Hentys Wills and Estate Glossary

Abatement
Adequate Provision
Ademption
Ambulatory Will
Applicant
Assets
Attestation or Attestation Clause
Bankruptcy
Beneficiary
Bequests
Benjamin Order
Binding Death Benefit Nomination (BDBN)
Blended Family
Capital Gains Tax (CGT)
Calderbank Offers
Caveat
Challenging a Will
Civil Procedure Act 2010
Codicil
Conditional Will
Constructive Trust
Contesting a Will
Costs Order
Crisp Order
Deed of Family Arrangement
Devise
Domestic Partner
Donatio Mortis Causa
Duty of Disclosure
Dying Intestate
Dying Testate
Elder Financial Abuse (EFA)
Eligibility
Enduring Guardian
Enduring Power of Attorney
Entitlement
Estate
Estates in Fee Simple
Estrangement
Equitable Estoppel
Executor/Executrix
Executor’s Duties
Factors Warranting
Falsa Demonstratio
Family Provision Claim
Fiduciary Duty
Forfeiture Rule
Guardian
Holographic Will
‘Informal’ Document
Inheritance Tax
Insolvent Estate
Informal Will
Inter Vivos Gift
Intestacy
Joint Proprietors
Legacy
Legatee
Letters of Administration
Liability
Limitation Period
Mediation
Mediator
Member of a Household
Moral Duty
Moveable/Immoveable property
Negotiation
Notional Estate
No Win, No Fee
Offer of Settlement
Partial Intestacy
Precatory Words
Pre-deceased
Probate
Promissory Estoppel
Proprietary Estoppel
Property
Residue of Estate
Resulting Trust
Step-child
Superannuation
Superannuation Nominations (Binding & Non-Binding)
Survivorship
Tenants in Common
Testator
Testamentary Capacity
Testamentary Trust
Trustee
Undue Influence
Will
Witness
Abatement

Common law doctrine of Wills. When a person passes, if the assets of estate are insufficient in paying all of the deceased’s debts, as well as all gifts bequeathed in his or her will, the principle of abatement applies to the distribution of the estate to the beneficiaries, meaning that the gifts set out in the testator’s will are reduced proportionately and in order depending on the type of bequest.

If the estate has insufficient assets to pay the testator’s debts, it would be insolvent and the legacies described in the testator’s will would be unable to be paid. If there are assets leftover after payment of debts but they are not sufficient to fully satisfy all gifts, then some or all of the gifts will abate.

If the testator’s will does not specifically provide for the order in which gifts are to abate, the order of abatement of bequest is as follows:

  1. Residuary personalty;
  2. Residuary real property;
  3. General legacies, including pecuniary bequests from the residue;
  4. Demonstrative legacies, meaning bequests from the proceeds of a specific asset or fund not forming part of the residue;
  5. Specific bequests of personalty;
  6. Specific devises of real property.

The abatement of gifts in each category will occur in equal proportion so that no single beneficiary will be made to bear the full burden of the abatement.

Adequate Provision

The term ‘Adequate Provision for Proper Maintenance and Support’ is considered relative to each individual’s circumstance. In order to determine whether adequate provision has been made, the court will consider the terms ‘adequate’ and ‘proper’ in relation to the applicant’s situation. E.g. if the child of a wealthy mother has not been awarded as much as she would have expected from her estate, she may be able to contest the will. Even if the daughter has been awarded a lower sum that will ‘adequately’ cover her necessities, this amount may not be sufficient to ensure her ‘proper’ maintenance. The adequacy of the provision that has been made is not decided in isolation but rather is determined by considering whether the applicant has been given enough to live comfortably, in the lifestyle that they are accustomed to.

The terms ‘adequate’ and ‘proper’ are therefore considered in the context of:

  • The age, sex, condition, lifestyle and situation of the applicant
  • The applicant’s needs and the resources they require for meeting those needs
  • The nature, extent and character of the estate and other claims upon it
  • What the will-maker regarded as superior claims or preferable dispositions
Ademption

Ademption occurs when property (either real or person) that is gifted under a Will fails because it no longer exists upon death of the testator. The term comes from the latin word ‘ademption’ meaning ‘a taking away’, as the property has literally been ‘taken away’ previously.

A classic example is where the testator’s main residence has been bequeathed to a child in the Will, but the main residence has been subsequently sold during the lifetime to fund the bond for an aged care facility. Accordingly, the specific gift has been ‘adeemed’, so the gift fails.

Another example is where the property has substantially changed from how it was described in the Will. I.e. if the Will refers to shares in that company, but that company has been taken over by a different company, it also falls foul to the ademption rule.

The assumption stands that if a specific gift of an item of property does not exist upon the testator’s death, then the testator had the intention that the beneficiary of that specific gift is to receive nothing in its place. Thus, ademption can lead to instances of unfair outcomes and often requires a Part IV application to ensure the person is still adequately provided for.

In Victoria, ademption as a principle is not ruled by statutes such as the Wills Act 1997 (Vic) or the Administration and Probate Act 1958 (Vic). Instead, it is part of the common law. To determine whether ademption has occurred, the Court is required to ask two questions:

  • Is the gift a specific or general gift?
  • If it is a specific gift, is the gifted property still in the Estate at the date of death?

A specific gift is something which has been described in a way that separates it from other assets disposed of within the Will. For example – the property of 125, Wills Street, Victoria 3000; or, “my car”.

A general gift is usually a specific “value” which will be paid by the executor out of the estate. For example, an amount of money.

If the gift is specific, and no longer part of the Estate because it has been disposed of by one way or another, the gift fails; the beneficiary receives nothing and cannot receive the cash equivalent of the gifted property.

Unlike many other aspects of Will interpretation, this rule is clear and unforgiving. The Courts do not look at it on a case-by-case basis. It is simply based on the notion that the will-maker intended for the beneficiary to receive nothing because they were aware that once disposed of, the specific gift no longer forms part of the estate.

There are however exceptions to the rule:

Exception 1: Ademption rule will not apply when the property is disposed of by a wrongful act of a third party

These are cases where an unauthorised or otherwise fraudulent act has lead to the disposition of property without the knowledge of the will-maker. A prime example here is where a power of attorney sells a property, but the conditions for the exercise of this power have not been met.

Exception 2: Ademption rule will not apply when the property is lawfully sold on behalf of a will-maker by an administrator (guardian) of an estate as appointed by VCAT – Section 53 of the Guardianship and Administration Act 1986 (Vic).

Where a VCAT appointed administrator is making decision, the person on whose behalf they are acting has usually lost the capacity to make a Will. As a result, the will-maker does not have the capacity to change their will to reflect the new circumstance, and in some circumstances may even be completely unaware of the sale. Thus, the statutory allows for the beneficiary to have the same interest in any money or other property arising from or received in respect of any sale, mortgage, exchange etc should the property not have been subject to the sale, mortgage, exchange etc.

Exception 3: Ademption rule will not apply when the property is lawfully sold on behalf of a will-maker by an administrator or person acting under an enduring power of attorney *uncertain*.

