Some Observations About Wills and Estates

What Happens if You Die Without a Will – Intestacy

If you die without a valid Will your estate is distributed according to the rules set out in section 72G of the Administration and Probate Act. These rules provide that:

  • If you have a spouse but no children, then your entire estate passes to your spouse;
  • If you have children but no spouse, then your estate is distributed evenly amongst your children;
  • If you have a spouse and one or more children, then your spouse will receive the first $100,000 plus half of the balance with your children receiving the balance of the estate in equal shares;
  • If you have neither a spouse nor any children, then your estate passes in the following order of priority:
    • Your grandchildren;
    • Your great grandchildren;
    • Your parents;
    • Your siblings;
    • Your grandparents;
    • Your uncles and aunts;
    • Your nieces and nephews;
    • your cousins.
  • If none of the above survive you, then, and only then, will your estate pass to the Crown.
  • If one of your children passes away before you, their children are entitled to their parent’s share of your estate. This rule also applies to the children of other relatives who pass away before you.

Where there is no valid Will or the deceased’s Will does not validly appoint an executor, then a beneficiary will be entitled to apply for Letters of Administration and to administer the estate. The order of priority to apply for Letters of Administration is the same as that governing the right to inherit the estate.

Purchase of Main Residence by Spouse

If the intestate deceased is survived by a spouse, then that spouse will have the right to purchase the house in which they and the deceased were residing at the date of death. The spouse must exercise this right within 3 months of the grant of Letters of Administration. If the spouse decides not to purchase the property, they are entitled to reside in the property rent free until 3 months after the grant of Letters of Administration.

Spouse vs Domestic Partner

In estates law a spouse means someone who was legally married to the deceased. A domestic partner is the present term to describe someone who would previously have been described as a de facto or putative spouse. A domestic partner is defined as someone who has been living with the deceased in a close personal relationship:

  • continuously for three years;
  • for three of the last four years; or
  • they have a child with the deceased.

A domestic partner may be of the same sex as the deceased and is not required to have been in a sexual relationship with the deceased.

While domestic partners generally have the same rights as spouses (except the right to purchase the main residence), it is important to note that a domestic partner cannot enforce any of their rights without first obtaining an order from the court declaring them to have been the domestic partner of the deceased at the date of death.

The period of uncertainty between the date of death and the date at which the court declares a person to have been the domestic partner of the deceased can cause problems, especially if the other beneficiaries of the deceased are not on good terms with the domestic partner.

Hotchpot and Intestacy

If a beneficiary of an intestate estate (other than a spouse) has received a benefit exceeding $1,000 from the deceased in the 5 years prior to the deceased’s passing, then that benefit is taken to have been given in partial or full satisfaction of that person’s share of the estate. This is commonly referred to as bringing that benefit into hotchpot.

Gifts being brought into hotchpot will not occur with a Will unless there is a clause in the Will to this effect. Such clauses have become more common in recent years due to uncertainty as to whom a superannuation trustee will pay a deceased person’s superannuation benefits.

Unless you have a binding nomination for your superannuation, depending on the type of super fund, the trustee has discretion as to whom amongst your spouse and children will receive your superannuation death benefit. To remedy the uncertainty of this situation, you can add a clause to your Will providing that any superannuation paid to a beneficiary in your estate must be taken into hotchpot and counted against that beneficiary’s share of your estate.

Requirements for a Valid Will

To be valid a Will must comply with the following requirements:

  • it must be signed by the testator or by some other person in the testator’s presence and by the testator’s direction;
  • it must appear, on the face of the will or otherwise, that the testator intended by the signature to give effect to the will;
  • the signature must be made or acknowledged by the testator in the presence of two or more witnesses present at the same time;
  • the witnesses must attest and sign the will (but no form of attestation is necessary); and
  • the signatures of the witnesses must be made or acknowledged in the presence of the testator (but not necessarily in the presence of each other).

In every jurisdiction in Australia except South Australia, a Will is not valid if one or more of the witnesses is a beneficiary of the Will. While it is preferable for the witnesses to not be beneficiaries (or even executors), a South Australian Will will not be invalidated solely because it was witnessed by a beneficiary or executor.

