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Consideration of Inheritance in Property Settlements: Who’s Entitled to What?

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How Does Financial Separation Work?

There are four ways financial separation can occur:

  1. By Orders of the Family Court of Western Australia;
  2. By Consent Orders;
  3. By Binding Financial Agreement; or
  4. By Informal Agreement.

You should seek legal advice from a lawyer experienced in Family Law property matters to determine the best form of financial separation for you.

When finalising your orders formally, there is an expectation that Orders or an Agreement should completely sever the financial ties between the parties, known as the clean break principle, and then ‘vest’ any property a party is entitled to in the name of that party. In doing that, it means that except in very limited circumstances, your ex should not be able to come back and try and seek further funds from you.

 

What Happens if I receive an Inheritance Payment Prior to Financial Separation?

It’s not always simple to come to an agreement on financial separation, and there is always a risk if you only come to an informal agreement, that your ex can try and come back later and seek more funds from you. This may occur where one party receives an inheritance after the death of a parent.  

There is a common misunderstanding that inheritance received after separation, or towards the end of the relationship will not be included in the asset pool. This is not always correct. Assets obtained post-separation or to benefit only one party are still considered a part of the asset pool. The Courts starting position is that all assets obtained, during the relationship and even post-separation is to be considered during a property split. This is often referred as the “global approach” and whilst it is common, there are exceptions to the rule. If a party wishes to “quarantine” inheritance then they must be able to show there are sufficient funds in the asset pool to ensure a just and equitable division and that the other party can still receive a fair portion of the asset pool without having to take from the inheritance.

When it comes to inheritance, relevant considerations include, when the inheritance was received and the nature of the relationship between the deceased and the other party.

 

Timing

If the inheritance was received early in the relationship or even before the relationship commenced, it is usually treated as an initial contribution of that party and is a relevant factor in the division of assets.

If the inheritance was received during the relationship it can be considered to be used for the “betterment of the family or the couple” and is likely to be considered a contribution to the relationship and not to the benefit of either party. The exception to this however is if the deceased makes it very clear that the inheritance is only to benefit the inheriting party. In which case, the funds would likely be considered as a financial contribution by the inheriting party and there would be some recognition in the division of the asset pool of the money provided.

If the inheritance is received post-separation, there are two ways it could be treated, and, depending on your individual separation will depend how it is treated. It will be treated as either:

  1. Part of the global assets; or
  2. A quarantined asset

 

Relationship Between the Deceased and the Other Party

When deciding if an inheritance should be shared between the spouses in a financial separation, the court considers the intention of the deceased. If the deceased appears to have left the inheritance for the betterment of the entire family, a court is likely to include it in the asset pool despite the receipt of the inheritance being after separation. On the other hand, if it appears to have been left only to the named beneficiary, it is likely to be kept apart from the divisible assets. Similarly, the court will look at the relationship of both spouses with the deceased to discern what the intentions would have been.

Essentially, if the inheritance is received before finalising Consent Orders for the property settlement, it is possible that it may be included in the asset pool. It is best to seek legal advice on the possibility of including or protecting an inheritance from being included.

For advice on financial separation, especially if you are aware you or the other party will be, or have, received inheritance or the likelihood of inclusion of an inheritance after separation, contact us on (08) 9408 5212 or info@cdlawyers.com.au to book a meeting.

 

Please note that the above is general information and should not be relied upon as legal advice. All situations are different and legal advice must always be tailored to the specific situation.

The Pitfalls of Homemade Wills

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Homemade Wills are a tempting proposition for those interested in reducing the costs associated with obtaining legal services. Whilst on the surface these Homemade Wills kits appear be straightforward and binding, this is not always the case. It is important to ensure that your Will is prepared in the proper legal manner so that your wishes are unambiguous, and your estate may be correctly dealt with at the time of your passing.

The common issues surrounding Homemade Wills have been exemplified in the Supreme Court of Western Australia’s recent case James Edward Donnelly as executor of the estate of Sarah Shulman v Donnelly 2020 WASC 254. In this decision, Master Sanderson at [13] heavily criticised the ambiguity of the Homemade Will in question, stating:

“Although it is a valid will because it complies with the provisions of the Wills Act apart from appointing the plaintiff as executor, it has no content. It makes no disposition. It is meaningless.”

