Debunking 10 common misconceptions about estate disputes
1. My family takes care of things
Some people believe that a family member, normally the spouse, is automatically appointed to look after the estate. For this reason, some people may even fail to appoint a power of attorney or guardian.
In reality, your spouse or next of kin do not have the automatic right to make decisions about finances if you are unable to. Your next-of-kin cannot deal with your finances unless they are held jointly and cannot deal with your real estate even if they are jointly owned. Without a Will, your family members are unable to deal with third parties including banks, Centrelink, ATO, Superannuation funds, government institutions or even pay for debts from the estate.
Anyone who has a genuine and continuing interest in your welfare may apply to be appointed as your guardian. This power is therefore not automatically referred to your next-of-kin.
For financial matters, however, VCAT may appoint a person to act if they are satisfied that you have impaired decision-making capacity and that a decision maker is required to ensure that your needs are met and protected.
Claims to a power of attorney may not be as simple as first thought.
2. Intestacy and estate disputes
In addition to the misconception and issues outlined above, many people believe that if you die without a will, your assets will automatically transfer to the Crown. In reality, when a person dies without making a will, the estate is distributed according to the rules of intestacy.
Whilst this complicates matters, your estate will most likely be divided among your closest relatives. First and foremost, your assets will be divided on the basis of a pre-defined formula which may not be the way you’d choose to distribute them. Additionally, the cost of organising the division of your estate will be taken from the estate.
This will follow a system involving Letters of Administration, a court order allowing the administration of an estate without a will. This process also involves several Supreme Court documents to be filed. Please see our previous article about what happens when a person dies intestate, which offers more in-depth guidance on the issue.
3. Reading of the Will
A Hollywood myth has crept into the operation of Wills and Estates here in Australia. Some people believe that an official ‘Reading of the Will’ must take place. This may be sought after for a range of reasons, the first is for transparency purposes, to ensure that everyone is told the same information regarding the will.
Unlike Hollywood, however, there is no such requirement in Victoria or anywhere in Australia for that matter. This can cause potential beneficiaries to be left in the dark regarding whether they will receive anything from their love one’s estate. Although there is no official reading of a will, Will should normally be dealt with by the time 12 months has passed since the date of decease.
4. Anyone can see a deceased person’s Will
Another Hollywood myth brought from US TV Shows is that anyone may read the will of a deceased person. Until probate of the Will has been granted, a Will is not a document of public record. This allows potential challengers to ensue legal action before the document is made public.
Historically, it was incredibly difficult to see the Will before probate, even if you were named as a beneficiary in the Will. Now, interested people are allowed to obtain a copy of a deceased person’s Will or inspect it. Please see our previous article about who is entitled to see the Will, for the list of ‘interests people’ and other processes under the Wills Act 1997 (Vic).
5. If I have a Will, I don’t have to worry about probate
Probate can be a long and expensive process in which several courts make decisions with respect of who may inherit your assets. For this reason, some believe that they can bypass this process by having a will.
Whilst a will provides courts with guidance in their decision-making process, it does not avoid the probate process. This is especially the case where you have real estate across multiple states. Each property may have to go through probate in the state in which it is found.
6. Executor or agreed family has the right to decide how the assets are distributed
It is not unheard of for families of the deceased to request executors to divide the estate in a manner different to that expressed in the will. The law is clear that an executor does not have the power to change the way your estate is distributed in your Will. The role of the Executor is to properly administer the estate in accordance with the terms of the Will and more generally in line with the deceased persons wishes. An executor must not interfere with the assets to the detriment of any beneficiary, otherwise they will be faced with serious charges.
7. I have been disinherited or estranged; therefore I have no rights to pursue an estate dispute
Some people wrongly assume that they are not entitled to any of their parents’ estate because they don’t have a relationship with them. Under the law of Succession in Victoria, all children of the deceased are entitled to make a family provision claim on their parents’ estate as they are an eligible individual. This includes biological, adopted and stepchildren.
Some parents or grandparents may also incorrectly attempt to disinherit someone. They may attempt to do this by attempting to relocate wealth or real estate to avoid claims against the substance of their estate before they die. In some states, there are certain provisions of legislation which allow the Court to ‘claw back’ assets removed for the purpose of reducing the value of the estate in order to provide for family provision proceedings after death.
Estrangement may be considered when dividing an estate. It is not uncommon for a testator to become estranged from certain relatives in the months or years leading up to their passing and, in many cases, tensions are left unresolved. This can make for a painful period whilst the estate is settled. Even if an individual has physically and/or emotionally distanced themselves from the decease over a period of time, they may still be eligible to pursue a claim under the estate. The court considered the unique circumstances of each case. For particular considerations, and a case study, see our article that covers whether an estranged family member can contest a Will.
8. Adopted children can dispute their biological parents’ estate
Unlike the previous misconception, there is also a niche situation where biological children have been adopted away and then seek to claim on their biological parent’s estates.
It must be noted that children who have been adopted are unlikely to be able to claim as beneficiary of their biological parent’s estates. This is because their biological parents are no longer responsible parents of that child. There are particularly specific circumstances where the child may still claim on their biological parent’s estate. The child’s right to claim from their biological parent’s estate may ensue if, after adoption, the child re-establishes a relationship with the biological parent and becomes financially dependent on them. See our most recent article on whether secret relatives can contest a Will for more information.
9. Only meddlers and cranks contest a Will
Many people fail to contest a will to avoid family conflict or general public embarrassment. This is primarily because the general attitude towards people contesting a will is negative, seen as someone who is seeking to ‘meddle with the system’. It is important to stress that the laws are clearly designed to help those people who haven’t been adequately provided for.
There is a vast array of reasons people may contest a Will. These include where a will does not reflect the current relationships and circumstances, a person is in dire financial circumstances which can be provided for by the estate, the circumstances surrounding the validity of the will or its execution may be suspicious, or that the deceased did not have full knowledge or approval of the contents of the Will.
10. A deceased estate Bears the burden of costs of an estate dispute
We may act for clients who don’t wish to enter into this kind of arrangement. When we enter into litigation for these clients, they may raise a common misconception about fees, that the deceased estate bears the burden of the costs of litigation.
This myth might arise out of a High Court judgement of the nineties by Gaudron J. Whilst it is true that family provision cases stand apart from cases in which costs follow the event, many overlook the complexity of costs in such matters. As Gaudron J herself points out later in that judgement, costs in an estates matter depends on the overall justice of the case. Therefore, whilst family provision claims are unique statutory claims which have specific costs rules developed through case law, they are determined on a case-by-case basis.