishes rather than the provisions of a government act, but this is not possible if they didn’t get around to making a will.

This article provides a basic outline of how an estate is divided in the event of a loved one dying without a valid will.

Who can inherit a deceased’s estate without a will in place?

There is a hierarchy of next-of-kin who stand to inherit a deceased’s estate in the event of intestacy. It begins with a spouse and then, where there is no spouse, the deceased’s children and grandchildren, parents, siblings, grandparents, aunts and uncles, cousins and finally, the state (where a person dies with no living relatives).

Where a person dies with a spouse but no children, the spouse may be entitled to the whole estate of the deceased. If the deceased leaves both a spouse and children behind, and the children are the children of the spouse, it is the spouse who may be entitled to the whole estate. If the children are not the children of the spouse, the spouse may be entitled to: the personal effects of the deceased; a statutory amount, adjusted for CPI plus interest; and one half of any remainder.

In the event that the deceased had multiple spouses, various other considerations will come into play as to how the estate will be distributed and expert legal advice should be sought.

Under the NSW law, a spouse is defined as the person the deceased was married to immediately before their death, or was in a ‘domestic partnership’ with. This latter relationship can include de facto relationships or an interstate relationship that is registered. For de facto relationships, the relationship must have been for a continuous period of two years or resulted in the birth of a child.

It should be noted that if the deceased owned property with someone else as a joint tenant, then that person will inherit the entire property.

What is the process when there is no will?

For an intestate person’s assets to be distributed when they die without a will, someone needs to be appointed as an ‘estate administrator’, who will take on the responsibility of distributing the estate in line with the intestacy rules.

Often the administrator will be a lawyer, a financial planner or someone else trusted by the deceased (where possible), who needs to apply for a grant of administration from the court. This grant will allow them to reconcile matters related to the deceased’s estate – such as any unpaid debts, taxes, funeral expenses, etc – by withdrawing the deceased’s funds, before distributing what remains of the estate.

In simpler cases where the deceased left few assets and has a single spouse to inherit his or her estate, a grant of administration will not always be needed. The same applies if those likely to inherit from the estate can come to agreement on how best to distribute the assets.

Applying for a grant of administration can be time-consuming, involving a lot of paperwork and background research in order for the deceased’s estate to be properly distributed.

For this reason it is recommended to seek the guidance of legal professionals with a background in wills, estates and intestacy, such as the experts at Felicio Law Firm. Call us today on (02) 4365 4249.

Marriage Divorce Separation Existing Will

What is the Effect of Marriage, Separation or Divorce on an Existing Will?

By Estate Planning

Once you’re of age and working, making a will – or what lawyers refer to as ‘estate planning‘ – is a highly recommended course of action to ensure your wishes are carried out in the event of your death.

But the terms of a will are necessarily complicated once you marry or, later on, separate or divorce. Various pieces of government legislation have further complicated the picture, meaning expert legal advice is strongly advised when it comes to making, amending or updating a will.

How does marriage impact the terms of a will?

If you have a will and then decide to get married, that will is revoked once you exchange vows. The exception to this is if you make a will in the “contemplation of marriage”. That is, you decided to make a will to cover the circumstance of gaining a beneficiary (or beneficiaries) in the form of your new spouse.

A law change made on March 1, 2008, will also provide an exception to the ‘revocation-on-marriage’ will provision. If you got married on or after that date, any terms in your will which provide a benefit to your spouse, or any appointment of them as an executor or trustee of the will, or as a guardian (of children, for example) remains in place, though the will is otherwise revoked.

If you die and didn’t manage to update a will that was made before March 1, 2008, then you may be partially intestate depending on the terms of the will at the time you married. In this case, your spouse will likely be able to claim most if not all of your estate and a state’s intestacy laws will determine who is entitled to anything not left to your spouse in the will.

How does separation affect a will?

On its own, separating from your spouse has no effect on your will but as noted above, your now ex-spouse will have the largest claim on your estate should you die before you divorce. For this reason, legal experts in estate planning recommend you always update or amend your will if your separation from your spouse looks like it is permanent.

What happens if we then divorce?

Various changes to relevant legislation over the years affect the impact of divorce on your will. If you were divorced in NSW before November 1, 1989, the will you had in place at the time of that divorce is unaffected and your ex-spouse is entitled to any gift in your will, unless you specifically revoked or updated the document.