If the Will complies with all of the above requirements, then obtaining a grant of probate should be a reasonably straightforward affair.

Will Kits and other Home Made Wills

One might expect a lawyer to have negative things to say about Will Kits because they take business away from lawyers. To the contrary, Will Kits create a lot more work for lawyers than they take away.

The probate Registry will not make a grant of Probate for a Will Kit Will without an affidavit of due execution. This is a sworn statement from one of the witnesses to the Will confirming that the formalities of making a Will outlined earlier were complied with. This affidavit will add more to the cost of obtaining a grant of probate than the cost of making a Will with a lawyer.

However, the affidavit of due execution is the least of the problems caused by Will kits. Of the Will kits that I come across, I would estimate that approximately half contain errors or ambiguities which need to be resolved.

The most common error that I come across is the use of the word “between”. The original meaning of the word between was to divide in two. Today the meaning is a more general division into any number of parts.

A simple example of this is the phrase commonly used in Will Kits along the lines of:

My estate is to be divided equally between my sons Michael and Tito and my daughter Janet.

This phrase could equally mean either that each of the three beneficiaries receive a third of the estate, or that Michael and Tito receive half and Janet the other half. Frustratingly the cases dealing with this form of words contain no consistent view as to which meaning is correct, with each case decided on its own facts based on surrounding circumstances.

As a best case scenario, a Will Kit Will using this phrase will costs a couple of thousand dollars to resolve by negotiation, with the agreement set out in a deed. In a worst case scenario, this uncertainty could result in litigation costing in excess of $100,000 in combined legal fees.
Other errors which commonly occur, despite the instructions contained in Will Kits, are that either a witness will sign with a different coloured pen or on a different day to the other witness.

While there is no legal requirement that all signatures on a Will use the same pen, if different coloured pens are used and none of the witnesses is a lawyer, the Probate Registry will assume that the witnesses were not present at the same time until proven otherwise.

As an accountant, you should let your clients know that you will not agree to be one of their executors unless the Will is drawn by a lawyer. Apart from the issues with home made Wills outlined above, these Wills will rarely if ever contain a clause allowing the executor to charge for their time. This issue is dealt with in more detail below.

Section 12(2) of the Wills Act

If the Will fails to comply with one or more of the requirements of the Wills Act, then it will often still be possible to obtain a grant of probate with the assistance of section 12(2) of the Wills Act.

If the Court can be satisfied that:

  • a document expresses testamentary intentions of a deceased person; and
  • the deceased person intended the document to constitute his or her Will,

then the document will be admitted to probate as a Will even though it has not been executed with the formalities required by the Wills Act.
The Wills that are most commonly the subject of 12(2) applications are in my experience incorrectly executed Will Kit Wills and handwritten codicils seeking to amend previous Wills.

For some reason which I cannot fathom, it is common for clients who have recently made a Will with a lawyer to decide a couple of weeks later that they wish to make a few changes. Rather than call the lawyer and add the changes to the Will (which many lawyers will not charge for), they decide to make a handwritten codicil (addendum) to the Will.

To make things more interesting for their executors, the testator will generally find a way to make the addition or alteration to their Will sufficiently ambiguous to require a lawyer to become involved to untangle the mess.

Some of the more interesting Wills which have been admitted to probate in South Australia with the aid of section 12(2) include:

  • a will scratched into the wall of a house (in which the section of Wall had to be cut out and brought into the probate registry);
  • a handwritten will prepared by a rather eccentric old Greek lady which was signed but not witnessed. I had the pleasure of acting for one of the parties in that matter in which the Will contained the following somewhat unconventional directions:

