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LexisNexis Professional Development JUDY HAYWARD – WILL DRAFTING 2011

Will Drafting 2011 - QLD

Judy Hayward, Principal, Hayward & Co. Lawyers

Navigating wills and family considerations

“Solicitors drafting wills owe a duty, not only to their client, but also to intended beneficiaries. This duty arises from the undertaking to ensure the Will maker’s intention of benefiting a beneficiary is realised.”1

Will drafting is a complex area of law, but a will is only one element of a proper estate plan. If a will is challenged all of the estate planning strategies which rely on the will may be hindered or fall apart. A will should always be drafted with a view of limiting the potential for claims or challenges post-death. The main basis on which a will or estate may be challenged include: 1. Lack of testamentary capacity; 2. Undue influence; 3. Lack of knowledge or approval; 4. Invalidity of will; 5. Family provision application; 6. Equitable compensation. This paper will focus on providing advice to will makers faced with the probability of a family provision application against their estate upon their death. The Succession Act 1981 (Qld) enables “eligible persons” to make an application for provision from a deceased person’s estate where no provision or inadequate provision has been made for the claimant. There is no strategy that will stop an eligible person from making a family provision claim. There are strategies that will make it more difficult for an eligible person to succeed in their claim. The complexity of will drafting and estate planning arises where a will maker has complicated asset structures, complex family structures or both. This paper will look at will drafting issues for complex family structures.

1 White v Jones [1995] 2 AC 207; Hill v van Erp [1997] HCA 9.

LexisNexis Professional Development Will Drafting 2011 – Judy Hayward Paper

1 What is a family? According to Australian Bureau of Statistics in 20102 there were some 2,336,000 families in Australia with children under the age of 15 years. In 2009 there were 120,100 registered marriages of which 70.6% were first marriages for both spouses. There were 49,400 divorces recorded and 49.1% of those divorces involved children. Locally, in 2009, there were 26,300 marriages recorded in Queensland of which 67.6% were first time marriages for both spouses. Queensland recorded 11,200 divorces of which 51.3% involved children. Approximately 30% of marriages are not first time marriages for both spouses; that is, at least one spouse has been married previously. Generally “blended family” is the term used to describe a family unit where at least one spouse has been married previously and has children from that prior marriage. The term “blended family” is a generalisation as there are wide and varied, and some quite unique, permutations. There is no legal definition of “blended family”. A blended family can be much more than simply two traditional family units blending together. A blended family may include de facto couples, same-sex couples, and children from extended family members, foster children, parents and siblings with disabilities. Blended families are also commonly referred to as non-traditional families or modern families. These modern families pose certain challenges to will drafters. Today we will look at some issues to consider and strategies to use when advising modern families. 2 Eligible applicants When taking instructions for a will be alert to the categories of eligible persons for a family provision application. This paper will focus on the current legal position in Queensland.

2 Australian Bureau of Statistics, Australian Social Trends Data Cube – Family and Community Cat no.4102.0 14 December 2010.


Section 41 Succession Act 1981 Estate of deceased person liable for maintenance s41(1) If any person (the deceased person) dies whether testate or intestate and in terms of the will or as a result of the intestacy adequate provision is not made from the estate for the proper maintenance and support of the deceased person’s spouse, child or dependant, the court may, in its discretion, on application by or on behalf of the said spouse, child or dependant, order that such provision as the court thinks fit shall be made out of the estate of the deceased person for such spouse, child or dependant.

If your client owns assets situated outside of Queensland, particularly real estate, you should seek advice from a practitioner in that jurisdiction on the category of eligible applicants in that jurisdiction. In Victoria there is no prescribed category of eligible claimants. A deceased’s foster daughter,3 a deceased’s niece by marriage,4 and a deceased’s adult brother5 have all made successful claims. In New South Wales Section 57 of the Succession Act 2006 (NSW) enables a person who was in a close personal relationship6 with the deceased to make a family provision claim. 2.1 Deceased’s spouse You should be familiar with the definition of spouse in Queensland.

Section 5AA Succession Act 1981 Who is a person’s spouse 5AA(1) Generally, a person’s spouse is the person’s— (a) husband or wife; or (b) de facto partner, as defined in the Acts Interpretation Act

1954 (the AIA), section 32DA. (2) However, a person is a spouse of a deceased person only if, on

the deceased’s death— (a) the person was the deceased’s husband or wife; or (b) the following applied to the person— (i) the person was the deceased’s de facto partner, as

defined in the AIA, section 32DA;

3 Sellers v Hyde [2005] VSC 382. 4 Iwasivska v State Trustees Limited [2005] VSC 323. 5 Marshall v Spillane [2001] VSC 371. 6 Section 3(3) Succession Act 2006 (NSW).