It has been suggested that a similar provision to s 53 of the Guardianship and Administration Act be introduced for persons acting under an enduring power of attorney. Traditionally, under the common law, the actions of financial attorneys are not considered an exception to the ademption rule. However, in recent years Victorian judges have recognised such exception, and called for legislative reform to clarify the issue – see Simpson v Cunning [2011] VSC 466.

Ambulatory Will

The characteristic of a Will that enables the testator to change and amend their Will before their passing.

Applicant

A person or entity who is applying to the court for a legal remedy to a matter or issue.

Assets

A deceased’s assets are anything they own at their date of death. However, not every asset can be disposed of within a Will. As a broad rule of thumb – assets which can be disposed of via a Will (estate assets) include anything the deceased has sole ownership over, such as; real or personal property, business ownership, digital assets and intellectual property. Assets which cannot be disposed of via a Will (non-estate assets) are things that the deceased does not have legal ownership over, or has joint ownership with another party. Examples of such include discretionary/family trusts, company assets, life insurance and superannuation.

Attestation or Attestation Clause

The signature clause in a Will.

Bankruptcy

In Victoria, if a beneficiary is bankrupt then the bankruptcy legislation requires that any inheritance should be paid to the trustee in bankruptcy. The bankrupt person will have to use their inheritance to pay the creditors, costs of the bankruptcy, administration as well as the trustee’s costs. Only after that is all finalised will they receive any surplus.

In order to avoid this situation, certain bankrupts in recent years failed to disclose the receipt of inheritances so to avoid having to hand over their newly acquired funds. However, in the cases documented, the trustee in bankruptcy has discovered the fraudulent behaviour and not only did the bankrupt beneficiaries need to hand over the proceeds, but they were also subject to prosecution in the Magistrates Court. Depending on the severity of the situation penalties for such a crime ranged from community service to imprisonment.

However, an applicant’s financial position is one of the key elements considered by the Courts when deciding whether or not that particular individual has the right to further provision from the Estate. Bankruptcy will indicate that an individual is in dire financial straits and may give them a better chance at succeeding, but along with the length of time some has been declared bankrupt for, and whether they are now back to receiving a stable income, the Court also has other important conditions to inspect. E.g. the relationship between the applicant and the deceased, the physical, mental or intellectual state of the applicant, any benefits the deceased had previously given to the applicant during their lifetime, whether the applicant was ever maintained by the deceased wholly or partly before their death and significantly, the financial position of the estate.

Beneficiary

A beneficiary in a Will is someone/something who/which has been listed in a Will to ‘benefit’ from the deceased’s estate. For an example, the deceased may have left real property, cash or a family heirloom to one or multiple individuals or organisations, making them a beneficiary. However, if listing a charity as a beneficiary, it is imperative that you first check whether that charity is able to accept your gift, if they cannot, the specified amount/portion will form part of your residual estate.

It is also imperative that you fully consider the effects that including or omitting certain people as beneficiaries in your Will may have on your estate. For example, if you fail to provide for certain dependents, they could later bring a family provision application to try and claim part of your estate. See the glossary term “Family Provision Claim” for further information.

Bequests

Bequests is the name for the testator’s wishes outlined in the Will. There are four key types of bequests that can be made;

  1. Fractional: A certain percentage of the testator’s estate is awarded to the charity, organisation or individual.
  2. Pecuniary: A specific gift is nominated. This could include a sum of money, stocks, property or shares.
  3. Residual: Once the testator’s other gifts have been allocated and any legal fees paid, the remainder of the estate is left to the recipients.
  4. Whole Estate: The testator’s entire estate and assets are bequeathed to one beneficiary.
Benjamin Order

This is a principle arising out of the case of Neville v Benjamin [1902] 1 CH 723 which enables the executors/administrators of the estate to seek a declaration from the Court on who should benefit from the Estate when they cannot locate beneficiaries. The problem is that unless the Court orders the personal representatives to be at liberty to distribute the Estate, they cannot finalise its administration and all other beneficiaries do not receive what they are entitled to.

Accordingly, a ‘Benjamin Order’ is made by the Court which allows the personal representative to start distributing even though the personal representative is not certain of who really should be benefiting. Once this declaration is made, the personal representative is no longer liable if they distribute the Estate to whom they believe are the correct beneficiaries, even if more entitled beneficiaries are subsequently discovered.

Binding Death Benefit Nomination (BDBN)

A Binding Death Benefit Nomination (BDBN) specifies who will receive a deceased individual’s super, or ‘death benefit’, in the event of their passing. In a valid Binding Death Benefit Nomination, the deceased appoints one or more ‘dependents’. Each dependent will either receive the testators super as a lump sum or have it transferred in periodic instalments (a super income stream).

Legally, a ‘dependent’ individual is defined as being either:

  • A spouse of the deceased (including de facto relationships);
  • A biological or adopted child of the testator;
  • Any person who was financially dependent on the deceased;
  • Any person who had an interdependency relationship with the deceased at the time of their passing.

A valid Binding Death Benefit Nomination, either lapsing or non-lapsing, can be made at any time. Those that are lapsing will be valid for three years from the date the nomination is first signed or last amended by the writer. In cases where it is not updated prior to this time passing, the document will become invalid. A non-lapsing Binding Death Nomination, however, will not expire unless the testator amends or cancels it.

Blended Family

Following remarriage(s) and after a divorce this is where a family is formed by a combination of two or more families.

Capital Gains Tax (CGT)

CGT is a tax levied form the profit from the sale of a property or an investment. This means that if you inherit a dwelling or other property and later sell it CGT will apply unless an exemption applies.

The same applies if the executor of administrator of the Estate sells the deceased’s property as part of winding up the Estate assets.

The exemptions are dependent on when the deceased acquired the property, when they died and whether the property had previously been used to produce any sort of income (such as rent).

See the blog on CGT for the exemption situations.

Calderbank Offers

As established in the case of Calderbank v Calderbank, a ‘Calderbank Offer’ is an offer (usually in writing) that represents a genuine attempt to resolves the dispute. Importantly, the offer must state “without prejudice save as to costs”. This means that the offer cannot be used as evidence in any proceeding, and is without prejudice to the party’s right to continue litigation. The exception regarding costs means that if the offer is rejected and the case proceeds to judgement then the offer can be relied upon in court when determining who will pay the costs of the proceeding.

Caveat

The word caveat comes from the Latin and literally means ‘let him beware’. Thus broadly, a caveat is classified as a legal notice to a court or public officer to suspend a certain proceeding until the notifier is given a hearing. In a Will dispute, a probate caveat is a document that is filed in court to prevent probate of the Will being granted because the plaintiffs want to challenge the validity of the Will.  After a probate caveat is filed, the proposed executors of the estate cannot administer the assets until (1) it has been decided by the Court that the proposed Will is the last valid Will of the deceased, and the challenge is quashed (2) the caveat has run out or (3) it has been withdrawn by the caveator.

Challenging a Will

To challenge a Will is to dispute a Will, or to say that the Will itself should be struck out. These types of cases usually arise when the person who made the Will was suffering from a mentally degenerating disease at the time, or they were put under pressure to change their Will.

Most common challenges to a Will occur because: The will maker did not have the capacity to make the will at the time it was signed; the Will was the subject of fraud, forgery or made under the influence of others; there was an insufficiency and inappropriateness of witnesses to the signing of the Will; the Will was left unsigned.

