This is the greatest value we can provide on your untimely passing. We will turn up and help your family navigate the emotional and confusing situation and guide them through the process ahead.
7 MINUTE WISDOM PODCAST #19: How To Choose Your Executors
A lot of people struggle to choose the people who they want to ultimately represent them on their passing. A family member will have your best intentions at heart, and someone with business and professional experience will be valuable for key decision making.
7 MINUTE WISDOM PODCAST #13: THE BUSINESS PARTNER FROM HELL
Business partnerships begin with the best of intentions and positive outlook. However, if the partnership breaks down or if one partner suddenly passes, this can often lead to an unqualified beneficiary becoming involved. Effective planning is essential to protect your years of hard work and success.
7 MINUTE WISDOM PODCAST #12: THE BENEFITS OF A TESTAMENTARY TRUST
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.
7 MINUTE WISDOM PODCAST #11: Estate Planning, Not Just A Will
Many people believe an up to date Will is all that is required for their Estate Plan. Realistically a Will is just the start, just the foundation. Tom discusses what else is required even for those who have apparently simple structures.
7 MINUTE WISDOM Podcast #10: The Delinquent Documents Trap
Sadly we have seen many cases when failing to make simple updates to your Will and Estate documents can lead to disaster. When was the last time you reviewed your personal and business documents? What events have transpired that are relevant to your Estate Plan?
7 Minute Wisdom Podcast #6: Special Needs Children
Children with special needs often require specific planning and individual arrangements when it comes to preparing your Will and Legacy Plan. Not only as to who will provide the ongoing care, but primarily in many cases the need for adequate finance for the child's care is the greatest issue.
7 Minute Wisdom Podcast #5: The Unaware Squared Trap
The greatest danger in estate planning could be the fact that you simply don't know what you don't know. Could there be something missing from the advice you have received? A thorough, detailed discovery questionnaire is essential to eliminate potential issues.
7 Minute Wisdom Podcast #4: The Deferral Dilemma
When it comes to Estate Planning and drafting a Will, why is it that so many people procrastinate or wait for the perfect situation before getting started? Tragically this habit and attitude can lead to a messy situation if you pass before getting your plan sorted.
Taxman Set for Purple Patch
Prince's DNA tested as claims besiege estate. As the singer had no Will, it is expected more than 50 per cent of Prince's estate will be lost to death taxes.
Prince's estate has been deluged by claims prompting a request for his blood to be DNA tested. Bremer Trust, appointed to temporarily oversee Prince's assets, has been given permission by a Minnesota judge to obtain a sample of his blood held by the Midwest Medical Examiner.
Judge Kevin Eide, who ordered the blood analysis on Friday, said people wishing to make a claim had four months to file a claim. Judge Eide said the request for genetic testing was because "parentage issues might arise".
Prince's estate is estimated to be $300 million and his sister, Tyka Nelson, said he had left no will.
Possible heirs include Nelson and five half siblings. Prince's only known child was a son, Boy Gregory, who died a week after his birth in October 1996, due to a rare genetic disorder called Pfeiffer syndrome. As the singer had no will, it is expected more than 50 per cent of Prince's estate will be lost to death taxes. Minnesota's death tax rate, one of the highest in the US, is 16 per cent. After the US federal government 40 per cent death tax is added, a total of 56 per cent death tax will be applied.
Prince, whose full name was Prince Rogers Nelson, was found dead on April 21 at his Paisley Park home-studio complex in Chanhassen, a Minneapolis suburb. He was 57. The Minneapolis Star Tribune and KSTP-TV reported on Thursday that Prince's autopsy had found the painkiller Percocet in his system. KSTP-TV, citing two unnamed police officials, reported that Prince also had a dangerously low red blood cell count, indicating he had been ill. A spokeswoman for the local medical examiner's office that conducted a post-mortem examination of Prince declined to confirm the reports.
The cause of Prince's death remained undetermined.
THE SYDNEY MORNING HERALD | May 7, 2016 Lenny Ann Low
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
Why is Making a Will Expensive?
It’s too expensive!
These are often the famous last words of regular people when advised to seek the services of a lawyer to draft a will. Yet a recent case handed down by the Supreme Court of Queensland highlights exactly why a specialist succession lawyer is a vital part of any estate plan.
Fernando Masci and Elizabeth Masci were married later in life, after previous marriages and each had children of their own. They did not have any children together. Mr Masci died in 2012. Mr and Mrs Masci decided to draft a will together in 2006, on a pre-printed form. In the document, they appointed Mr Masci’s son and Mrs Masci’s daughter as co-executors of the will. The will was short and not very clear, but appeared to give each other the right to reside in the family home until both had died, whereupon the proceeds of the home and other assets would be equally split between the couple’s children.
Problem 1.
Mr Masci’s son, Graham and Mrs Masci’s daughter, Susan, named co-executors of the will, could not agree on how to administer the will. Graham asked for Susan to be removed as executor from the will as part of his application, while Susan asked that they both be removed as executors and a solicitor be appointed as administrator instead.