(ii) the person and the deceased had lived together as a couple on a genuine domestic basis within the meaning of the AIA, section 32DA for a continuous period of at least 2 years ending on the deceased’s death; or

(c) for part 4, the person was— (i) a person mentioned in paragraph (a) or (b); or (ii) the deceased’s dependant former husband or wife. (3) Subsection (2) applies— (a) despite the AIA, section 32DA(6) and section 36, definition

spouse; and (b) whether the deceased died testate or intestate. (4) In this section— dependant former husband or wife, of a deceased person,

means a person who— (a) was divorced by or from the deceased at any time, whether

before or after the commencement of this Act; and (b) had not remarried before the deceased’s death; and (c) was on the deceased’s death receiving, or entitled to receive,

maintenance from the deceased.779 Consider the possibility that your client, the will maker, may be married, intending to marry, presently separated, contemplating separating, divorced, preparing for divorce or estranged from his/her spouse with no intention to divorce. Your client may be legally married to one spouse whilst living in a de facto or same-sex relationship with another.8 Note the requirement in Section 5AA(2)(b)(ii) that a person claiming to be a de facto partner must have lived with the deceased together as a couple on a genuine domestic basis for a continuous period of at least 2 years ending on the deceased’s death. The definition of spouse includes the deceased’s dependant former husband or wife. Section 5AA(4) defines “dependant former husband or wife” as a person who was divorced by or from the deceased and had not remarried before the deceased’s death and was receiving, or entitled to receive, maintenance from the deceased. “Receiving, or entitled to receive, maintenance” means actually receiving it or having an entitlement enforceable at law.9 It may be possible for a divorced spouse to apply for provision from a deceased's estate even though a maintenance order has been discharged if there are arrears of maintenance owing.10

7 Maintenance normally terminates on death s82(2) Family Law Act 1975 (Cth). 8 It is possible to have more than one de facto spouse. 9 Fox v Burvill (1955) 29 AJR 414; Re Prakash [1981] Qd R 189; Re Lack [1981] Qd R 112. 10 Re Blood [1983] 1 Qd R 104.


A bigamous wife cannot claim as husband or wife of the deceased11 but may be entitled to claim as a de facto of the deceased. A will maker may be validly married in a foreign jurisdiction, but not validly married according to the laws of Australia. Section 88EA of the Marriage Act 1961 (Cth) provides that a union solemnised in a foreign country between same sex couples is not recognised as a marriage in Australia. 2.2 Children

Section 40 Succession Act 1981 Definitions for pt 4

In this part— child means, in relation to a deceased person, any child, stepchild or adopted

child of that person.

Section 40A Succession Act 1981

Meaning of stepchild (1) A person is a stepchild of a deceased person for this part if— (a) the person is the child of a spouse of the deceased person; and

(b) a relationship of stepchild and step-parent between the person and the deceased person did not stop under subsection (2).

(2) The relationship of stepchild and step-parent stops on the divorce of the deceased person and the stepchild’s parent.

(3) To remove any doubt, it is declared that the relationship of stepchild and step-parent does not stop merely because—

(a) the stepchild’s parent died before the deceased person, if the deceased person’s marriage to the parent subsisted when the parent died; or

(b) the deceased person remarried after the death of the stepchild’s parent, if the deceased person’s marriage to the parent subsisted when the parent died.

Section 5A Succession Act 1981

Reference to child or issue of a person

A reference in this Act to a child or issue of any person includes a child or issue en ventre sa mere at the death, provided such child or issue is born alive and remains alive for a period of 30 days.

The Status of Children Act 1978 (Qld) deals with the issue of illegitimacy. An illegitimate child is permitted to commence an application for provision from a

11 Re Milanovic [1973] Qd R 205.


deceased's estate but, in accordance with the provisions of the Status of Children Act 1978 (Qld) is required to obtain a declaration of paternity.12 An adopted child has no right to claim provision from the estate of his or her natural parent. An adopted child has exactly the same rights, in relation to the estates of his or her adoptive parents, as a natural child.13 The effect of section 40A of the Succession Act 1981 (Qld) is that the relationship of step-child and step-parent is only terminated by the divorce of the parent and step-parent. The relationship of step-child does not end on the death of the child's parent, provided the marriage between the child's parent and the step-parent subsisted when the parent died, whether or not the step-parent remarries later.14 There are no equivalent provisions for the “step” children of a de facto relationship. 2.3 Dependant

Section 40 Succession Act 1981 Definitions for pt 4

In this part— dependant means, in relation to a deceased person, any person who was

being wholly or substantially maintained or supported (otherwise than for full valuable consideration) by that deceased person at the time of the person’s death being—

(a) a parent of that deceased person; or (b) the parent of a surviving child under the age of 18 years of that

deceased person; or (c) a person under the age of 18 years. Section 40(c) of the Succession Act 1981 enables a foster child, a “step” child from a de facto relationship and a former step-child to make an application. Section 41(1) of the Succession Act 1981 requires a dependent to satisfy the court of the need for the continuance of the deceased's maintenance or support. 2.4 Other factors It is important to bear in mind that eligibility to make a claim does not guarantee success. There are many factors that the court consider in assessing whether an eligible person is entitled to provision or further provision, they include:

12 See Section 8 & 10 Status of Children Act 1978 (Qld). 13 Re Theaker [1955] QWN 51. 14 Re O’Malley [1981] Qd R 202. For the position prior to Section 40A Succession Act 1981 (Qld) see Re Burt [1988] 1 Qd R 23; [1989] 1 Qd R 638.