    I leave ten thousand dollars to Dimitri Son of Alexandros Tsiangouris “Jim Tsiangouris” to see to it that the house is not sold to the Italians next door because they crucified me with their dishonest acts. The Italians do not have the right to bring and park the customer cars in the driveway. Only their cars and these in their yard and not in the driveway. ………………The house is to be sold to a good family and not to the Italians. ………….. Dimitris and Katarina to look after it until everything has been settled and see to it that the moneys go towards the construction of an orphanage for orphan girls who have no parents within or around Tripoli ………… You will arrange this together with the Arcadian Association and naturally with the supervision of a Solicitor who is to be an honest person and not a swindler. ……. In the orphanage the orphans shall learn crafts and be educated, they should not be given milk or meats or chicken because these are harmful foods. Only salads, carrots, potatoes and generally vegetables, chickpeas, black eyed peas, lentils[2] wheat bread and walnuts, almonds, vegetable pies always with wheaten or corn flour. Teas from thyme, chamomile, marjoram, herbal teas, rosemary all to be taken with honey and not with white sugar. Black olives, oranges and all the fruits in season. The apples to be washed and dried with a cotton napkin, to wipe them well because the apple is the food of the dead and must be washed and then wiped with a napkin. I want my gravestone to be good and magnificent and not cheap in a good part of the Panorama cemetery, and to have on it the photograph, which I keep above the fireplace in the sitting room given that it was the last which I took before I left England in which I am wearing my suit. The children in the orphanage to wear clothes made from wool and cotton and silk not from any other materials because they are harmful and they don’t say it. For this reason the children must not be given milk from animals if they are to be healthy. The body’s main foods are the carrots, white headed cabbage, onion and parsley. … To the other relatives, I leave bugger all! For the way they treated me. I helped them all. My grave to be made out of marble up to 50 thousand dollars. The girls at the orphanage not to be given white sugar but dates, carobs. A white woollen blanket be placed in my grave because sometimes the body reawakens and wants warmth.

Despite the rather eccentric instructions in her Will, the court found that Mrs Tsagouris had testamentary capacity and found the Will to be valid.

This can be taken to a logical extreme. The shortest English language Will ever admitted to probate was a three word Will by an English soldier which said simply “All to Mother”. As the soldier was a Geordie, the Will was found to validly gift the soldier’s entire estate to his wife.

The shortest Will ever admitted to probate (or the German Equivalent) was a German Will which went one word better. The Will simply stated “Zer Mutter” which was held to leave the person’s entire estate to his mother.

Holographic Wills

A holographic will is a Will that has been entirely handwritten and signed by the testator. Normally, a Will must be signed by witnesses attesting to the validity of the testator’s signature and intent, but in many jurisdictions, holographic Wills that have not been witnessed are treated equally to witnessed Wills and need only to meet minimal requirements in order to admitted to probate:

  • There must be evidence that the testator actually created the Will, which can be proved through the use of witnesses, handwriting experts, or other methods;
  • The testator must have had the intellectual capacity to write the Will, although there is a presumption that a testator had such capacity unless there is evidence to the contrary; and
  • The testator must be expressing a wish to direct the distribution of his estate.

Holographic wills are common and are often created in emergency situations, such as when the testator is alone, trapped and near death. Jurisdictions that do not generally recognize unwitnessed holographic Wills will accordingly grant exceptions to members of the armed services who are involved in armed conflicts and sailors at sea, though in both cases the validity of the holographic Will expires at a certain time after it is drafted.

On June 8, 1948 in Saskatchewan, Canada, a farmer named Cecil George Harris who had become trapped under his own tractor carved a Will into the tractor’s fender. It read:

In case I die in this mess I leave all to the wife. Cecil Geo. Harris

The fender was admitted to probate and stood as his Will. The fender is currently on display at the law library of the University of Saskatchewan.

In Australia, holographic Wills are dealt with under section 12(2) of the Wills Act.

Suicide Notes

I have dealt with several holographic Wills. They have all been suicide notes. It appears to be very common for suicide notes to make directions as to the disposal of the suicide’s property. In many cases these wishes will express sufficient testamentary intent (an intent to gift assets after death) to be admitted to probate as a Will.

While there are many different reasons that people take their own lives, the courts have consistently held that the fact that someone is suicidal, is not evidence that they have a mental illness which robs them of the capacity to make a Will.

While it is a delicate matter to ask to see a suicide note, an executor has a duty to present all testamentary documents to the court. Accordingly it is important for an executor to satisfy themselves that there is not a later testamentary instrument in existence which has not been disclosed to the court.