The first step in challenging a Will is to get a probate caveat placed on the Will (see above – caveat). Once a caveat is placed on the Will it is for the plaintiff to plead the case to the courts as to why they think the Will should not be the last valid Will of the testator. If successful, the Will, will be struck out and the applicant can file for probate on a previous Will, or alternatively if there is no previous Will, the Estate would be divided in accordance with Intestacy Law.

Civil Procedure Act 2010

The Civil Procedure Act 2010 (Vic) imposes obligations on parties, legal practitioners and law practices in relation to the conduct of litigation in Victoria.  The Act is in place primarily to ensure the just, efficient, timely and cost-effective resolution of the ‘real issues’ that are in dispute. The act outlines the ‘paramount duty’ owed to the courts and the ‘overarching obligations’ that are imposed on all parties.

The ‘overarching obligations’ apply to the parties in the dispute, as well as any legal practitioners and law practices involved in the dispute. They also extend to anyone who provides financial assistance to a party in a dispute, such as an insurer or litigation funders.

It is obligatory for legal practitioners to comply with the obligations of the Act despite any obligation that they have toward their client.

The obligations set out under the act are as follows:

  • to act honestly
  • to not make a claim that is frivolous, aggravating, abuses the legal process or with no factual or legal basis
  • to only take the steps that are necessary to facilitate the resolution or overall proceeding
  • to co-operate with other parties and the Court
  • to not mislead or deceive
  • to reasonably try to resolve the dispute. Or if the dispute cannot be completely resolved, to use reasonable endeavours to resolve any issues that can be resolved and minimise the outstanding issues
  • to ensure costs are reasonable and in proportion
  • to act reasonably and ensure minimal delay
  • to disclose documents that are critical to the resolution of the dispute. This includes documents that are no longer in the possession or control of the party
Codicil

This is a properly executed change or addition to an existing Will. It needs to be executed in accordance with the provision in the Wills Act, or may not be considered a valid alteration to the Will.

Conditional Will

A Conditional Will is one where the inheritance depends on the occurrence of some uncertain event before it becomes operative. Although the Courts are generally reluctant to deny a person’s testamentary wishes, a conditional of a Will, will not be upheld where:

  • It violates the rule of law because it is uncertain, or impossible to satisfy; or
  • It is contrary to public policy.

Examples of conditions may be not marrying outside the family religion, quitting smoking, attending the funeral, having the children be baptised in a certain church etc.

See the Supreme Court of NSW case of Hickin v Carroll & Ors (No 2) [2014] NSWSC 1059 in the blog on Conditional Wills for more information.

Constructive Trust

This is a trust formed where it is proved that the mutual intention of the deceased and the claimant was that the claimant would have some interest in the deceased’s property (whether real property, money, a car, bank account etc) and the claimant has relied upon this to their detriment.

The main features of a constructive trust are that the trust is implied by a Court, the Court determines that the owner of the asset is a constructive trustee for the benefit of the true owner, and that there is no formal trust document or agreement.

Contesting a Will

Contesting a Will refers to the making of a ‘Family Provision’, Part IV or ‘Testators Family Maintenance List’ claim. It is an application to the Court to seek further adequate provision from the Estate of a deceased person.

Costs Order

An order by the court for one party to pay another party’s legal costs. This order can be made at any stage of the proceeding or after the proceeding ends. Costs can be awarded in relation to the whole proceedings, a particular question or a particular part of the proceedings.

The most commonly used cost order phrases are:

  • Costs of the day
    • An order awarding a part the costs of a specific day or event in the proceedings.
  • Costs in any event
    • The party awarded costs in the application/motion gets the costs of the application, regardless of the final result of the proceedings.
  • No order as to costs
    • Each party has to pay their own costs, unless it can be seen that one party has acted unreasonably in bringing or defending the proceedings.
  • Reserved Costs or Costs Reserved
    • No costs of the motion or application which brought the matter to court shall be allowed to either party without further order of the Court.
Crisp Order

A Crisp order, named after the decision in Crisp v Burns Philp Trustee Company Ltd (Supreme Court (NSW), Holland J, 18 December 1979) (an unreported NSW case) usually takes the form of a flexible Order from the Court that grants an applicant a portable life interest in particular items of estate property.

For example, a person passes away and their will leaves his partner of 25 years nothing but stipulates that his two children get his $500K house and the $50K in his bank. His partner has been living in the house for the 25 years and has no savings of their own and no biological children. In these circumstances the court may order that the partner gets a portable life interest in the house. This means that the partner can continue living in the house until such a time that they pass away or move out.

If the partner moves, it is likely they will get a portion of the value of the house to enable them to pay for new accommodation and whatever is leftover will revert to the deceased’s two children as per the will.

If they pass away, the house will revert back to the deceased’s two children per the will.

This demonstrates that those named in the Will ultimately receive what is bequeathed to them, thus they are not robbed of their inheritance, yet the claimant was protected until such a time where it was no longer needed.

Deed of Family Arrangement

A written agreement to record the distribution of the Estate where all beneficiaries in the will/potential claimants agree to not distribute in accordance with the Will of the deceased person. This usually occurs where the beneficiaries wish to rearrange the distribution of the Estate between themselves so to settle an imminent and potential Part IV – Family Provision Claim against the Estate.

Devise

Another word for bequeath.

Domestic Partner

A domestic partner under the Administration and Probate Act 1958 (Vic) is someone who has:

  • Been living with the deceased at the time of their death, as a couple on a genuine domestic basis; and
  • Either had lived with the deceased in that manner for a period of at least 2 years immediately before the person’s death; or
  • Is the parent of a child with the deceased who was under the age of 18 at the time of their death.

You need to prove these elements in order to be considered eligible to contest a Will. However, this definition is not clear cut. Some other factors assessed include the financial position of the applicant, the size of the Estate, the sexual relationship between the applicant and the deceased, competing interests of others and the conduct of the partner before and during the litigation process.

See the blog on proving a De Facto relationship for a case study of Bell v Barley [207] VSC 24 which is a perfect exactly of what evidence is required to prove a ‘genuine domestic relationship’.

Donatio Mortis Causa

Donatio Mortis Causa roughly translates into “gift by reason of death” in Latin and refers to a gift of personal property that is made by someone who expects to die in the immediate future. This gift will only take effect after the person has passed away. It is important to note that this gift will not pass to the personal representative of the deceased, generally the executor, but directly to the person the deceased gifted the item to.

There are three factors which must occur for donatio mortis causa, including:

  1. The gift must be made by the person in contemplation, rather than expectation of the person’s impending death;
  2. The gift must be contingent on the death of the person, meaning that the person may reclaim the gift at any time before their death; and
  3. The person must deliver the gift to the receiver.

Donatio mortis causa can have the effect of significantly reducing the size of an estate and as a consequence, can affect what is covered under a family provision order. Proving donatio mortis causa has occured can result in risk of expense for the estate, the personal representative of the estate and the intended recipient of the estate.

Duty of Disclosure

A party to a claim for further provision is required to disclose to each party the existence of all documents that are critical to the resolution of the dispute. This must occur at the earliest reasonable time and is an ongoing obligation throughout the dispute. The duty of disclosure is created under s 26 of the Civil Procedure Act 2010 (Vic) and parties are bound to it by signing the Overarching Obligations Certification.