In this case, despite there being every reason to believe that the deceased intended to leave her entire estate to the first defendant, even the most benign interpretation of the Homemade Will offered no benefit to the first defendant. Apart from being mentioned as executor of the Will, the first defendant was not mentioned at all – in fact, no-one was.

Master Sanderson suggests in this judgement that there is no question of the Will being ambiguous, as it simply remained silent on who was to receive the benefit (the beneficiaries of the Will). Through proper exercise of the construction of the Will, it was determined by Master Sanderson that, on the facts, he was satisfied that the deceased intended to leave her estate to the first defendant.

Although in this case the exercise of discretion fell in the favour of the defendant, this acts as a reminder as to the pitfalls of drafting Homemade Wills.

 

How do the Courts Construct an Ambiguous Wills?

You may be wondering what process is undertaken to properly “construct” or “read” an ambiguous will by the Courts? Construction of a Will is a two-step process:

  1. Firstly, the Will is to be read on its own without regard to any evidence. If this does not lead to an interpretation of the Will then an attempt must be made to deduce the intentions of the testator.
  2. If the intentions of the testator cannot be readily discerned for any reason, then the court should proceed to construe the Will with the assistance of cannons of construction. These cannons often allow a judicial officer to review extrinsic materials, as per section 28A of the Wills Act 1970 (WA), to better consider the intentions of the testator at the time of drafting the Will.

 

Common issues with Homemade Wills

Although use of these Homemade Wills kits may provide you a legally binding Will, it may not be drafted in such a way as to achieve what you truly intended. Common issues with Homemade Wills include the following:

  1. Failure to properly date the Will;
  2. Leaving the wrong assets or assets you are not entitled to distribute;
  3. Misunderstanding legal definitions;
  4. Losing the Will;
  5. Incorrectly witnessing documents;
  6. Unintended Tax Consequences;
  7. Appointing the wrong Executor;
  8. Ignoring potential and eligible beneficiaries; and
  9. Failing to provide for the guardianship of children.

 

Recent Judicial Commentary regarding Homemade Wills

Despite gaining popularity in recent years, Homemade Wills have been an enduring cause of concern within the Judicial system. Recent Western Australian examples which demonstrate this concern include the following:

Kossert v Ruggi as Executor of Will of Korps (No 2) [2012] WASC 191

Kenneth Martin J at [8] stated:

‘Sadly, as so many home-made wills seem to do because of a failure to receive proper legal advice, it throws up the question of [the deceased’s] failure to deal fully by his will with the one substantial asset he left, namely the house and land’

 

O’Brien, as Executor of Will of Hogan v Warburton [2012] WASC 82

EM Heenan J at [3] stated:

“ [the deceased’s] last will was prepared by him or at his direction apparently without any legal advice or assistance. Major difficulties have arisen in determining the proper construction of the testament and, in particular, whether or not it fails fully to dispose of the testator’s estate, so leaving a partial intestacy”

EM Heenan J at [58]:

“Obvious difficulties arise when parts of a will are ambiguous or, worse still, inconsistent. Such problems are often experienced in home-made wills such as this..”

 

Thomas v Pearman [2017] WASC 209

Master Sanderson at [1] criticised Homemade Wills, stating:

“The will and the codicil were home-made. They comprise 14 pages in all. They are a particularly egregious example of the folly of home-made wills.”

 

How can Carter Dickens Lawyers help?

Our expert lawyers are able to properly draft a will in the accepted legal manner, ensuring all of your wishes are to be fulfilled upon your passing. This will circumvent the ambiguous situations that often arise from Homemade Wills kits, and ensures that you can confidently have your Will executed as per your intentions.

At Carter Dickens Lawyers, we have the experience and knowledge to help you navigate this potentially complicated area of law. We understand the difficulties faced by families upon the death of a loved one, and we hope to ease this process by ensuring your final wishes are understood and binding.