Consequences of Marriage and Divorce

When you marry or re-marry there are a few things that you should know regarding your will.

A will is cancelled by marriage unless it is expressed to be made in contemplation of that marriage.

A will is not cancelled by divorce but the following occurs:

  • an appointment of the former spouse as executor is revoked;
  • any gift to a former spouse is revoked; and
  • the rest of the will is interpreted as if the former spouse died prior to the will maker.

These rules do not apply to de facto spouses/domestic partners.

Should You Act as an Executor?

Functions of an Executor

An executor has a number of functions. In general terms they can be summarised as follows:

  1. bury/cremate the body;
  2. ascertain the assets and liabilities of the deceased;
  3. pay any tax liability which has accrued as at the date of death;
  4. obtain a grant of probate (where required);
  5. bring in the assets of the deceased (including issuing proceedings to recover them where required);
  6. realise sufficient assets to pay for the funeral and other estate expenses;
  7. manage (and insure where necessary) the property of the deceased during administration of the estate;
  8. pay all liabilities all liabilities;
  9. prepare accounts of the period of administration of the estate;
  10. pay pecuniary legacies (cash gifts) and hand over assets specifically bequeathed;
  11. transfer the residue of the estate to the residuary beneficiaries.

What is a Grant of Probate and when is it required?

A grant of Probate (or Letters of Administration where there is no Will) is an order made by the Court which confirms that a particular executor or administrator has the right to administer the estate of a deceased person and specifies either that there is no Will or which Will is the last Will of the deceased.

A grant is required when:

  1. a person (such as a bank or the Land Titles Office) requires an executor to prove title to an estate asset;
  2. a debtor requires proof of a grant before discharging a debt;
  3. where an executor commences litigation on behalf of an estate;
  4. where an executor cannot issue a tenant with a notice to quit without a grant; and
  5. where a beneficiary wishes to issue proceedings pursuant to the Inheritance (Family Provision) Act.

Generally speaking, a grant is required whenever there is real property in the deceased’s name either solely or as a tenant in common or where they had a bank account with a balance greater than the bank’s limit for closing an account without probate (generally $30,000 to $50,000 depending on the bank).

How long will it take to finalise an estate?

Beneficiaries often believe that obtaining probate and winding up an estate should be completed in a matter of weeks, rather than months. However, the courts are unlikely to criticise an executor for any estate that is wound up within a year or less. This is called “the executor’s year”.

If the estate takes more than a year to administer, the executor should have a valid reason for the delay, such as a difficult to realise asset or litigation.

While administration of the estate will generally be complete within a year, this does not mean that an executor’s work will be finished within a year. The Will of a deceased may contain trusts which an executor will need to administer for decades. The most common examples of this are life interests granted to surviving spouses to reside in the marital home and trusts set up for the benefit of minor or disabled children.

While it is possible to appoint a separate person in the Will to be trustee for long term trusts, more often than not, this role falls to the executor.

Foreshadowed Inheritance Claims

The Inheritance (Family Provision) Act is a piece of legislation which makes it possible for spouses, children and grandchildren (amongst others) of a deceased person to seek further provision from the deceased’s estate. These claims may be brought despite the deceased’s Will be entirely valid.

The duty to wind up and distribute an estate in a timely manner is complicated where the executor has knowledge of the possibility of a claim against an estate pursuant to the Inheritance (Family Provision) Act. This knowledge can be actual (as when a beneficiary or their lawyer notifies the executor of an impending claim), or implied, where a spouse or child is excluded from the Will.

In either case, an executor should not distribute an estate until 6 months after the grant of probate, as this is the time limit for bringing such a claim.

If there has been no undertaking given regarding the distribution of the estate, arguably an executor should endeavour to distribute an estate as soon as possible after the expiration of the 6 month time limit. This is because extensions of time to bring a claim will only be granted where the estate has not been distributed.

Once an Inheritance (Family Provision) Act claim has been issued, an executor needs to act impartially. It is not their job (as is commonly thought) to fight to protect the wishes of the testator.