Dying Intestate

This means that a person has died without leaving a Will. Their estate is to be distributed in accordance with the Administration and Probate Act 1958 (Vic). There are new intestacy laws which came into operation as of November 1 2017, and apply to all person who die without a Will from 2 November 2017 onwards.

Dying Testate

This means that a person had died leaving a valid Will. That person’s estate/proper is to be distributed in accordance with their wishes as expressed in the Will.

Elder Financial Abuse (EFA)

As defined by the World Health Organisation, EFA is “any illegal or immoral exploitation or use of the funds or resources of the older person”. This is most commonly demonstrated in the form of asking for loans/loan guarantees which are never paid back, forgery of signatures, misuse of enduring powers of attorney, using an older person’s property to obtain a mortgage or finance, misrepresentation or just plain manipulation.

Eligibility

In order to contest a Will, you first must be considered an eligible person under s 90 of the Administration and Probate Act 1958 (Vic) s 90. Eligible people are:

  • The spouse or domestic partner at the time of death;
  • Child of the deceased (including an adopted or step-child or someone who believed the deceased to be their parent and was treated as such) who, at the time of death, was:
    • Under the age of 18;
    • A full-time student under the age of 25;
    • Suffering from a disability
  • A former spouse or former domestic partner of the deceased if the person, at the time of the deceased’s death would have been able to make proceedings under the Family Law Act 1975 Cth; and has either
    • Not taken those proceedings; or
    • Commenced but not finalised those proceedings because of the death of the deceased
  • A child or step child of the deceased not referred to above (i.e adult children);
  • A registered caring partner;
  • A grandchild;
  • The spouse or domestic partner of a child (i.e. son or daughter in law) of the deceased where that child has died within one year of the deceased’s death;
  • A person who was or had been (and was likely to be in the near future) a member of the deceased’s household.

It is important to note that siblings and parents are not considered eligible people just based of their relation.  

Enduring Guardian

The person who is appointed to make lifestyle, health and medical decisions on the behalf of an individual who is no longer capable of making these decisions alone.

Enduring Power of Attorney

An enduring power of attorney is a legal document which allows you to appoint someone else to have the legal power to make decisions on your behalf (they become your enduring guardian as outlined above).

Entitlement

Broadly, entitlement refers to having the right to something. When discussing a will, an entitlement is what share of the estate a beneficiary has the right to inherit. When a testator passes away, the beneficiaries of their will should be promptly informed of their entitlement to inherit certain assets.

If the deceased failed to create a valid will detailing how they would like their estate to be administered, they are said to have died intestate. In such instances, the Court will determine which individuals are entitled to a share of the testator’s estate and distribute their remaining assets accordingly. It is, however, important to note that beneficiaries also have specified entitlements during the proceedings that follow a testator’s passing. When a will is being administered, its beneficiaries have a right to access documents relevant to the assets they have a direct interest in. This means that, if a testator expressed in their valid will that their son ought to inherit their boat, then he is entitled to access any information relating to the boat.

When the expected date for an estates distribution is determined or changed, its beneficiaries have the right to be notified. In addition to this, if an individual decides to dispute a will, any beneficiaries that may be affected have the right to be informed.

Estate

All the property owned by a person at the time of their death. This includes both real and personal property.

Estates in Fee Simple

A legal term denoting real property/real estate. It represents absolute ownership of land, and therefore the owner of that land may do whatever he or she chooses with the land.

Estrangement

Family tensions are not uncommon in Wills and Estates disputes and often go hand in hand with family estrangement. Family estrangement is where the relationship between two or more members of a family has deteriorated to the extent where there is little or no communication between the family members.

There are a number of reasons why family estrangement may occur including arguments between family members, violence, differing value and beliefs, or other major life events. Sometimes family estrangement may occur due to the involvement of a third party, for example, where a family member may not get along with the spouse of another. Often in Wills and Estates disputes, estrangement exists between parents and children, between former spouses or between siblings.

Estrangement between family members does not necessarily make a person ineligible to contest the Will of a testator. A person must first be an “eligible person” under s 90A of the Administration and Probate Act 1958 (Vic) to be able to lodge an application for further provision. This may include a spouse or domestic partner of the deceased, a child, step-child or adoptive child of the deceased, or a member of the deceased’s household. The character and conduct of the eligible person is a factor that the Court will take into account when considering whether a family provision order should be made. This includes whether any estrangement existed between the eligible person and the testator. In Wheatley v Wheatley [2006] NSWCA 262, Bryson J of the New South Wales Court of Appeal held that:

I do not regard the state of estrangement or even hostility as necessarily bringing an end to any moral duty to make provision for an eligible person…it may do so, but whether it does, calls for appraisal in each case and is not reduced to a clear principle.

Therefore, in order to be eligible for further provision from a deceased’s estate, it needs to be established that the deceased had a moral obligation to provide for you. The 1961 High Court ruling in The Pontifical Society for the Propagation of the Faith v Scales shows where the Court will balance estrangement against a deceased’s moral obligation to provide further provision and the applicant’s financial position. Here, a son had been estranged from his father for 46 years. The father had left his wife and son (aged 4). The father did not have any contact with his son and did not provide for him in his Will. The son was middle aged with a young family, he had a job as a public servant and a home with a mortgage. The High Court found in the circumstances the deceased did not owe the son a moral obligation to provide.

As long as an applicant can show the deceased had a moral obligation to provide for them, they may be able to successfully contest a Will despite estrangement.

Equitable Estoppel

Estoppel is a legal principle which prevents or stops a party from acting in a way that is inconsistent with their prior action or conduct. There are two types of estopped – promissory and proprietary.

Executor/Executrix

An executor (male), executrix (female) is the person named in a Will who is to carry out the wishes of the deceased after they have passed. It is a large responsibility, and if the Will is challenged or contested it is the job of the executor to defend the Will. An executor named in the Will is under no obligation to accept the responsibility. Instead, if a substituted executor has also been named, the duties can be delegated to them and the original executor will be exempt from all obligations. If no other executor is named, then an application to the Court can be made to appoint an administrator.

When selecting an executor, it is a good idea to ask your proposed executor whether he/she will accept the appointment due to the significance of the appointment, and also consider whether:

  • The proposed executor is able to be independent of their actions and act impartially (eg will not be biased towards one or more of the beneficiaries)
  • The proposed executor is familiar with your wishes and your family, and will stay true to your wishes
  • The executor is completely trustworthy, reliable and understands their obligation for the information they receive to remain confidential.

It is also a good idea to appoint a substitute executor, just in case at the time of your death the primary executor either does not want to accept the responsibility, or is unfit to do so.

Executor’s Duties

All wills vary depending on the wishes of the testator, and the circumstances within which they have departed. That being said, there are a number of executor’s duties which remain largely consistent regardless of the surrounding circumstances of the Will. It is an executor’s fiduciary duty to adhere to these duties

  • Notifying all the beneficiaries named in the Will
  • Obtaining a grant of probate
  • Managing any property or goods left in the Will
  • Having the estate valued, and keeping a list of the valuations
  • Completing any necessary income tax returns and get clearance for distribution of the estate from the Australian tax Office
  • Paying any debts that the deceased may still owe
  • Establishing trusts
  • Obtaining the authority to administer the Estate
Factors Warranting

This refers to the factors to be considered in making a family provision order, provided by s 91A of the Administration and Probate Act 1958 (Vic).