Our Wills and Estates matters are provided on a fixed fee basis. Wills and Estates matters we may assist you with include the following:

  • Single Wills
  • Couples Wills
  • Enduring Power of Attorney (EPA)
  • Enduring Power of Guardianship (EPG)
  • Advanced Medical Directive
  • Probate Application
  • Letters of Administration (Deceased had no Will)

If you would like to discuss your Wills and Estates related matter, please contact Carter Dickens Lawyers on (08) 9408 5212.

Please note that the above is general information and should not be relied upon as legal advice. All situations are different and legal advice must always be tailored to the specific situation.

 

Do you require a ‘Sharia-compliant’ Australian Will?

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Australian Muslims are often obliged to ensure that they have a legally valid Will which conforms to both Australian Law and Islamic guidelines. This is particularly difficult to achieve where key understandings of the cultural, religious and legal needs of Islam are misunderstood by the practitioner tasked with drafting their client’s Will.

Islamic law is not recognised in Australia as we are deemed to be a ‘secular’ nation. Your will, therefore, needs to comply with Australian law for it to be legally enforceable, whilst incorporating the required clauses to ensure that your assets are distributed in accordance with the Islamic rules contained in the Quran.

At Carter Dickens Lawyers, we seek to bridge this gap and have ensured we have services tailored towards these specific needs of our clients. Our ‘Sharia-compliant’, or ‘Islamic Wills’, offer a service which provides legally valid Australian Wills custom-made to satisfy the strict Islamic guidelines following a person’s passing. In particular, we understand the varying requirements with regards to burial arrangements, the distribution of the estate, payment of obligations and the powers of trustees.

 

Burial Arrangements

Burial Rites

By executing a valid Islamic Will, a Muslim can give directions for the executor to make proper preparations for the washing and shrouding of the body. In addition, directions can be made for the funeral procession, funeral prayers and the burial. This allows a Muslim to state their intention to have an Islamic funeral.

At Carter Dickens Lawyers, we further ensure a proper Islamic burial via making provision for the counsel of a pre-selected Imam for any questions that arise.

Autopsy

As per the Quran, your valid Islamic Wills may contain directions for the prevention of voluntary autopsies, unless required by Australian Law. In addition, your Will can contain provisions for either allowing or preventing removal and donation of organs and other internal body parts.

 Obligations & Distribution of Estate

 Under Islamic law, your estate will be distributed as follows:

  • First, all funeral expenses must be paid, followed by the payment of all debts (secured and unsecured) owing.
  • The remainder of your estate, after deducting liabilities/debt is referred to as your net estate.
  • From your net estate, Islamic law permits you to distribute up to one-third as a legacy to any person, provided they are not heirs to the remainder of your estate. A legacy can be paid to a Muslim or non-Muslim and to any organisation or charity of your choice.
  • The remainder of your net estate, after deducting any legacies, must be distributed to your heirs in accordance with Islamic law. The section below outlines the expected shares.

 

Expected Distribution Percentages

Essentially the beneficiaries of your estate are your spouse (if you have one), your parents and children. Other immediate family members may become beneficiaries if your parents or children have not survived you. The percentage distributions are allocated as per the Quran, and varies depending on survivorship of the beneficial parties. Essentially, the basic inheritance shares are to be distributed according to the following table:

Relative Share
Each surviving parent 1/6
Surviving husband (where children exist) 1/4
Surviving husband (no children) 1/2
Surviving wife (where children exist) 1/8
Surviving wife (no children) 1/4
Surviving son (where surviving sister(s) exist) Son receives twice the share of a daughter
Surviving son (no sister) Son(s) receive remainder of estate
Surviving daughter (where surviving brother(s) exist) Daughter receives half the share of a son
Surviving daughter (no brother) Only one daughter = 1/2 of the estate

Two or more daughters = they share 2/3 of the estate

It is due to these particular Islamic requirements and their interaction with jurisdictional legal issues that legal advice is recommended prior to drafting and executing a ‘Sharia-compliant’ Australian Will.