1. Moral claim of the applicant; 2. Contribution by the applicant to the deceased’s estate; 3. The relationship between the applicant and the deceased; 4. The age, gender and health of the applicant; 5. The deceased’s influence on the applicant’s lifestyle; 6. The of the applicant’s conduct in reducing a moral claim; 7. The means and financial responsibilities of the applicant; 8. The size of the estate; and 9. Any disentitling conduct on the part of the applicant.15 2.5 Contracting out of the legislation If a will maker includes a provision in his or her will to the effect that any gift to a beneficiary will be forfeited if that beneficiary contests the estate, that provision will be invalid as it is contrary to public policy. The beneficiary will still be entitled to make a family provision claim. In New South Wales it is possible for a person to release the right to claim on a deceased's estate during the lifetime of the deceased and with the Court’s approval. 3 Taking instructions When you take instructions for a will you should clearly identify all possible claimants. Your client must assist you in assessing the risk of an eligible person making a claim against his or her estate. Those instructions should encompass the will maker’s current and past personal relationships as well as his or her assets and liabilities. If more detailed instructions are obtained generally a more comprehensive advice and strategy will be formulated. Ø It is rarely sufficient to simply ask and record the names and ages of the will

maker’s children. Enquiries should also be made as to whether those children are of the will maker’s current relationship or a prior relationship. It is possible for a child to be born outside of a relationship and the only connection being bare paternity or maternity.

Ø You should ascertain whether your client is providing any financial or moral

support to those children. Is it quite common for children in their early 20’s to continue to reside at home for nominal rent or no rent, this has the potential of exposing the will maker’s estate to future claims of dependency.

Ø The fact that a will maker is not providing financial or moral support to an

eligible person will not prevent that person from making a successful claim.

15 Singer v Berghouse (1994) 1981 CLR 201; Vigolo v Bostin (2005) 221 CLR 191.


There are a number of reported decisions where a will maker had not provided financial or moral support but perhaps should have.16

Ø You should also obtain details of each child’s occupation and personal

relationship status. Those in “at risk” professions may influence your advice and the strategy that you propose.

Ø You should seek instructions as to whether there is any other person who is

financially or morally dependant on the deceased. The will maker’s extended family may be dependent or co-dependent. Whilst some of these people may not be eligible persons for the purpose of a family provision application, they may be inter-dependent and eligible to claim superannuation death benefits.

Once you obtain a comprehensive statement of assets and liabilities you should advise your client on the issues concerning succession to those assets. 3.1 Recognition of undue influence and conflicts Most couples consider the making of a will to be a joint exercise. They will often attend your office together to provide instructions for their will. It is possible the issues you raise with them when taking instructions for their wills may raise concerns that they have not previously discussed together. It is important that the clients have the opportunity to discuss, in private, the arrangements they wish to make. You should ensure both will makers approve the instructions you receive. You should ensure that each will maker realises that they are entitled to obtain separate advice in relation to the issues raised and/or that they may wish to leave wills with different provisions. This is particularly important when advising modern families. 4 Reducing the likelihood of success of a claim If a deceased dies in Queensland leaving no estate the Courts are unable to make an order for provision, or further provision, as there are no assets available to meet an Order. Your client may wish to prioritise assets to be safeguarded so that the most serious assets at risk are identified and, if possible, quarantined from a claim. In smaller estates what amounts to proper provision must be adjusted to the circumstances.17 Justice McMeekin in Manly v The Public Trustee of Qld & Anor18 said:

16 Welsh v Mulcock [1924] NZLR 673; Coates v NTE&A (1956) 95 CLR 494. 17 Allen v Manchester (1922) NZLR 218 at 221-222 per Salmond J. 18 [2007] QSC 388 at 114 and on appeal Manly v The Public Trustee of Qld & Anor [2008] QCA 198.


“…there is little point to litigation in these modest estates. The executor is entitled and, save perhaps in a clear case, duty-bound to uphold the Will. Parties and their legal advisors would be well advised to bear this firmly in mind before embarking on litigation in such circumstances.”

4.1 Inter vivos transactions The Queensland courts have no jurisdiction to roll back gifts or property disposed of by the deceased during his or her lifetime even if the gift or disposal took place with the intention of defeating a prospective claim. There are no notional estate provisions in Queensland. If you are advising a client on inter vivos gifting take note of the recent Supreme Court decision of Rutledge v Sheridan19 where it was held that a document stating "I wish to transfer" the whole of the balance of an investment account was a statement of wishes, not a gift. There were certain acts that needed to be completed before the gift could take effect. A donatio mortis causa may be recalled for the purposes of meeting a claim against an estate.20 Factors that may influence a client in deciding whether to make an inter vivos gift or disposal include: 1. Capital gains tax; 2. Transfer duty; 3. Centrelink deprivation rules; 4. Loss of control of assets; 5. Loss of income from asset; 6. Loss of capacity – conflict of interest transaction vis-à-vis attorney. 4.2 Joint tenancies As part of the will making process you should generally conduct a title search of all real property to verify your client’s instructions as to the form of co-ownership - joint tenants or tenants in common. A very simple strategy for avoiding a family provision claim is for the will maker to own assets as joint tenant with another. In a traditional family model it is usually the husband and wife who own property and bank accounts as joint tenants. In modern families it is not unusual for will makers to own a bank account as joint tenant with a child, grand-child or de facto spouse in order to defeat an estate claim.