The Court must take into account, if any, the deceased’s Will, any evidence of the deceased’s dispositions in the deceased’s Will and any other evidence of the deceased’s intentions in relation to providing for the eligible person.

The Court may have regard to the length and nature of the relationship between the deceased and the eligible person, any obligations of the deceased, the size and nature of the estate, the financial needs of the eligible person, any disability of the eligible person, the eligible person’s age and any contributions they may have made to the estate.

Falsa Demonstratio

When the testator establishes a clear intent as to their desired outcome, this request can still be fulfilled even if they have provided a false description. In such instances, rather than the written document becoming void the testators’ wishes can still be carried out. This legal maxim is referred to as the falsa demonstratio principle and is often used to address an obvious mistake, typically, those made in wills.

The falsa demonstratio principle can be applied if there is enough certainty of the individuals’ true intentions, even if these were inaccurately conveyed in the description. If this is the case any false descriptions can be ignored, with the testators’ real wishes instead becoming viable and being performed accordingly.

The maxim of falsa demonstratio could potentially be applied in circumstances where a testator expresses in their will that they plan to gift certain stock to their significant other. Should it be found that the testator no longer possesses the mentioned stock but they do, however, hold other stock that is unaccounted for the court will need to make a decision regarding their true intent. If it can be determined with reasonable confidence that the testator made an error, their significant other would receive the stock in question regardless of the false description as per the falsa demonstratio principle.

Family Provision Claim

A Family Provision Claim also known as Part IV claim or Testator’s Family Maintenance (TFM) claims are launched when an eligible person feels they have not adequately been provided for under the Will. To do so successfully, the eligible person first needs to prove that the deceased had a moral duty to provide for their proper maintenance and support (e.g. that they were maintained by them at some point in time), and then they need to prove that the distribution of the deceased’s estate as set out in the Will, or pursuant to the rules of intestacy fails to make adequate provision for the proper maintenance and support.

Fiduciary Duty

An obligation to act in the best interests of another party. For example, an executor has the fiduciary duty to always act in the best interest of the Estate, a trustee has a fiduciary duty to act in the best interest of the trust’s beneficiaries and a solicitor has a fiduciary duty to act in the best interest of a client.

Forfeiture Rule

Is a rule governed by the common law which prevents a person who has unlawfully killed another form inheriting from their victim or acquiring another financial benefit from the death. It has no statutory basis in Victoria but is nevertheless a well-established rule of public policy which override any words of a Will or other legally binding agreements to which the deceased person was party.

Ultimately, the effect of the rule means that one cannot murder their parents or spouse and still expect to inherit. The leading case comes from the English and Wales Court of Appeal – Cleaver v Mutual Reserve Fund Life Association [1892]. See the blog on the forfeiture rule for the case study.

Guardian

A guardian is a person who you appoint in your Will to take legal responsibility for any dependent children you may have. The guardian may not necessarily “care” for the children, but will retain control over important decisions in the children’s lives such as their care, residence and education.

This is identical to “litigation guardians” who are often appointed when an individual no longer has capacity to make legal decisions on their own.

Holographic Will

A holographic Will is a Will written entirely by the testator within his own hand and has not been witnessed (attested). A prime example of a holographic Will is a suicide note.

‘Informal’ Document

For a will to be considered valid, it must comply with the following legislative requirements:

  • Written and signed by the testator;
  • Signed by two or more witnesses;
  • Created with the intention that it will revoke any former wills and that, in the event of their passing, their wishes will be executed.

In some circumstances, however, one or more of these formal legal conditions are not adequately satisfied. If this is the case, an informal will can be presented to the Court. This is a document that is believed to comprise the deceased individual’s wishes and show clear testamentary intention. This means it must be proven that, when creating the informal document admitted, the testator anticipated that it would function as their last will.

An informal will can include anything from a handwritten note or text message to a video of the deceased detailing how their estate ought to be distributed. Although it is possible for certain informal documents to be accepted by the Court, there is no guarantee that they will be approved. For this reason, if you have distinct wishes you would like executed, creating a valid will is usually a far more reliable option.

Inheritance Tax

Inheritance tax refers to the rage of taxes that may be payable by a person who is a beneficiary in a Will. However, in Australia there is no inheritance tax or death duties imposed. All states in Australia abolished death duties in 1979.

Insolvent Estate

An insolvent Estate is one where the person has died with an insufficient amount of assets to pay all the deceased’s creditors. I.e., the deceased person had debts in excess of the value of their estate. In such cases, the potential beneficiaries will be excluded from the provision as the executor needs to use whatever remaining funds available to pay off the deceased’s respective creditors.

The process of repaying the creditors does not happen automatically. The executor will still have to apply for a grant of probate to ensure all assets are released correctly for distribution as well as fulfil the remainder of their role as normal. Once the funeral, testamentary and administrative expenses are taken care of, then the creditors are repaid and the estate is finalised. There is no room in an insolvent estate to dispute its division of funds

Informal Will

An informal Will is a document which does not comply with the formalities listed in the Wills Act 1997 (Vic) which makes a document a valid Will. These include: The Will maker must have attained the age of 18 years to make a valid Will (with a few exceptions); the Will, in writing must be signed by the Will maker or by some other person in the presence of and at the direction of the Will maker; the signature must be made with the Will maker’s intention to make the Will; the Will maker must sign the Will in the presence of two witnesses present at the same time; and, the two witnesses must sign the Will in the presence of the Will maker (but not necessarily in the presence of each other).

Just because a Will is informal, it does not mean that it cannot be admitted to probate as the final Will of the deceased. If the Court is satisfied on the balance of probabilities that the deceased had testamentary capacity at the time and intended that the document be his or her Will, then it will be considered the testator’s last Will and Testament for all intents and purposes.

See blog on Informal Wills for informal Will case studies on computer wills and a text message.

Inter Vivos Gift

Gift(s)/property (real or otherwise) given during the life time of the testator. This term becomes especially relevant when an item of property has been bequeathed to an individual under the Will, but was already given to another individual “inter vivos”. Accordingly, the ademption rule applies and that gift no longer forms part of the testator’s estate

Intestacy

Intestacy occurs if there is no Will, or an earlier Will has been revoked without a new one being made. The deceased is said to have died ‘intestate’. In such circumstances, the Estate will pass to the next of kin in accordance with statutory order as directed by the Administration and Probate Act 1958 (Vic). Intestacy can come in two forms – total intestacy or partial intestacy. In the latter form, although a Will may exist detailing the distribution of part of the deceased’s estate, the remainder has been left in a sort of limbo and therefore needs to be distributed in accordance with the statutory order.