Problem 2.
Because the will was homemade and it’s intentions not clear, the court was required to make sense of it in order to grant probate. Justice Dalton remarked that: “the drafting of the will in this case is so poor that I wondered whether or not I could sensibly give any effect to it.”
Problem 3.
Was the will executed together by the Masci’s considered a mutual will? A mutual will is when a couple make a certain will on the understanding and expectation that the last person to die will not change their will. In most instances, the agreement is that the assets will pass to the surviving spouse first, then to the beneficiaries. Mutual wills become most tricky when, as in this case, there are children from previous relationships. If the court finds that it was a mutual will, the beneficiaries are afforded some legal protections in the event that the surviving spouse does not honour the mutual will.
The Court’s Findings
Problem 1.
Justice Dalton agreed that it was impossible for Graham and Susan to continue as co-executors and considered whether to remove both as executors and appoint a solicitor to take over the task. However Justice Dalton remarks: “a paid administrator would be a significant imposition on what will remain of the funds of the estate…..I am conscious that even if an unpaid executor is left in charge….they will need to consult lawyers because of the complexity of the problems still to be dealt with, and that legal costs will therefore necessarily be incurred in any event.” Justice Dalton eventually appointed Graham as sole executor. However, the message here is clear: the inability of the executors to agree has and will continue to cost the estate dearly.
Problem 2.
Justice Dalton was required to interpret the will, given it was unclear, in order to grant probate. He agreed to grant probate, after considering the intentions of the will-makers. However there was a great deal of argument over the wording contained in the will. The executors could not agree on what the term “stay in the house” or “handle all monies” meant or how it should be handled. It’s imperative to understand at this point that it is prohibitively expensive to have the court determine what these terms mean, rather than having a specialist succession lawyer draw up wills which clearly deal with these matters.
Problem 3.
Justice Dalton had to answer the question as to whether the will could be construed as a mutual will. The question of whether it is or isn’t revolves around whether the will-makers agreed not to revoke their wills without giving the other notice. There does not have to be an express declaration of this, but is implied in the making of a joint will. Justice Dalton found this to be the case and this decision gives some protection to Mr Masci’s beneficiaries. Mrs Masci is conscience-bound by the mutual will to ensure that Mr Masci’s beneficiaries receive an inheritance as he intended.
What can we learn from this case?
· Homemade wills invariably do not save money. Whilst in the short term, it is tempting not to spend money on receiving expert advice, in the long term, estate litigation is much more expensive. In this case, to such an extent that even the judge urged the parties to reach agreement or “none of them will have any of the benefit which their parents intended for them.”
· Homemade wills are often unclear or lead to confusion. No matter the purity of the will-maker’s intentions, it may be difficult to interpret what they mean after they've passed away. This is especially true when no legal advice has been sought by the will-maker, and they haven’t known what they should cover in the document. In this case, while Mr & Mrs Masci probably thought the term “all monies” was clear, the co-executors couldn't agree on its meaning to the extent that they required the court to decide the meaning. This is a very expensive exercise.
· Blended families bring a level of complexity to estate planning. If ever there was a situation that requires careful thought and planning, it’s a blended family situation. A specialist succession lawyer can provide the protection of beneficiaries and flexibility required to cover many of the possibilities that could arise.This situation is very complex and requires specialist advice from a lawyer experienced in Succession Law.
Bryan Mitchell, Accredited Specialist in Succession Law (wills and estates including estate planning). Mitchells Solicitors, Brisbane.
Will Your Spouse Do the Right Thing?
I know she’ll do the right thing....
Thelma and Walter Bauer were married for twenty five years and each had children from previous relationships. Walter Bauer died in 1992 and Thelma died in 2007. When Walter died, he left everything to his wife. After he died, Thelma did two more wills, and when she died, she left everything to her children. Isn’t this normal?
Walter’s children from his first marriage didn’t think so and challenged the will. The Queensland Supreme Court held that the couple had entered into an agreement for mutual wills; a term of which was that the estate of the last to die would flow equally between Thelma and Walter’s children. The Court of Appeal upheld the decision.
What is a mutual will?
An agreement for mutual wills is essentially that a couple make certain wills on the understanding and expectation that the last spouse to die will not change his or her will. The agreement will in most instances leave the assets they own to each other in the first instance, and then to any dependents.
Usually this agreement is entered into without benefit of legal advice, and is done so because the couple want to make sure the other is comfortable as the surviving spouse. This agreement is often not made in writing, but something agreed upon at the kitchen table and which sounds reasonable at the time. It’s possible that nobody else knows about the existence of this agreement.
That sounds good in theory but....
Mutual wills most often become tricky when there are blended relationships, and the spouses have children from previous marriages. There is no obligation for the surviving spouse to keep the agreement and will often leave the estate to their own children, cutting off their spouse’s children completely.