19 [2010] QSC 257. 20 Section 41(12) Succession Act 1981 (Qld).


Naturally the client must ensure adequate safeguards are in place for their protection e.g. consider the necessity for both signatories to any bank account sign for withdrawals. Clients should be warned of the risks of co-ownership, particularly if a co-owner experiences financial difficulties. The relationship between the will maker and the proposed joint tenant should be thoroughly canvassed and the joint tenant should be referred for independent legal advice. Some of the issues that the parties ought to consider include: (a) If the asset is real estate, is there is a mortgage debt over the property? Will

the will maker provide an indemnity in respect of each co-owner against liability caused by any failure to fulfill his or her obligations under their mortgage? Will the co-owners be liable for the mortgage debt as part of the arrangement?

(b) If the property generates an income (e.g. share portfolio, interest on term

deposit or rent receipts) does the will maker propose to share this income with the co-owner(s)? If so, in what proportion? What arrangements will be made for payment of operating expenses?

(c) How will decisions concerning the property be made in the future? Is it at the

will maker’s discretion as to when and if a property should be sold? If your estate planning strategy includes the recommendation to transfer assets to be held by the will maker and another/others as joint tenants you should also consider: (a) The effect of capital gains tax, if any, on the proposed transaction; (b) The effect of transfer duty; (c) Registration of title fees; (d) Centrelink deprivation rules. If the joint tenant pre-deceases the will maker, the asset will once again form part of the will maker’s estate. The will maker should be advised in writing of the risk of this possibility, and cautioned of the future need to re-establish co-ownership with another if the first co-owner predeceases in order to achieve the will maker’s goal of defeating a family provision application. The costs of creating a joint tenancy (and subsequent joint tenancies should a co-owner die) may mean that this strategy is not affordable. If the co-owner dies and the will maker subsequently loses capacity it is unlikely, in the absence of express authority, that his or her attorney appointed by enduring power of attorney will be able to create a joint tenancy with another.21

21 See Sections 73 & 88 Powers of Attorney Act 1998 (Qld).


The will maker should be advised to provide alternate instructions for the disposal of the asset in his or her will. 4.3 Superannuation death benefits Superannuation death benefits are often a large proportion of the will maker’s overall wealth. Careful consideration should be given to the potential beneficiaries of superannuation death benefits. The Superannuation Industry Supervision Act 1993 (Cth) provides that a trustee of a superannuation fund must only pay superannuation death benefits to a member’s dependant or legal personal representative. Dependants for superannuation purposes include:22 (a) A spouse (including a de facto spouse and same sex partner); (b) A child (natural, adopted and step-child); or (c) An interdependent person. A person is an “interdependent person” if they had a close personal relationship with the deceased and they lived together and one or each of them provided financial and/or domestic support and personal care to the other.23 The category of beneficiaries for superannuation death benefits could include same-sex partners or de facto partners (regardless of the duration of the relationship), children of de facto partners or same sex partners, dependent parents, adult children or siblings. Excluded persons include friends, flat mates, paid carers and employees. Superannuation death benefits do not form part of a member’s deceased estate unless the benefits are paid to the member’s legal personal representative. In the absence of a binding death benefit nomination or a death benefit agreement, the Trustees of a superannuation fund have a discretion to distribute a deceased member’s superannuation death benefits to any one or more of the deceased member’s dependants irrespective of any general written nomination of beneficiary by the deceased member. Some superannuation funds do not accept binding death benefit nominations or death benefit agreements. You may consider referring your client for financial advice on the prospects of rolling over their superannuation account to another superannuation fund that does offer binding death benefit nominations. This is not always a viable option for all clients.

22 See Section 10 Superannuation Industry (Supervision) Act 1993. 23 See Regulation 1.04AAA of the Superannuation Industry (Supervision) Regulations 1994 (Cth).


If your client elects to sign a binding death benefit nomination you should advise that the binding death benefit nomination: (a) is only valid if signed in accordance with the Superannuation Industry

(Supervision) Regulations 1994 (Cth);24 (b) will lapse after a period of three (3) years unless renewed within that three (3)

year period; (c) will enable your client to divide the superannuation death benefits amongst a

number of “dependants” (d) may enable your client to specify whether the death benefits should be paid by

way of lump sum or pension; (e) may not include the ability to prescribe alternate beneficiaries in the event of