At current the statutory order is as follows: If a person died intestate and leaves one partner without a child of the intestate, the partner receives 100% of the Estate. If that person dies and leaves a partner and children, the partner receives the first $451,909, all chattels and 50% of the residuary. The other 50% is to be divided equally among the children. If the intestate leaves multiple partners without any children. The partners receive 100% to be divided either by agreement or a Distribution Order. If the intestate left multiple partners and children, the partners divide the chattels, first $451,909 and 50% of the residuary by agreement or Distribution Order and then the remaining 50% is to be divided between the children. If none of those circumstances apply there is then a hierarchical chain. Beginning with the children of the intestate to share in the entirety of the Estate, then it moves to the parents, siblings, grandparents, uncles/aunties and cousins and finally if there is no family the Crown will take the entirety of the Estate.

Joint Proprietors

Joint proprietors are where two or more people own property together in “joint names”. This means that when one of the proprietors dies, the property automatically reverts to the remaining proprietor(s). Common examples are houses and bank accounts of spouses, and is known as the “right of survivorship” as the surviving owner automatically absorbs a dying owner’s share of the property.

Legacy

A Legacy, also known as bequest, involves the gifting of money or personal property to a beneficiary that has been passed down in a testators’ will. When a testators’ will is being administered, the executor of their estate will be responsible for fulfilling their specified legacies.

The distinct type/s of legacy that an individual leaves will be dependent on how exactly they intend to distribute their inheritance. If the testators’ will denotes that they would like to gift a fixed amount of money from their estate to a certain person, this is referred to as a pecuniary legacy. Similarly, a specific legacy involves the testator of a will leaving a specified item of theirs to a particular individual.

In instances where the testator would like their beneficiaries to inherit something that they do not actually own, such as shares, this results in the construction of a general legacy. When such circumstances arise, the deceased individuals’ executor will be required to administer their estate accordingly.

Another potential option is to execute a demonstrative legacy. This is where the testator identifies an individual of their choice to inherit an exact sum of money from a particular part of their estate, such as a specified bank account.

Legatee

A legatee is a historic word for a beneficiary. In the context of Wills and Estates it is effectively just a person who has received a ‘legacy’ or a ‘gift’ in the Will.

Letters of Administration

Letters of administration is intestacy’s version of probate. The Supreme Court will make a Grant of Administration and appoint an administrator to dispose of the deceased’s assets, just as an executor would once probate has been granted. To apply for letters of administration, the person must be the deceased’s closest next of kin in the following order: Lawful spouse or domestic partner, children (excluded step children), grandchildren, parents, siblings.

Liability

These are the debts that a deceased person owes at the time of their death. All liabilities must be listed in the Inventory of Assets and Liabilities.

Limitation Period

Pursuant to s 99 of the Act, you have strictly 6 months from the date that a grant of Probate or Letters of Administration is successfully made to contest a Will. The law can be harsh in the sense that often ‘out of time’ is synonymous with being ‘out of luck’, although in some exceptional circumstances an extension of time will be granted. However, the application for an extension cannot be made after the final distribution of the Estate.  

Mediation

Mediation is a confidential meeting that takes place between two parties and is frequently used as an alternative to going to court when contesting or challenging a Will. It is a far more cost-effective way of resolving a dispute with the aim of reaching a mutually agreeable solution. It is an important term to understand if engaging with the team at Hentys Lawyers, as in the last 5 years not one of our Estate disputes has made its way to court, everything has been settled via this form of alternative dispute resolution.

A mediation is most commonly held face to face in a ‘conference room’ environment rather than  formal court room, however it is ultimately up to the partners to determine where to meet, so long as the location is on neutral ground. It can be held either before a Registrar of the Court or a private mediator. In both circumstances, the parties’ legal representative begin by making short statements to the mediator, explaining their position. The mediator will then explain the purpose of the mediation to each of the parties, go through the costs involved if the proceeding were to progress to a hearing before a judge and generally finishes their opening by encouraging the parties to try and solve the matter then and there. The mediator is engaged as a completely independent third party and is simply present to guide the discussion and to ensure the proper process is followed, they by no means set the agenda. They remain impartial and have no authority on the decisions regarding settlement, their role ultimately is simply to encourage different viewpoints in the hope that they will reach a mutually agreeable solution.

Mediator

Mediation is the most common form of alternative dispute resolution in Victoria and is used to resolve estate dispute cases without the parties having to attend court. A Mediator facilitates the discussion in an attempt to get both parties to agree on an outcome that both sides are satisfied with, without having to go through a potentially long and expensive court battle.

The Mediator’s role in the Mediation process is:

  • To direct the discussion
  • To ensure both parties are following a proper process
  • To help to guide settlement discussions
  • To actively assist both parties in ensuring a mutually acceptable settlement is reached.

The Mediator will always remain impartial throughout the proceedings. They will encourage both parties to express their own viewpoint and to consider the other person’s point of view.

The Mediator is not appointed to give legal advice, and does not have the authority to make any decisions regarding the settlement. Rather they are there to guide both parties to reach a mutually satisfactory solution.

Member of a Household

A member of a household is a person who, at the time of the deceased’s death is (or had been in the past and would have been likely in the near future, had the deceased no died, to again become) a member of the household of which the deceased was also a member.

This class of person is eligible to contest a Will pursuant to s 91 of the Administration and Probate Act 1958 (Vic)

However, a member of a household is more than simply living in the same place as the deceased. A household is a group of people who are living cohesively together as a unit or in other words a ‘faux family’ and are involved both in the runnings of the household and in each other’s lives. See the case of Russel v NSW Trustee and Guardian [2014] NSWCA 405 for more information.

Moral Duty

The concept of Moral Duty was first set by the Privy Council in Bosch v Perpetual Trustee Co (Ltd). “Their Lordships agree that in every case the court must place itself in the position of the testator and consider what he ought to have done in the circumstances of the case, treating the testator for the purpose as a wise and just, rather than a fond and foolish, husband or father”. The Bosh v Perpetual Trustee Co (Ltd) case demonstrated that it was not enough for the Court to take into account what a wise family member would do in specific situations, but the Court should place itself in the position of the testator and decide what should be done in light of a “moral duty”.

The concept of a moral duty was later confirmed by the High Court in Vigolo v Bostin [2005] HCA 11, with Chief Justice Gleeson noting that the concept in relation to the Part IV provision is to be understood less as a legal right and more as a ‘moral value’.

Moveable/Immoveable property

The distinction can be complex, however generally speaking “immovable” property includes land and buildings which are extremely difficult if not impossible to move, and everything else (such as liquid assets, intellectual property, chattels) are usually regarded as moveable. This is especially important when dealing with estate property overseas, as often if the property is immovable, it is governed by the overseas jurisdiction, but it is moveable, it can be dealt with in Australia.

Negotiation

Negotiation is the term for any form of direct or indirect communication where parties with opposing interests discuss how to resolve their conflict without the need for going to Court. Negotiations can be used to resolve a pre-existing conflict or to pre-empt any problems that may arise in a future relationship between two or more parties.

Characteristics of a Negotiation in a will dispute case:

  • Negotiation is Voluntary: Parties are not forced to participate in a negotiation and each party can accept or reject the outcome of the negotiation. They are also free to withdraw at any point during the negotiation process.
  • Direct Participation or Representation: Parties can choose to participate in a negotiation themselves, or they may prefer to be represented by someone else, such as a family member, friend, or legal professional.
  • Bilateral or Multilateral: The negotiations can involve two, three or more parties depending on the specifics of the estate dispute case.
  • Informal: There are no set rules for a negotiation. The parties. Generally they will agree on issues such as the subject matter, timing and location of negotiations. Further matters such as confidentiality, the number of negotiating sessions the parties commit to, and which documents may be used, can also be addressed.