Litigation in this specific area of succession law arises because the children of the first spouse to die have received nothing under the will of their step-parent. As in the case of the Bauer’s, the court found that the estate should have been split equally between both groups of children.
Litigation can usually only occur when there is some evidence that such an agreement took place, often because the children were present at the kitchen table when the agreement was reached.
In the case of the Bauer’s, the children had been told by Walter and Thelma that the assets they owned would be split equally among the five children. This constituted verbal evidence and assisted the court to make judgement in favour of the plaintiffs, Walter’s children.
When should mutual wills be used?
Bryan Mitchell says only as a last resort, because a) there is no other option, or b) the clients insist upon it (whether we like it or not). They are most often entered into by spouses with children from previous relationships who are concerned that their own children will not receive their due inheritance. There are other ways of ameliorating this concern.
Other solutions exist that include:
- Direct provision to children from a previous relationship, rather than giving it all to the spouse
- Flexible life interest/right to reside agreements
- Using a discretionary trust
No matter which vehicle is used, Bryan Mitchell suggests that ensuring your wishes are completed in writing under the advice of a wills and trusts specialist is vastly superior to a verbal kitchen-table agreement that may or may not be upheld once you pass away.
If a client continues to insist upon mutual wills, they should be:
- In writing
- Drafted thoughtfully
As always, it’s important to remember that good estate planning consists of more than a will and that often there are factors which may impact your estate of which you aren’t aware.
Bryan Mitchell, Accredited Specialist in Succession Law (wills and estates including estate planning). Mitchells Solicitors, Brisbane.
Who Needs a Trust?
Who needs a trust and why?
What does a trust have to do with a will?
What is a discretionary testamentary trust?
A discretionary testamentary trust is a type of trust that is created under a will and comes into existence upon the death of the will maker. There are advantages to establishing a trust like this, which include tax minimisation, protection of assets and flexibility.
A discretionary testamentary trust must have a trustee: a person/s or company who will be charge of the trust.
The trust will own assets under the will, and assets can include cash, real estate, shares, cars, boats, artworks or any other assets.
The trust will have beneficiaries – those people who may benefit under the trust; usually family members and can be other persons or entities.
The trustee has discretion to distribute income or capital from time to time in varying proportions, amounts and categories to the beneficiaries of the trust. The trustee has the discretion to make distributions so any appointed trustees should be reliable and trustworthy.
Advantages of a Discretionary Testamentary Trust
Often one of the biggest assets owned by someone is their life insurance policy. When owned by the trust (by being paid out into the estate of the person whose life was insured), the income from the proceeds of such life insurance policy can be split among children and others rather than one person paying all the tax on it (at much higher rates). This is because the recipient of the income pays the tax, rather than the trust. From a tax point of view, sharing the taxation burden makes sense. Tax is still paid; just paid at much lower rates.
A discretionary testamentary trust can protect assets is from bankruptcy. Because the owner of the assets is the trust, they cannot be liquidated if one of the beneficiaries goes through a bankruptcy.
There could also be protection if a beneficiary enters a relationship that ultimately fails. If there is a property settlement, it is less likely that the assets of the trust will form part of the marital pool of assets that will be divided.
There are also advantages in the area of capital gains tax. The sale of an ordinary asset will trigger a capital gains tax event. But if the asset is held in a trust, it can quite often be moved to a beneficiary without triggering a capital gains tax event.
Overall discretionary testamentary trusts offer more flexibility, especially when catering for a myriad of ‘what-if’ events.
Case Study
John and Judy establish a discretionary testamentary trust which comes into effect upon their deaths. They have a son, Peter, who will be the trustee of the trust. Beneficiaries of the trust include Peter, his wife Sarah, their children and grandchildren.
The assets in the trust include both life insurance proceeds, the family home, an investment property and some cash. When Peter assumes control of the trust after the death of his parents, he is able to split income from the life insurance proceeds to his children and grandchildren at low tax rates.
Later, he will also be able to transfer the family home and investment home to his children (if he chooses to do that) without paying capital gains tax on the asset transfers.
Should he, his children or grandchildren face bankruptcy proceedings, the assets held by the trust should not be liquidated, offering protection for future generations.
Should Peter and Sarah divorce, there is a better chance that the assets in the trust will be protected from the property settlement.
The benefits of a discretionary testamentary trust will only come into effect upon your death, but it is worth considering to protect assets for future generations. You should seek specialist advice when considering establishing a trust.
Bryan Mitchell is an Accredited Specialist in succession law (wills and estates including estate planning). Mitchells Solicitors has a second, brand new location. You can visit us by appointment only at: Riverside Centre Level 18, 123 Eagle Street, Brisbane.
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.
2014 © Kliger Partners Lawyers
280 Queen Street, Melbourne Victoria 3000 Australia
T +61 3 8600 8888 www.kligers.com.au
Steve's Story
Jeff Hawks, a Real Estate Agent from the USA, tells an unfortunate story reiterating the importance of forward planning regarding your legacy and estate. Saving your spouse and family additional grief at the time they least need it.