the death of a preferred beneficiary. You should also advise your client, or refer your client to their financial adviser, for advice on the tax consequences of payment of the superannuation death benefits by way of lump sum or pension to the proposed beneficiaries. It is beyond the scope of this paper to canvass issues of taxation of death benefits but briefly, how the benefit is taxed depends on whether or not the recipient is a tax dependant25 and whether there are untaxed elements in the fund. A death benefit lump sum paid to a tax dependant is tax free if there are no untaxed elements. If the lump sum death benefit is paid to a non-dependant, the taxable component will be taxed at 15% on the element taxed in the fund, and at 30% upon the element untaxed in the fund. The untaxed element can arise from insurance proceeds. The tax free component has no tax. Finally, you should review the client’s enduring power of attorney. Do the attorneys have authority to make, renew or re-fresh a binding death benefit nomination? You should also consider who are the client’s attorneys. If the client’s attorneys are the same people as, or related to, the proposed superannuation death benefit beneficiaries the attorney may not be able to make, renew or re-fresh a binding death benefit nomination in their own favour, or in family of a family relation, due to the prohibition on attorneys entering into conflict of interest transactions.26 The enduring power of attorney may need to specifically authorise this type of transaction. If your clients are members (and generally trustees or shareholders of a corporate trustee) of a self managed superannuation fund careful consideration is required of

24 See Regulation 6.17A. 25 section 302-195 Income Tax Assessment Act 1997. 26 Section 73 Powers of Attorney Act 1998 (Qld).


the provisions in the superannuation trust fund deed concerning the appointment of a replacement trustee in the event of death or incapacity.27 The superannuation trust deed should also be reviewed to ensure that its provisions enable its members to make a binding death benefit nomination. Self-managed superannuation funds often enable members to nominate alternate beneficiaries in binding death benefit nominations. Some self-managed superannuation funds also enable members to make non-lapsing superannuation death benefit agreements. You should ensure that your client strictly adheres to the provisions set out in the superannuation trust deed when entering into a death benefit agreement to ensure its validity. When drafting a will it may be prudent to consider including a superannuation adjustment clause to adjust the estate assets amongst the named beneficiaries in the event one or more beneficiaries receives the superannuation death benefits. This clause can assist clients who wish to ensure an equal or proportionate distribution of assets amongst intended beneficiaries. 4.4 Insurance You should request clients provide copies of all insurance policy documents. This does not include insurance provided by superannuation funds. Insurance provided as part of a superannuation fund is, upon the member’s death or incapacity, payable to the trustees of the superannuation fund. The member, or the member’s dependants, will need to establish entitlement to the proceeds of the insurance policies in accordance with the terms of the superannuation fund trust deed. Life insurance can be an excellent way to secure provision for intended beneficiaries by nominating the intended beneficiaries in the policy document. Policy ownership is another strategy to secure provision for intended beneficiaries. If a life insurance policy is owned jointly, the surviving owner will receive the insurance on the death of the life insured. A disadvantage of a beneficiary receiving life insurance proceeds directly is that all future income earned on the investment of those funds will not attract the same preferential tax treatment as funds paid to an estate and then held upon a testamentary trust. Another disadvantage to direct nomination of life insurance beneficiaries arises if the beneficiary is under a disability. Nomination of infant children from a prior marriage

27 Katz v Grossman [2005] NSWSC 934.


may result in the insurance proceeds being paid to the client’s former spouse as trustee for those children. 4.5 Family trusts Assets held within an inter vivos trust are not directly disposed of by a will maker’s will. The assets may only be dealt with by the trustee in accordance with the terms of the trust deed.

4.5.1.1 Who will control the trust? You should review the trust deed to determine who is the trustee and who will become the replacement trustee in the event of death or incapacity. The trust deed may include provisions concerning succession to the role of trustee or it may nominate an appointor/ principal or guardian of the trust who is enlisted to appoint a new trustee upon death or incapacity of the acting trustee. You should also review the trust deed provisions concerning succession to the role of appointor/ principal or guardian of the trust in the event of death or incapacity of the acting appointor/ principal or guardian. The trust deed should specify how a replacement trustee or appointor might be appointed. It may allow an appointment by will, by deed or simply by nomination in writing. Some provisions are only triggered by the death of the trustee or appointor, not loss of capacity. The provisions of the trust deed concerning the appointment of a replacement trustee or appointor should be strictly adhered to. You should carefully consider whether it is appropriate to nominate a replacement trustee or appointor in a will. If there is a challenge to the validity of the will, the appointment of the replacement trustee or appointor may also be called into question. Part of the estate planning strategy you devise may include amending the trust deed to include the ability to nominate a replacement appointor or trustee by deed, perhaps also including the ability to make a contingent appointment. Your client may then sign a deed of retirement and appointment of a new trustee or appointor. If the trustee is a corporation, you will need to consider who owns the shares in that company. If the will maker owns those shares personally they will form part of his or her estate assets. Most company constitutions provide that the executor or legal personal representative of a shareholder will be recognised in lieu of the shareholder upon death or incapacity.


When devising an estate plan, carefully consider what effects may follow from the executor acting as shareholder of the trustee company.