Settling a claim prior to the commencement of court proceedings can save significant legal costs. Although legal costs are most often paid out of the estate, legal fees can significantly reduce the value of the estate and as a result, the amount you may be entitled to receive.

Notional Estate

A rule which currently applies only in NSW where the assets of the deceased are returned to the Estate upon the testator’s death, because they should not have been disposed of prior to death. This is governed by s 80 of the Succession Act 2006 (NSW) which permits the Court to designate property as notional estate where the deceased has entered into a “relevant property transaction” in three years prior to his or her death. To rely on this section, it also must be proved that the property was the subject of a “prescribed transaction, entered into by the deceased, specifically for the purpose of avoiding a TFM claim”. Furthermore, if the property was “gifted” to another within 12 months of the deceased dying, then it must be proved that: (1) at the time the gift was given, the deceased had a moral obligation to make adequate provision to the eligible person who is disputing the will (the applicant); and (2) the moral obligation to the applicant was greater than the moral obligation to give the gift in the first place.

Although this concept does not operation within the Victorian Legal system, it does not mean that it applies only to those who reside in NSW. Any property that is held within NSW (even if the deceased lived in Victoria), can be declared as a notional Estate.

No Win, No Fee

This means that your legal costs are not payable unless we provide a successful outcome, as at Hentys we believe that your financial position should not prevent you from achieving justice. For more on Hentys Lawyer’s No Win No Fee arrangement please click here.

Offer of Settlement

In Wills and Dispute cases, if a settlement is not reached at mediation, it is then scheduled for trial where a judge makes a decision on the dispute. Trials can be costly and lengthy, which is why in the interim between a failed mediation and the trial date, it is not uncommon for informal offers to be exchanged back and forth between both sides to try and settle before it reaches court.

These informal offers are known as ‘Calderbank Offers’, and are always made prior to judgement in a dispute, they can even be made prior to legal proceedings being commenced. See ‘Calderbank Offers’ for more information

Partial Intestacy

Partial intestacy is when a deceased individual leaves a valid, but incomplete, will. When such instances arise only certain components of the testators’ estate are accounted for, with those that were excluded from mention being administered under intestacy laws.

There are a number of ways an estate can become partially intestate, for instance, if the deceased did not update their will after having accrued certain new assets. In other circumstances, the testator could have attempted to conceal wealth from those close to them. There is also the possibility that the deceased simply did not have knowledge of their ownership of certain assets or, alternatively, just forgot to include them.

When a will is found to be partially intestate, all assets that have been mentioned by the testator will be distributed as per their instructions. Any wealth that the deceased has failed to include is administered in accordance with relevant intestacy laws, being bequeathed to appropriate beneficiaries as legally deemed suitable.

It is, however, important to note that intestacy rules do not take the closeness of relationships into account. As such, there is the potential for estranged or unknown relatives of the testator to receive partial intestacy of their estate.

Precatory Words

In a will, precatory words are those used to convey hope and desire. They reflect how the testator wishes for beneficiaries to act and include terms or phrases such as ‘requesting’ and ‘expectation’. Precatory words make recommendations to those receiving certain assets on how they ought to be managed, however, such terms are often merely viewed as a suggestion rather than a legally enforceable request.

When determining if precatory words can be enforced, it is important to first distinguish between whether the testator intended for them to be a legal or moral obligation.

If it is determined that the testator simply made a suggestion, then the beneficiary of the assets in question would not be required to act in accordance with such proposal. In such instances the individual would be free to do as they wish regarding the precatory phrase, as long as they are still meeting their other obligations that have been outlined in the will.

Alternatively if the court decides that the testator did intend for these terms to be enforced under legislation, the language used will no longer be interpreted as precatory. As a result of this, the testators’ request becomes mandatory and the beneficiary of their will has the obligation to satisfy their wishes as specified.

Pre-deceased

This is where someone dies before the person who has made the Will, and is why it is always a good idea to include in your Will a substitute executor and substitute beneficiaries

Probate

Probate means proof of the Will. Once the Will has been proven to the satisfaction of the Court – that is, the Supreme Court (Probate Division) agrees that it is the last valid Will of the deceased, probate is granted to the executor of the Will. It authorises the executor to administer the Estate. The executor’s duties include paying debts of the estate, releasing assets and distributing those assets to the beneficiaries. A will cannot be contested until probate has been granted.

Promissory Estoppel

A person may be prevented from leaving someone out of their Will, if the claimant can prove that they were induced by that person into believing that they would be provided for in some way, and that person has relied on this to their detriment.

Ultimately, in these situations, equity binds the promisor to deliver on the promise, even if the promise was not supported by consideration from the promise. The key question is whether it would be unconscionable if the promise is not kept by the promisor.

Proprietary Estoppel

This type of estoppel restricts the legal rights of landowners if they have encouraged the believe in another that he or she has some entitlement over the property, and that belief has been acted upon, usually by some alteration or improvement having been made on the land.

Property

Real Property = Any property that is immovable, being its land and anything attached to the land. Eg Land, buildings, crops and mineral rights.

Personal Property = Any property that is moveable. Personal property is not affixed to or associated with land, and are also known as chattels. Note that personal property includes both tangible and intangible items. Tangible being furniture, vehicles etc. Intangible being stocks, bonds, intellectual property and money.

Residue of Estate

The residue includes the possession, property and money remaining after all gifts have been distributed in accordance with the Will and all debts are settled.

Resulting Trust

A resulting trust scenario begins when one individual transfers funds to another with the understanding that the receiver will use their money to purchase property. Although the finances are a direct contribution from the initial party, the property that is acquired is registered in the buyers’ name.

An agreement of this type involves the individual on the legal title of the property holding it on trust for the other. The registered buyer is seen as having no equitable interest in the property, and it is implied that the transferrer of funds will receive all benefits.

In a resulting trust, however, the registered buyer goes against this principle and intends to acquire personal gain from the property.

When circumstances of this nature arise, it is essential to determine whether the first individuals’ investment in the property was intended to be a gift or a loan. Once such technicalities have been examined, the precise share each individual legally has in the property can be identified. This decision will be dependent of the differing contributions made from each party, and their intent when making them.

Step-child

A step-child of the deceased is by definition a child of one’s husband or wife by a previous marriage. However, there has been a question whether a child can still be considered a ‘stepchild’ at the death of a natural parent, as there is no definition of ‘stepchild’ in the relevant Victorian Act. In the Victorian case of Bail v Scott Mackenzie [2016] VSC 563 it was decided that the meaning of stepchild within the Victorian Act should be widened to include the same as the definition in the QLD act where it explicitly states that a person’s status as a stepchild does not end merely due to the death of a stepchild’s parent, so long as the relationship did not end prior to the natural’s parent’s death.