Carter Dickens Lawyers excel at providing legal assistance and advice regarding the specific circumstances surrounding these Wills. We will ensure that you are made aware of any risks, and will provide a fully compliant Will to ease the potential legal strain associated with your passing.

Please note that the above is general information and should not be relied upon as legal advice. All situations are different and legal advice must always be tailored to the specific situation.

Applying for a Grant of Probate

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What is Probate?

Probate is the process in which a deceased person’s Will is proved and registered by the Supreme Court of Western Australia as being the last valid Will of the deceased person.

A Grant of Probate confirms that the executor named in the deceased person’s Will has the legal right to deal with deceased person’s estate. Banks and other financial institutions, Landgate, and share registries will often require a copy of the grant or to see the original version when dealing with the executor/administrator on the deceased’s person’s property.

The type of Grant required from the Supreme Court depends on the circumstances surrounding the execution of a Will by the deceased. For example, where no valid Will has been left, the process of applying for a Grant is via Letters of Administration, this process becomes more complex than a Grant of Probate, and we therefore recommend contacting Carter Dickens Lawyers to assist you through the process.

 

Common Forms of Grant:

  • Probate – where a person has died leaving a Will that nominates a person as executor the Court may grant Probate to that person.
  • Letters of Administration with the Will Annexed – where a person has died leaving a Will that does not name an executor or where the only executor named in the Will is unable or unwilling to apply for a grant of Probate, the Court may grant Letters of Administration with the Will Annexed to an appropriate person who will usually be a beneficiary of the deceased’s estate.
  • Letters of Administration – where a person has died without leaving a valid will the Court may grant Letters of Administration to an appropriate person who will usually be a beneficiary of the deceased’s estate.

Being awarded one of these types of Grants is representation to the World that the Executor/Administrator of the Estate has the right to deal with the deceased’s Estate.

 

When Will Probate Not Be Required?

There are particular circumstances where an Executor may not require a Grant of Probate from the Supreme Court of Western Australia. These include:

  • The deceased person did not own any assets in Western Australia (in which case Probate may be necessary in the Supreme Court of the relevant State);
  • The deceased owned real estate at the date of death as a joint tenant with another person. In this case the title can be transferred to the surviving party without a grant of probate being required;
  • The deceased’s bank account was jointly held with another person such as a spouse or partner. Such bank accounts will normally be transferred to the surviving party on production of a death certificate to the bank by the surviving party;
  • The deceased’s only other assets were personal possessions and household effects;
  • Shares owned by the deceased have a market value of less than $15,000;
  • The bank accounts of the deceased have a balance of less than $10,000 (the precise balance before a bank requires a Grant varies between individual banks).

 

Documents Required in Simple Application for Grant of Probate

All basic applications for probate require the same five documents (which increases to six if there are any other testamentary instruments). Additional documents may then be required to satisfy the court as to other issues.

The five basic documents (the sixth being any other instrument of a testamentary nature) are:

  1. motion for a grant of probate;
  2. affidavit of applicant for probate;
  3. rule 9B statement of assets and liabilities;
  4. the original will and any codicil;
  5. the original death certificate; and
  6. any other instrument of a testamentary nature.

 

What is the Process to Obtain a Grant of Probate?

The executor named in the deceased person’s Will must make an application to the Supreme Court. An application can be made at any time after fourteen days from the death of the deceased person, but it is necessary for the deceased’s death certificate to be provided in this application.

Once an application for a Grant has been lodged in the Supreme Court, the typical period of processing is four to eight weeks, however, this is dependent on the court’s capacity to hear the matter.

If the court is satisfied with the application, they will issue a Grant of Probate. If the court is not satisfied with the application, it may issue a requisition notice. A requisition notice is simply a notice which advises that there is a defect with the application or that the court requires more information.

At the conclusion of this process, the deceased person’s original Will is retained by the Supreme Court, with a copy of the Will being attached to the Grant of Probate.

 

For More information please see the Supreme Court of Western Australia’s Wills & Probate Webpage or contact Carter Dickens Lawyers on (08) 9408 5212 for a free 15-minute phone consultation with one of our Lawyers.