4.5.1.2 Definitions When reviewing the trust deed you should also pay particular attention to the definitions of “spouse" and “child". It is not unusual to see provision for former or future spouses of a beneficiary as potential beneficiaries of a discretionary trust. Consider the effect of a will maker appointing a child from his or her first marriage to the role of trustee of a discretionary family trust of which his or her former spouse is also a potential beneficiary. Some couples may instruct you to amend the definition of spouse so that: (a) upon the death of the first spouse, any future spouse of the surviving spouse

may not benefit from the trust assets; and (b) any previous spouses may no longer benefit from the trust assets. You should take care when amending trust deeds that you do not trigger a resettlement of the trust. This may then trigger a stamp duty and/or capital gains tax liability. 4.6 Companies Company assets do not form part of a deceased’s estate, only the deceased’s shares pass to the deceased’s estate. Shares owned as joint tenant will pass to the surviving joint tenant(s). You should review the constitution to ensure there are no restrictions on the transmission of shares to intended beneficiaries. You should ascertain whether the will maker has provided personal guarantees to secure the debts of the company, if that has occurred, the company debts may become part of the estate’s liabilities and might affect the estate plan. The will maker should review the amount of issued shares in the company and the intended beneficiary/s. If the will maker holds one share and intends to transfer this share upon his or her death to three children, those children will hold that one share as co-owners. Only the first named child will have voting rights. 4.7 Mutual will contracts Mutual will agreements do not prevent family provision applications. Mutual will contracts are made to record an agreement reached between two will makers that neither party will change their wills (or certain provisions in their wills) during their respective lifetimes without the prior approval of the other party. After the death of the first party, the survivor is bound by the mutual wills contract.


An agreement may be implied from the circumstances of making the will.28 The Court has recently considered the doctrine of mutual wills in the following terms: (a) Two will makers must agree to make wills in particular terms; (b) Those will makers must agree that those wills (or terms contained in the wills)

are irrevocable; (c) Substantially similar wills are not mutual wills unless there is an agreement that

they may not be revoked; (d) Merely making wills simultaneously and in similar terms is not enough, by itself,

to establish a mutual wills agreement.29 The surviving will maker is not permitted to make substantial gifts during his or her lifetime, or deal with the property the subject of the agreement, with the intention of defeating the obligations imposed by the mutual wills agreement.30 The terms of the mutual wills agreement should be carefully documented. Mutual wills limit the testamentary freedom of the surviving party and should be used with caution. As mutual wills may be implied by the conduct of the parties it is important that the effect of mutual wills be raised with all will makers, not just modern families. The instructions of the will maker concerning the issue of mutual wills should be carefully documented, if the parties did not intend mutual wills, the file note recording those instructions will be important evidence if one party later alleges the existence of a mutual wills agreement. You may also wish to adopt the practice of recording in the will the intention of the parties not to create mutual wills when preparing “mirror” wills or wills with substantially the same provisions. 4.8 Binding financial agreements De facto couples and spouses (or former spouses) may make a binding financial agreement setting out each parties’ rights and obligations as to property division in the event of a relationship breakdown.31 Binding financial agreements bind the respective estates of the parties32 but do not protect estates from family provision claims. Justice Keane in Hills v Chalk & Ors (as executors of the estate of Chalk (deceased)) stated:33 28 Hussey & Anor v Bauer & Ors [2011] QCA 91. 29 Hussey & Anor v Bauer & Ors [2011] QCA 91 at [29]. 30 Fazar v Cosentino [2010] WASC 40 Le Miere J at [32]-[47]. 31 Part VIIIA and Part VIIIAB Family Law Act 1975 (Cth). 32 Section 90H Family Law Act 1975 (Cth). 33 [2008] QCA 159 at [44].


“In my respectful opinion, the learned primary judge erred in failing to appreciate that the pre-nuptial agreement made by the parties, though not of itself directly decisive against Mr Hills' claim, is of significance to the assessment to be made by the court of Mr Hills' application for further provision from the estate of the Testatrix. The mutually agreed intentions and expectations of the Testatrix and Mr Hills expressed in the pre-nuptial agreement in relation to their adult children, and their acknowledgment that each should not seek to defeat the intentions of the other in that regard, was a consideration which should be regarded by the court as illuminating the totality of their relationship, and as suggesting that the provision made for Mr Hills by the Testatrix was adequate for his proper maintenance and support within the meaning of the Act.”

5 Provisions for wills of modern families The will drafting process often does not commence until the estate planning strategy has been finalised. 5.1 Executors and Trustees All will makers should pay a particular attention to the appointment of executors and trustees of their will, and alternate executors and trustees In modern families the general practice of each spouse appointing each other as executor may not be satisfactory. Modern families may find the task of selecting an appropriate executor quite daunting. The role of an executor is challenging, even more so if dealing with conflict within the family, potential conflicts and disappointed eligible persons. When drafting an executorship clause it is a good idea to take specific instructions on what should happen if: (a) The intended executor fails to survive the Will maker; (b) The intended executor survives the Will maker but dies during the

administration process;34 (c) The intended executor renounces executorship; (d) The intended executor loses capacity.35 Some of the issues that should be discussed are: (a) It is not necessary to appoint a relative, solicitor or accountant. The executor

should be someone who is completely reliable and trustworthy. It is not

34 see s47 Succession Act 1981 as to the chain of executorial representation. 35 In Re Wild (Qld SC No 3783/02 unreported 17 July, 2002) White J held that the Registrar could issue a grant of Probate to the attorney of an Executor, subject to the condition that if the Executor regained capacity, the grant to the attorney would be surrendered.


necessary for the executor to have any business background or knowledge of the law. The executor is able to retain professional advisers when necessary.