Applications to the Court for Advice and Directions

If an executor is in particular difficulty as to how to act in relation to the estate, they can apply to the court for advice as to how to proceed. The major advantage in doing so, is that if the executor acts in accordance with the advice of the court, they are indemnified and held harmless for the results of their actions.

Examples of when such an application may be brought include:

  1. doubts as to the identity or rights of a beneficiary or a class of beneficiaries;
  2. seeking approval to issue or compromise legal proceedings;
  3. resolving an impasse between two or more executors;
  4. approving the sale method or price of an estate asset.

For estates of less than $500,000, this process has now been made quicker and cheaper. An Application for Directions can be made by virtue of one relatively simple form setting out the relevant facts and the advice sought. This is known as a Judicial Advice Book application.

Payment for Executors

Acting as an executor of an estate is often a time consuming and largely thankless task. Generally if a professional such as a lawyer or an accountant is appointed as an executor, the Will will contain a clause specifying that the executor is entitled to charge for their time at their usual professional rates.

If the executor is a layman or the Will does not contain a charging clause, then the executor is left with four choices. They can:

    1. refuse to accept the appointment as executor (this is known as renouncing the executorship);

act for free;

  1. reach agreement with all beneficiaries as to an appropriate commission and enter into a deed to reflect that agreement; or
  2. apply to the Court seeking the fixing of a commission.

The entitlement of an executor or trustee to claim commission arises under section 70 Administration and Probate Act 1919 and section 91 Trustee Act 1936.

70—Commission may be allowed to executors, administrators or trustees

(1) The Court may allow to any executor, administrator, or trustee, whether of the estate of a deceased person or otherwise, such commission or other remuneration out of the estate or trust property, and either periodically or otherwise, as is just and reasonable.

Strictly, for an executor to be able to claim commission from the estate, the payment must be authorised by the Court. However, if all residuary beneficiaries are over the age of 18 and able to consent, payment can be authorised by the unanimous approval of the residuary beneficiaries.

In order to determine the appropriate amount of commission to be paid to an executor, the circumstances of each case need to be considered. There is no statutory scale provided to calculate the amount of commission payable to individual executors. Trustee companies usually have their own scales for commission which cannot exceed the statutory scales which are generally set out in the relevant trustee companies legislation.

Generally commission has been assessed in terms of a percentage of the capital and income of the estate. However, the way that commission is assessed by the Court has been to consider exactly what work has been attended to by the executors and then to establish an appropriate level of remuneration for the work which is just and reasonable in all the circumstances.

The case of In Re Barr Smith [1920] SASR 380 (“Barr Smith”) set a scale to be used for the assessment of commission which takes into account the nature of the work which is undertaken and the level of difficulty of the work. The scale is as follows:

  1. On special assets got in and realised being cash, monies in the bank, bank treasury and other deposit receipts, money receivable under life insurance policies and mortgages, negotiable instruments, monies received from the executor, administrator or trustee of any other estate or fund, or any liquidator or other assets of a similar character:
    (a) 1.5% on the first $2,000
    (b) 1% on amounts from $2,000 to $200,000
    (c) 0.75% on amounts over $200,000
  2. On other assets got in and realised:
    (a) 5% on the first $2,000
    (b) 2.5% on amounts over $2,000
  3. On unrealised real or personal property (not being cash) transferred or delivered in specie, or specifically appropriated for any person being a devisee, legatee, beneficiary or other person, upon the value of such property:
    (a) 1.25% on the first $20,000
    (b) 0.75% on amounts over $20,000
  4. On income got in annually:
    (a) 5% on the first $2,000
    (b) 2.5% on amounts over $2,000

The scale further provided that for any capital or income which is got in, realised or collected with the assistance of agents or solicitors, one half only of the rate should be allowed for executor’s commission.

As stated in of Peter Henry Atkins as executor of the estate of Robert Charles Godfrey v Godfrey [2006] WASC 83, an executor is entitled to engage the services of agents, solicitors and accountants at the expense of the estate. However, when an executor has had this assistance, which has been paid for by the estate, it is to be taken into account in assessing the amount of commission payable to the executor.