Please note that the above is general information and should not be relied upon as legal advice. All situations are different and legal advice must always be tailored to the specific facts of your Legal Matter.

Are you legally prepared for COVID-19?

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Whilst we prepare for many events in our lives, we often neglect to discuss the difficult ‘what if’ topics like passing away suddenly. Unfortunately, for many people, this means they leave their family without information and guidance about what to do when they die. Without adequate preparation, your loved ones may be left exposed to drawn out litigation required to settle your estate. As such, it is importantly to ensure you are legally prepared for the unforeseen to prevent further hardship to your family.

On the 11th of March 2020, the World Health Organisation (WHO) declared the Coronavirus (COVID-19) a pandemic. This is just one example of many unforeseeable global issues that may have significant implications for those who are legally unprepared. It is vital that people of all ages ensure that they are prepared for the legal ramifications of death or illness. Please make sure that you stay up-to-date and comply with all government directions and policies regarding COVID-19.

If you have not already done so, you should ask yourself the following questions to see if you are legally prepared for the unforeseen:

Do I have a Will and is it up to date?

No one wants to be worried about their assets from a hospital bed, as such it is vital to have a Will prepared. A Will is a legal document that sets out how you wish for your assets to be distributed after your death. It forms part of an estate plan and is an important strategic step in preserving your property for your family or other beneficiaries.

Passing away without a Will can place a significant burden on your family. It can impose onerous legal fees on your loved ones, and may result in your assets being distributed by the Supreme Court of Western Australia. Having a Will may ensure that your estate is dealt with promptly and efficiently and that your family is not left to fight drawn out legal battles.

Simply put, a Will properly drafted by our lawyers is the best way to have your assets dealt with in accordance with your wishes after your passing. A Will is designed to reduce future complications and reduce the likelihood of disputes arising from the interpretation of your Will between trustees, beneficiaries, and other parties.

Do I have an Enduring Power of Attorney?

An Enduring Power of Attorney (“EPA”) allows you to appoint someone you trust to make property and financial decisions on your behalf in the event you lose the legal capacity to manage your own affairs. This will include managing your money and real estate. An EPA does not permit an attorney to make personal, medical and lifestyle decisions.

In light of events such as the COVID-19 pandemic, the benefits of an EPA are clear given the chances of hospitalisation or isolation. In such an event, an EPA would allow your appointed attorney to undertake a range of tasks  on your behalf when and if appropriate to do so. These may include everyday tasks, such as paying your bills and signing documents that require urgent attention, or more complex tasks such as dealing with your property (i.e. selling property) during your recovery.

Do I have an Enduring Power of Guardianship?

An Enduring Power of Guardianship (“EPG”) allows you to appoint someone to make personal, lifestyle and treatment decisions on your behalf should you ever become incapable of making these decisions yourself. These decisions include, but are not limited to, where you will live and what medical treatment you will receive.

With events such as COVID-19 having potentially life-threatening health impacts, it is vital to ensure that you have a guardian, appointed via a legally enforceable EPG. Your appointed guardian should understand your health care plans, directives and wishes should you become incapable of dealing with your own health care decisions. You must also ensure that if you have already appointed a guardian, they know of their appointment and are willing to act in such a capacity.

Where no attorney is nominated via an EPG you risk having the Public Advocate, which is a government body, appointed to assume responsibility over your health care decisions. This means that should you become mentally, or physically incapacitated without having executed an EPG, your family may not have sole control over your health care decisions.

Did you know that your Superannuation does NOT form part of your estate by default?

Superannuation is not considered an estate asset. A super fund is a type of trust meaning that it is not legally “owned” at the time of death. This means that on death it does not flow to the estate of the deceased automatically. Instead, without a binding death nomination a trustee of the super fund will pay out ‘death benefits’ in accordance with the governing rules of the fund and relevant law. This means that if you arrange to leave all your super to a child or spouse, this might not be honoured upon your passing.

However, an up-to-date Binding Death Nomination can be used to override the trustee’s discretion and ensure that the arrangements you have made during your lifetime are honoured. Simply put, a Binding Death Nomination is a legally binding nomination allowing you to advise the trustee who is to receive your superannuation benefit upon your passing and how to distribute your benefit.