If you were divorced after the above date, any terms in the will in favour of your ex-spouse, or any appointment of them as an executor or trustee in your will, are revoked. The further law changes in 2008, however, mean that if you were divorced on or after March 1, 2008, and your ex-spouse appears in your will as a trustee for beneficiaries such as any children from the relationship, then your ex may still act as trustee despite the divorce.

Same-sex couples

The passing of legislation enacting marriage equality in Australia in December 2017 has complicated the legal picture around same-sex couples and their wills.

Many couples married overseas prior to the Australian law changing, subsequently making their unions legal in Australia. Expert legal advice should be sought to determine the validity of wills made by couples who were legally married overseas prior to the recognition of marriage equality in Australia and made a will after this time, particularly if it includes beneficiaries other than their spouse.

As this article demonstrates, the legal landscape when it comes to the impact of marriage, separation and divorce on estate planning can be complicated. It involves different pieces of legislation with different dates before or after which certain aspects of a will are valid or not. In this case, contacting a law firm with proven experience in estate planning matters such as Felicia Law Firm is a wise course of action. Contact us today on (02) 4365 4249.

Litigation Guardians

Litigation Guardians – When Is It Appropriate?

By Estate Planning, Litigation

One of the most common misconceptions about hiring a lawyer is that he or she will be solely responsible for making all of the decisions about your case both before and during any litigation.

It is true that your lawyer is legally and ethically obligated to provide the best possible legal advice and act in your best interest but provided you are making sound decisions based on the information he or she provides, your lawyer must also follow your instructions.

But what happens if you aren’t capable of telling your lawyer what to do? If you’re incapable of doing so because you’re under 18 years of age or disabled, the court will appoint someone called a litigation guardian to act on your behalf. In other words, this is someone who will effectively ‘step into your shoes’ to assess your best interests and instruct your lawyer accordingly.

To be selected as a litigation guardian, someone must:

  • be an adult;
  • demonstrate that he or she does not have any interest in the case that is opposed or potentially harmful to the interest of the person in need of his or her services;
  • be able to act fairly and competently;
  • consent to being a litigation guardian under applicable laws.

In some cases, relatives or other concerned parties will ask a lawyer to act as a litigation guardian. This is because a knowledgeable, experienced lawyer can act with a certain degree of objectivity and professionalism.

More often than not, the litigation guardian is a relative, friend or caregiver.  Barring that,  the court may select someone who does not personally know the person requiring a litigation guardian. In either case, the person chosen to fill this role must become familiar with the person’s situation and issue instructions that reflect their charge’s best interests.

Litigation guardians are generally appointed in the following types of cases:

  • Personal injury;
  • a criminal compensation application;
  • various matters related to Wills;
  • family provision applications.

A litigation guardian must be selected to represent someone in any Federal Circuit Court matter in which that party is incapable of understanding the proceeding or its potential consequences; or is incapable of fulfilling his or her legal obligations. Applicable court rules dictate that a minor must have a litigation guardian unless the court orders otherwise.

In accordance with Family Law Rules, a litigation guardian in the Family Court is known as a ‘case guardian’. In any Family Court matter a person who is legally classified as a child or is otherwise incapable of instructing his or her attorney, and/or fulfilling his or her legal obligations, must have a case guardian in order to initiate, continue, respond to, or intervene in proceedings. The only exception to this rule is if the court finds that the child not only comprehends the nature and possible consequences of the case, but can also make certain decisions and meet his or her legal obligations.

There are several methods for appointment. Someone can simply apply to be appointed a litigation guardian or case  guardian. In certain circumstances, the court may ask the Attorney-General to nominate a litigation guardian or case guardian. The court may also make its own motion for appointment of a litigation guardian. It may also remove or replace a litigation guardian.

Once the appointment is finalised, the litigation or case guardian must advise all other relevant parties about it in writing.

A newly-selected litigation guardian or case guardian must also abide by applicable court rules. Furthermore, he or she must do everything ordinarily required of a party to the litigation. Finally, he or she may also do anything that the party to the litigation would ordinarily do for his or her own benefit.

As we have already noted, a litigation guardian must obtain proper legal advice. In this context, he or she must duly consider any proposals for resolution of the case, such as participation in alternative dispute resolution.

In accordance with a relevant court order, any costs incurred by the litigation guardian are paid by a party to the litigation or from the income or property of the person that he or she represents.

To learn more about how to be appointed as a litigation guardian or any related issues, contact our Central Coast lawyers today.