The scale set down in Barr Smith has been followed in a number of instances The scale was varied by the judges in the matter of Luck v Fogarty (unreported) Tasmanian Supreme Court decision number M63 of 1995 judgement number A9/1996 – 22 March 1996. In that case, a more generous approach was adopted for work involved in dealing with unrealised property transferred in specie to a beneficiary and assets got in. The court considered a rate of 1.5% as appropriate for assets distributed in specie and a flat rate of 1% properly reflected the work to be done for liquid assets got in.

It is clear that the application for an order that the executor be allowed commission is part of the administration of the estate and the executor is entitled to pay the costs of the application out of the estate (Peter Henry Atkins as executor of the estate of Robert Charles Godfrey v Godfrey [2006] WASC 83). Accordingly, it is the usual practice of the Court to so order that the costs of the applicant in relation to the preparation and examination of the accounts and the order granting commission be paid out of the estate of the deceased.

The cost of making an application to the Court for an award of executor’s commission can be substantial. As these costs will generally be borne by the residuary estate and the residuary beneficiaries who are affected by the award of commission, it is therefore more frequent that executors seek the residuary beneficiaries’ agreement to a level of commission before proceeding to seek an order from the Court as it is usually more cost effective to do so.

The Supreme Court has now issued a direction indicating that the Masters may publish an ‘indicator’ for use in such cases. This direction is as follows:

Direction 13.4 – Trustees’ Remuneration

13.4.1 The allowance of remuneration to executors, administrators or trustees in relation to deceased estates, whether under s 70 of the Administration and Probate Act 1919 or under s 91 of the Trustee Act 1936, is a matter for determination by the Court in each case.
13.4.2 The Masters may from time to time publish an indicator to the exercise of the jurisdiction in cases in which there are no special or unusual circumstances. Such an indicator is a guide only and does not fetter the exercise of the discretion in any particular case.
13.4.3 A copy of any indicator will be available on the CAA website and at the Registry

The Court has published such an Indicator which is published on the CAA website but is hard to find.

Indicator is set out below:
SUPREME COURT INDICATOR ON THE ALLOWANCE OF COMMISSION IN DECEASED ESTATES
UNDER SECTION 70 OF THE ADMINISTRATION AND PROBATE ACT 1919 AND SECTION 91 OF THE TRUSTEE ACT 1936

  1. This is an Indicator, and not a scale, relating to the remuneration to be allowed to executors, administrators or trustees in relation to deceased estates, whether under s70 of the Administration and Probate Act 1919 or under s91 of the Trustee Act 1936.
  2. The Indicator:
    (i) applies to deceased estates of $1m or less, and in which probate or letters of administration is granted on or after 1 July 2013;
    (ii) does not fetter the discretion of the Court as to the amount of commission or other remuneration to be allowed under s70 or s91.
  3. In estates in which the amount on which the commission is sought does not exceed $1m in total and in which there are no special or unusual circumstances, it is likely that the Court will exercise its discretion under s70 or s91 to allow commission on the value of the assets realised or distributed and the income received:
    (i) of at least one per cent on the first $500,000; and
    (ii) of at least half of one per cent on the balance.
  4. If there are successive applications for commission, this Indicator will apply to the first $100,000 of the assets realised and income received.
  5. The allowance in paragraph 3 will:
    (i) apply irrespective of whether paid agents have been employed in the administration of the estate;
    (ii) be payable to joint trustees collectively; and
    (iii) be subject to the Court’s discretion to allow a higher or lower amount of commission having regard to the particular circumstances of the case.
  6. Paragraph 3 will not apply if:
    (i) a trustee receives remuneration for professional services rendered to the estate;
    (ii) a trustee is a cotrustee with the Public Trustee or a trust corporation as defined in the Probate Rules; or
    (iii) the will provides for some remuneration or commission to be paid to a trustee.
  7. In all other applications for commission under s70 or s91, the Court will exercise its discretion having regard to the circumstances of the particular case.

This is a most useful resource in the advice to executors who wish to claim commission as to how it may be calculated. This then enables them to approach residuary beneficiaries for consent to be paid commission (or if necessary apply to the Court) with more certainty as to possible outcome.

