There are mixed opinions about whether Testamentary Trusts are worth the cost and effort to set up. Tom explains the benefits and how they offer greater control and protection of your estate from potential relationship breakdown, bankruptcy and tax.
Today, Where There's A Will, There's A Way to Fight Over It
Australia faces a growing battlefield over the distribution of deceased estates as more complex family arrangements trigger post-death conflicts, and a “sense of entitlement” by family members results in expensive fights over small amounts.
Special counsel at Paxton-Hall Lawyers Sharon Winn said that, in Queensland alone, 80 to 90 small estate family provision claims were lodged in the Supreme Court every month.
Small estates were those valued at about $500,000 and based around a primary asset such as a house.
Ms Winn said disputes were commonly between a second spouse and children from a first marriage, but the large number also reflected changing social attitudes and greater knowledge of court challenge options through legal firms advertising no-win, no fee.
“We’re seeing a distinct change in the estate dynamic,” she said. “People nowadays are more materialistic and have more assets worth more money, so families want their share.
“There (also) seems to be a societal shift to towards a greater sense of entitlement.”
The comments followed the release of a national report this week calling for community and legal re-education to redress the growing cost of conflict and family fracturing off the back of will disputes.
The research, conducted jointly by the University of Queensland, QUT and Victoria University, found 74 per cent of family challenges to wills were successful, but the disputes were known to drain the entire proceeds of an estate.
Further clues to the issue emerged yesterday with the release of survey findings by law firm Slater and Gordon suggesting most Australians did not support funds being left to non-family members. This reinforced the findings of the university report, which found a strong sense of entitlement to “family money” in Australia.
Earlier Slater and Gordon research showed more than a third of Australians had experienced conflict over distribution of assets from an inheritance.
The new research, based on a survey of 2000 people, found 63 per cent of people did not believe that a non-relative was entitled to a significant inheritance even if they visited someone regularly, helped with daily tasks and celebrated holidays together.
Slater and Gordon senior estate planning lawyer Rod Cunich said people needed to be mindful when they were drafting wills of the potential to create family disputes after their death.
“Clearly, these new figures show that the majority of people feel that assets should stay in the family,” he said. “I see quite often many people who don’t have family, or aren’t close to their family members, so they choose to leave their assets to people who they have forged a strong relationship with — and that’s well within their rights.
“But we must remember that in Australia children have the right to contest a Will, so a willmaker should be very clear and concise about how their assets are to be distributed, why, and the likely consequences.”
Ms Winn suggested parties should avoid emotional distress and save money by exploring other settlement avenues such as mediation.
“What people don’t understand is (that) the legal fees surrounding these seemingly small cases can be upwards of tens of thousands of dollars, and that’s before it’s even been to court,” she said. “These cases are labour-intensive, and the same administrative procedures and standard responses need to be followed, no matter how small the estate.”
THE AUSTRALIAN, APRIL 10, 2015, Shane Rodgers, Queensland editor
New Changes to Estate Litigation
On 21 October 2014 the Justice Legislation Amendment (Succession and Surrogacy) Bill 2014 Act (the Act) received assent – it is now official, the landscape for Estate litigation has changed.
What is the impact?
The Act changes the law as to who can challenge an Estate in Victoria (Estate claim). The Act comes into effect from 1 July 2015 and will apply to :
- an estate of any person who dies on or after this date; and
- any claims made after this date.
Up and until 1 July 2015, any person can continue to bring an Estate claim on the basis that the Estate (either by Will or the intestacy laws) does not adequately provide for them. The range of persons who can claim can be as wide as children, domestic partners, step children, grandchildren, carers, related family members and non-family members (such as friends, neighbours).
Who can claim?
From 1 July 2015, essentially two categories of persons will be able to claim. Only those who are ‘eligible’ and who fit into a defined category will be able to claim, they are:
Group one – related/immediate family members :
- a spouse or domestic partner;
- a child or stepchild of any age with or without a disability;
- a person who for a substantial period during the life of the deceased believed that the deceased was his/her parent and was treated by the deceased as a natural child of any age; and
- a former spouse or domestic partner (only if no property settlement reached).
Group two – others :
- a grandchild;
- a registered caring partner;
- a spouse or domestic partner of a child of the deceased (including a step child or person who for a substantial period during the life of the deceased believed that the deceased was his/her parent) if the relevant child of the deceased dies within one year of the deceased’s death; and
- a person who, at the deceased’s death is a member of the household in which the deceased was also a member (or had been in the past and would have been likely again in near future have the deceased not died).
If an eligible person forms part of group two :
- that person must be wholly or partly dependent on the deceased for proper maintenance and support; and
- the Act casts an obligation upon the Court to assess that person’s ability to, by reasonable means, provide for their own proper maintenance and support.
The Act is not as restrictive for adult children/step children as what was contemplated in the Bill. For instance, the requirement that an adult child or step child be wholly or partly dependant on the deceased for their maintenance and support has been removed.
It is likely that there will be a significant number of claims issued leading up to 1 July 2015.
Post 1 July 2015 it is likely there will be a significant increase in the number of persons who become a registered carer, with Births, Deaths and Marriages. Those persons who can be registered as a ‘registered caring partner’ do not need to be a direct family member.
There is also likely to be an increase in executors or administrators delaying applications for a grant of probate or letters of administration for a deceased Estate so as to avoid claims being brought before the commencement of the Act. This may well result in different litigation being issued to force an executor/administrator to apply for a grant of representation, rather than stall.
The positive outcome is that a Willmaker’s fundamental rights to leave their estate as they see fit is strengthened and deceased estates will be less susceptible to opportunistic claims.
To read the full article, please click here.
If you have any queries please either contact Sam Frey, Jennifer Maher or Sharon Favero.
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