Bail v Scott Mackenzie demonstrated the law’s changing perspective on blended families, and has been cemented by the more recent Victorian case of Trambath v Trembath [2017] VSC 369. Trembath concerned a plaintiff who sought further provision from the Estate of Olga Trembath who he described as his stepmother. The defendant however contended that the plaintiff had no real prospect of success in establishing that he was Olga’s stepchild at the date of her death as the plaintiff’s father had pre-deceased her. However, the plaintiff relied heavily on the comments in Bail v Scott Mackenzie , with the trial judge in agreeance. The plaintiff was held to be a step-child of the deceased at the time of her death, and accordingly was eligible for further provision from the Estate. The trial judge went further to say that good policy reasons exist in allowing a claim by a stepchild whose natural parent has predeceased the stepparent, and this is the precedent the law should follow in the future.

Superannuation

Superannuation does not automatically form part of a testator’s estate. This has recently been cemented by the Federal Court Decision in Stock (as Executor of the Will of Mandie, Deceased) v N.M. Superannuation Proprietary Limited [2015] FCA 612. The case confirmed that because superannuation does not form part of a testator’s estate, it is not subject to the terms of their will; and, if there is no binding death nomination in place at the time of a testator’s death, the trustee of the fund has the discretion to decide who benefits from the testator’s super provided that the decision is ‘fair and reasonable’.

The only way for superannuation to form part of an Estate is if the trustee’s discretion is exercised in favour of the Estate, or the Estate is the pre-determined recipient under a binding nomination, or by operation of the trust deed. Where the superannuation death benefit does become an estate asset, the Will is able to deal with the death benefit in any manner the testator determines.

Superannuation Nominations (Binding & Non-Binding)

Binding and non-binding nominations fall under the category of “death benefits”. This means they help the superannuation company determine who/where to distribute the superannuation monies after the super fund holder has passed away.

A binding nomination, as the name suggests is binding, so the super fund must follow the super fund holder’s instructions and the superannuation trustee does not have any discretion as to where the payment is to go. A binding nomination has no expiry date and never needs renewing

For a non-binding nomination, the super fund is not forced to follow the super fund holder’s nomination, and they are to simply take this nomination into consideration when making the distribution. When determining who to distribute the superannuation monies to, aside from the non-binding nomination, the superannuation trustee takes into consideration; the number of dependents, the relationship between the member and each of the dependent, the level of dependency between the member and each dependent, and anything outlined in the super fund holder’s Will. A non-binding nomination must be properly document and renewed every 3 years for it to remain valid.

Survivorship

Survivorship occurs where a property which is jointly owned (in joint proprietorship) passes to a surviving join owner automatically, despite what the Will bequeaths. A typical example is when a husband dies and the property automatically reverts into the surviving partner’s name. This property then becomes the sole property of the survivor and does not form part of the deceased’s husband’s Estate.

Tenants in Common

Tenants in common are two or more landowners whose interest in land is separate and distinct form one another. For example, if a married couple own a property together as tenants in common with an equal split, which means the wife owns 50% and the husband owns the other 50%. Upon death of the wife, she can bequeath her 50%, but her husband’s 50% remains his to do as he pleases.

Testator

The person who has made a Will, or given a legacy.

Testamentary Capacity

This is the capacity to make a Will. All adults (18 years or older) are presumed to have testamentary capacity. It is only challenged in cases of dementia, insanity, under the influence of a substance or if they in some other way lacked the mental capacity to form a Will. Anyone under the age of 18 is presumed to not have the capacity to make a Will, however in some jurisdictions minors in the military or who are married have the right to make a Will and are presumed them to have testamentary capacity.

Testamentary Trust

A testamentary trust is a trust created in your Will which operates in a similar way to a discretionary family trust. A trust is beneficial if you have significant assets or have young children as beneficiaries.

This is because:

  • A trust can protect the assets from creditors and trustees in bankruptcy, if there risk that a beneficiary may become bankrupt.
  • A trust can protect assets that may be subject to a beneficiary’s marriage or de facto relationship breaking down.
  • If a beneficiary is unable to property manner their own affairs (eg under-age/ill) a trust grants another person (the trustee) to control this. This allows the trustee to ensure that sufficient funds are available to meet the needs of the beneficiary, bu the beneficiary does not get to control the assets him or herself.
  • A trust can also provide taxation advantages, for example where there are minors who are beneficiaries under the trust.

Keep in mind that in a Will, an executor and trustee are often the same person. The executor ensure that your wishes are carried out in accordance with the will, and your trustee looks after the assets on behalf of beneficiaries.

Trustee

A Trustee is someone who holds a property on trust for someone else, in most cases, a beneficiary. It is common practice that at least two Trustees are appointed when making a Will. The Executors named in the Will are often also appointed as Trustees.

A trust can be set up to benefit a person, or people, or for charitable purposes. Those inheriting assets from the will are known as the ‘beneficiaries. ’ One of the most common circumstances where Trustees are appointed in a Will is when the beneficiaries are children. Their inheritance is often held on trust until they reach adulthood.

Trustees are bound by a ‘fiduciary duty’ to the beneficiaries, which means that they have a ‘duty of care’ towards the beneficiary. They must ensure there is no conflict between their own interests and those of the beneficiaries. The trustee also has a number of duties to perform, which are specific to the type of trust that has been set up.

Generally, a Trustee will be responsible for the following:

  • Acting impartially to all beneficiaries
  • Acting in the best interests of beneficiaries
  • Ensuring all investments are prudent
  • Not making a personal gain
  • Accounting for their own actions and ensuring beneficiaries are updated
Undue Influence

A common argument used when trying to prove that a Will is invalid. This being that the deceased acted under the influence or pressure exerted by another when writing their Will, the Will would be found to reflect the influencer’s wishes rather than the deceased’s and is invalidated.

Will

A Will is a written document (which can be revoked) that allows you as the testator to specify your wishes as you want them to be carried out after your death. It also designates (in the form of an executor/trustee) who you want to control your assets and distribute/supervise the management of your estate.

A will also lets you direct what is to happen with your body upon death, request any specifics with regards to funeral arrangements and choose the person/people to carry out this task.

Certain formalities listed in the Wills Act 1997 (Vic) are what makes a document a valid Will. These include:

  • The Will maker must have attained the age of 18 years to make a valid Will (with a few exceptions)
  • The Will, in writing, must be signed by the will maker or by some other person in the presence of and at the direction of the will maker
  • The signature must be made with the will maker’s intention to make the Will
  • The will maker must sign the Will in the presence of two witnesses present at the same time
  • The Two witnesses must sign the Will in the presence of the will maker (but not necessarily in the presence of each other)
Witness

In relation to a will, a ‘Witness’ is a person who observers the testator making the will. As proof that the witness has seen the testator sign the will, they also sign their own name on the will.

In Victoria, a will is not valid unless two people have witnessed it. Both of these people must witness the testator signing the will in the presence of the testator and each other. When the witness signs the will, they have to be in the presence of the testator, but don’t necessarily have to be in the presence of each other, however in most cases it is practical that all three parties are together.

Under Victorian Law, the witnesses have to see the testator sign the document, but they do not necessarily need to know that the document is a will.  They also do not need to make an assessment as to whether the testator is of sound mental capacity when making their will.

A witness can be any competent adult capable of performing the necessary duties, including a beneficiary under the will. There are no particular qualifications required to be a witness.

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