What to do if you are appointed and do not wish to act?

If you do not wish to act as executor for an estate even though you have been named as an executor in the Will of a client, friend or family member, it is very important that you make this decision at the outset.

If you are one of two or more executors who have been appointed to act jointly, then all you have to do to extricate yourself from the estate is to allow the other joint executor(s) to apply for a grant of probate. They will then obtain a grant in their names with leave reserved for you to apply to you to also apply for a grant. Once this grant has been made, you are off the hook and have no further rights or responsibilities as an executor.

If you are the sole person named as first choice executor, then you will need to sign a form renouncing your right to be the executor. This will allow the next person named, or one of the beneficiaries if no-one else is named, to apply in your staid.

Once you have undertaken any of the tasks of an executor, it will be considered that you have intermeddled in the estate. Once this has occurred, you cannot resign from your role without the approval of the court.

The court is reluctant to allow an executor who has intermeddled in an estate or taken a grant to resign without very good reason.

Fraud – Forgery

Wills cases involving fraud and/or forgery are probably the least common types of challenges to Wills, but undoubtedly the most interesting. These cases involve some combination of altered documents, forged signatures or deception of the testator.

The most interesting example of this that I have come across is the case in NSW where two young men visited a second hand car yard. While looking at cars they were asked to come into the office of the car yard owner to witness a gentleman’s Will.

The two men saw the testator sign his Will. The car yard owner then handed them the Will and they signed the Will as witnesses. Shortly thereafter the testator died and convincing evidence was lead to prove that the signature on the Will (which left everything to the car yard owner) signed by the two witnesses was a forgery.

The court concluded that the two witnesses must have been a party to the forgery and the two men were convicted of fraud despite being entirely innocent. Luckily for the two men, but unluckily for the car yard owner, the car yard owner contracted terminal cancer.

On his death bed the car yard owner confessed that he had given a Will leaving everything to the testator’s family to the testator to sign. The two witnesses saw the testator sign this Will. Unbeknownst to the witnesses, the car yard owner then surreptitiously switched the Will signed by the testator for another Will on which he had previously forged the deceased’s signature and gave this forged Will to the two witnesses to sign.

Dealing With Family Trusts and Self Managed Super Funds

It is increasingly uncommon for clients with any significant degree of wealth to hold the majority of their assets in their own name. Generally the bulk of assets controlled by high net worth individuals are held either in family trusts or self managed super funds.

From a Will making point of view, there is not a lot to be done about self managed super funds other than to ensure that binding nominations are up to date and noting the identity of the death benefit beneficiaries. The choice of nominations for self managed super funds tend to be governed largely by tax considerations and is beyond the scope of this paper.

Family trusts create very different issues to self managed super funds. The most important role in a family trust is that of appointor. As the person or persons who can hire and fire the trustee without notice or reason, it is the appointor(s) who truly control the trust.

Most trust deeds provide that an appointor can nominate a substitute appointor by Will or by Deed, with the executor of the appointor’s estate taking over the role in the absence of an appointment.

The main difficulty posed for estate planning by family trusts where there are multiple children whom a testator wishes to treat equally, is that the trust is a single pool of assets which is not divisible or controllable by a Will. Generally all that can be done is to pass control of the trust to one or more beneficiaries and leave it to them to control the distribution of income from the trust.

While it is possible to pass the appointorship to a trusted third party who is not a potential beneficiary of the trust, it is dangerous to ignore or try and fetter the effectively total discretion of a trustee deciding to whom to distribute trust income.

In most cases the best course of action when dealing with the combination of a family trust and multiple children or other beneficiaries is to pass control of the trust to one or two of the beneficiaries and then seek to equalise benefits with assets owned personally, superannuation death benefits or life insurance.

While family trusts no longer offer great protection from the spouses of beneficiaries in divorce proceedings, they are still a very effective way of protecting assets (such as the family farm) from challenges to a Will. While any gift in a Will is open to challenge by a disappointed child or spouse, assets in family trusts are immune from attack in estate proceedings in South Australia.