(b) The will maker should always appoint more than one executor, unless the first

executor is a trustee company. The appointment can be joint or successive. When appointing a trustee company the clients should be made aware of the

likely costs involved.

The appointment of a professional and independent executor and trustee may come at a significant cost to the estate but should be weighed against the costs and delays caused by bickering executors.

(c) The proposed executor should be of such an age or state of health that they

are likely to survive the will maker. Although it is also recommended that the clients appoint a substitute executors in any event.

(d) It is generally preferable to appoint a person as executor who lives in relatively

close proximity to the will maker. This may be important if the executor is called to act quickly in securing the will maker’s assets, attending to business responsibilities or making arrangements for the care of children or animals.

(e) An infant child should generally not be appointed as executor, although the

appointment may be expressed as being contingent on the child attaining the age of 18 years. Substitute executors should be appointed.

(f) Residuary beneficiaries generally have an interest in ensuring the estate is

wound up quickly, for this reason they are often preferred as executors, if suitable. Residuary beneficiaries may not be appropriate executors in instances where they have an interest in remainder. For example if the will maker has created a trust or life interest and those residuary beneficiaries interests are subject to the objects of the trust or life interest.36

(g) The interest the proposed executor may have in the will maker’s family and

business affairs should be considered. The business partner of a will maker may be considered an obvious choice of executor if a business is to be continued after the death of the will maker.

Such appointment should be avoided, if at all practicable, due to the potential

conflict of interest.37 Similarly, a person who co-owns or has an interest in property with the will maker may not be an appropriate person as there is a potential for a conflict of interest.

36 Reid v Reid (unreported Supreme Court of Victoria Beach, J No 5052 of 1996). 37 Vasiljev v Public Trustee [1974] 2 NSWLR 497; Ramage v Waclaw (1988) 12 NSWLR 84.


(h) A testamentary guardian should not be appointed as sole executor/trustee. Consideration should be given to an independent executor being appointed jointly with the guardian.

(i) There is no limit to the number of executors that may be appointed however in

Queensland the Court will not grant probate to more than four executors.38 The order of entitlement is the order in which the executors are named.

Section 15(1) of the Succession Act 1981 provides that gifts in a will in favour of a witness to the will, or a spouse of such person are null and void. This section excludes a charging clause included in a will allowing any person to make a proper charge for acting in or about the administration of the estate. The person entitled to the charge may witness the will without forfeiting the right to charge.39 A charging clause goes further than merely allowing an executor to claim commission in the discretion of the Court. A charging clause allows a professional, appointed as an executor, to charge his/her normal professional fees for the work undertaken as executor. The term “usual professional charges” in the context of a solicitor executor does not mean what the solicitor concerned usually charges but what is usual in the profession generally.40 Solicitors should comply with Rule 10 Legal Profession (Solicitors) Rule 2007 if the solicitor is appointed as executor of a client’s will. 5.2 Testamentary Guardians The Succession Act 1981 (Qld) enables parents and guardians to appoint testamentary guardians of infant children.41 A parent or guardian may appoint any person to be the guardian of their unmarried infant children.42 The will can dictate when the appointment is to be effective. If the will does not specify when the appointment commences then the appointment takes effect on the death of the last surviving parent.43 The Act distinguishes between a child’s long-term care, welfare and development and a child’s daily care. A testamentary guardian has all the powers, rights and responsibilities for making decisions about the long term care, welfare and development of a child, which are ordinarily vested in a guardian.44 38 s48 Succession Act 1981. 39 As to the previous position see Re Barber (1886) 34 Ch D 77; Re Oberg [1952] QWN 38. 40 Sacks v Gridiger (1990) 22 NSWLR 502. 41 See Part 5 A Succession Act 1981. 42 s 61C(1) Succession Act 1981; see s 61A for definitions of “child”, “guardian” and “parent”. 43 s61D(3)(b) Succession Act 1981.


A testamentary guardian only has the right and responsibility to make decisions about a child’s daily care and to have the child’s daily care if: 1. The child has no surviving parent; 2. no one else has daily care authority for the child (whether pursuant to a

decision or order of a federal or state court).45 It is customary for the surviving parent to be the sole guardian.46 The issue of guardianship should be addressed with all clients who have young children. Estranged couples may wish to appoint a testamentary guardian jointly with the surviving parent in order to ensure the child’s long-term care and development is nurtured by both the paternal and maternal sides of the child’s family. This may be particularly important if one parent considers the other unsuitable to act as a sole parent. Even married couples or estranged couples who are acrimonious may wish to appoint a testamentary guardian to assist the surviving parent cope with the child’s long-term care and development. If there is a dispute between the testamentary guardian and the surviving parent the Supreme Court has the power to make orders to resolve the dispute.47 The Family Court also has jurisdiction regarding parental responsibility.48 A well considered appointment of a testamentary guardian in a will would be helpful in Family Court proceedings as an indication of the parent’s choice of guardian in the event of a dispute between family members or friends. Parent should be advised to provide some directions to the testamentary guardians on important issues such as the child’s education, health, discipline, religion, sports, hobbies, pets, family and friends and lifestyle choices. A document embodying a parent’s wishes will provide some comfort to the testamentary guardian, knowing what the deceased parent(s) wishes were regarding the raising of their children. Will makers should consider close family and friends who would have their children’s best interests at heart and would be committed to fulfilling their wishes as to their child’s upbringing. 44 s61E(1) Succession Act 1981. 45 s61E(2) & (3) Succession Act 1981. 46 K. Bourke “Questioning the Capacity of the Standard Will” paper presented at Queensland Law Society Specialist Accreditation Conference 8 April, 2005 p.32. 47 s61H Succession Act 1981. 48 Part VII Div 2 Family Law Act 1975 (Cth) ss61A-61E).


Will makers should also appoint substitute testamentary guardians in the event the first named guardian fails to survive them, becomes unwilling or unable to act or to continue to act as guardian, particularly for very young children.49 Guardians have no automatic right to payment although it is usual for executors or trustees to advance funds for the education, maintenance and advancement in life of an infant to the guardian. This advancement of funds is not intended to benefit the guardian. Instructions should be obtained as to whether a direct payment should be made from the estate to the testamentary guardian or to provide directions and additional powers in the will to the Executors to ensure the guardian does not suffer financial hardship. Clients should always be advised to choose their executor carefully. Where infant children are involved and a testamentary guardian has been appointed, the relationship between the proposed guardian and proposed executors should always be considered. 5.3 Testamentary trusts Testamentary trusts can be useful mechanisms for the protection and transmission of wealth. There a many and varied forms of testamentary trusts and you will only be able to ascertain the most appropriate trust structure after detailed consultations with the will maker. Essentially there are three common forms of testamentary trusts: (a) Discretionary trusts (b) Fixed trusts (c) Hybrid trusts. Trust definitions require careful consideration in modern families. Definitions of “Children” and “Spouse” can be problematic. The will maker should consider how the estate assets would be held on trust: one trust for all proposed beneficiaries; separate trusts for each beneficiary or cascading trusts. The will maker should also appoint an appointor/ principal of each trust. Someone who is entrusted with the appointment and removal of the trustee(s) in the event the trustee loses capacity, dies, encounters a family relationship breakdown, bankruptcy or family feud.

49 C Rowland, “Hutley’s Australian Will Precedents” 6th ed LexisNexis Butterworths 2004 at 102.


5.4 Specific gifts Modern families should be encouraged to include in their will specific gifts of personal items to be bestowed on particular family or friends to avoid disputes arising over entitlement to items which often have a much higher sentimental value than actual value. Clients should not be encouraged to leave lists of personal items unless that list clearly expresses that it is not intended to operate as a testamentary document.50 6 Conclusion If a will maker properly attempts to make adequate provision for all possible claimants the risk of a family provision application is minimised. If the estate is large, it is much easier to provide for more people and testamentary trusts become a viable option. Where the estate is small the will maker must balance the competing claims. By reducing the assets in the estate through use of joint tenancies, superannuation binding death benefit nominations and other estate planning strategies a will maker will have peace of mind knowing that the most valuable assets have been secured for their intended beneficiaries. If a client insists on making little or no provision for a person who meets the criteria of being in eligible applicant then it is essential to obtain a comprehensive statement of reasons for the provision, or lack thereof. A statement or statutory declaration should be obtained and stored with the original will. It is generally not a good idea to include the reasons for exclusion in the will itself. You should warn your client to ensure the contents of the statement are accurate, and not based on speculation. It goes without saying that your comprehensive instructions should properly document the will maker’s intentions and be safely stored for future reference.

50 See Section 18 Succession Act 1981 (Qld).


Table of Contents

NAVIGATING WILLS AND FAMILY CONSIDERATIONS 1

1 WHAT IS A FAMILY? 2

2 ELIGIBLE APPLICANTS 2 2.1 DECEASED’S SPOUSE 3 2.2 CHILDREN 5 2.3 DEPENDANT 6 2.4 OTHER FACTORS 6 2.5 CONTRACTING OUT OF THE LEGISLATION 7

3 TAKING INSTRUCTIONS 7 3.1 RECOGNITION OF UNDUE INFLUENCE AND CONFLICTS 8

4 REDUCING THE LIKELIHOOD OF SUCCESS OF A CLAIM 8 4.1 INTER VIVOS TRANSACTIONS 9 4.2 JOINT TENANCIES 9 4.3 SUPERANNUATION DEATH BENEFITS 11 4.4 INSURANCE 13 4.5 FAMILY TRUSTS 14 4.6 COMPANIES 15 4.7 MUTUAL WILL CONTRACTS 15 4.8 BINDING FINANCIAL AGREEMENTS 16

5 PROVISIONS FOR WILLS OF MODERN FAMILIES 17 5.1 EXECUTORS AND TRUSTEES 17 5.2 TESTAMENTARY GUARDIANS 19 5.3 TESTAMENTARY TRUSTS 21 5.4 SPECIFIC GIFTS 22

6 CONCLUSION 22

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