Note, Binding Death Nominations should be reviewed regularly, as they can lapse in binding force after a period (usually 3 years). If you do not have a Binding Death Nomination or have not reviewed it in recent years, we advise that you talk to one of our lawyers regarding your options.

Do I have all my important documents in order?

You should ensure that copies all your important documents are stored together with your Will. Usually, after a person passes away, that person’s family will struggle to locate all relevant documents, passwords, and keys. To assist your family, you should prepare a list detailing your:

  • assets and liabilities;
  • access codes and passwords;
  • the location of keys and other documents i.e. bank account details, superannuation details etc.; and
  • details of your financial advisor, lawyer, accountant, insurance company and similar entities.

It is important to share with someone you trust the location of that list.

Do I need to nominate a guardian for my children?

If you are a parent of a child under 18, it is important that you know who will take care of your children if anything were to happen to you. Generally, whilst care of your children would flow to the other parent, it is worthwhile determining who would assume care of your children in the unfortunate event that both you and the other parent have passed on.

Fortunately, s71(3) of the Family Court Act 1997 allows you as a parent to appoint a testamentary legal guardian for your child via a Will or Deed. The appointment of a guardian will only take effect upon the death of the last surviving parent or legal guardian of the child. The appointment ends when the child reaches the age of 18 years. If you are unsure of who will take care of your children if you and the other parent are no longer, it may be time to speak to one of our lawyers.

If you have not yet prepared the above documents, you leave your family open to the potential of costly litigation. Further, there is no guarantee that your arrangements would be honoured upon your passing if you do not have a legally enforceable Will.

 Contact CD Lawyers today, and we can assist you and your family in ensuring you are legally prepared for the unforeseen.

Please note that the above is general information and should not be relied upon as legal advice. All situations are different and legal advice must always be tailored to the specific situation.

A Beneficiary’s Access to Trust Information and Documentation

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Beneficiaries have a prima facie right of access to information relating to their trust and trustees have a corresponding duty of disclosure. This right to access trust documents is exceedingly broad and encompasses almost all documents or information which can be categorised as ‘trust documents’. The definition of a ‘trust document’ was brought up in Silkman v Shakespeare and ‘may include those which evidence or record the nature, value and condition of trust assets’. Of these trust documents, trustee’s will always have a duty to disclose Accounts, Vouchers and Financial records.

One legal ‘grey area’ that remains is whether a beneficiary will be privileged to legal advice obtained by a trustee for the administration of trusts. As an example, legal advice which concerns a breach of trust, despite relating to the administration of a trust, may be privileged information between the trustee and their legal counsel.

Two competing approaches have developed around a beneficiary’s access to trust information.

The Londonderry Approach:

This approach is the more expansive of the two and was developed in the case of re Londonderry’s Settlement. The underlying basis of the Londonderry Approach is that documents are the property of the trusts or are so closely related to trust property that the beneficiary has a legal interest in them. Therefore, beneficiary’s right to inspect the trust documents held by the trustee is an equitable proprietary interest. The only thing that needs to be shown to the courts, when using this approach, is that the documents in question are trust documents. If this can be shown, then the courts will use their inherent jurisdiction to grant assess of the documents to the beneficiary. The most determinative factor when using this method is whether the documents in question where paid for using the trust’s funds.

The Schmidt Approach:

This approach has come out of the verdict of Schmidt v Rosewood Trust Ltd (Isle of Man). It represents a shift away from the former proprietary approach, seen in the Londonderry, to one more at the discretion of the courts. This approach has been used because it allows the court to take into account the parties competing interests in trust documents and determine if the beneficiary has a right to obtain trust documents.

What may be considered by the court has not been enumerated but can be inferred from cases. As an example, a beneficiary will not have a right to confidential communications between the trustee and their solicitor made for the dominant purpose of giving or receiving legal advice. The beneficiary’s rights to see these trust documents in these circumstances are not regarded as relevant for proper administration and transparency of the trust. However, a beneficiary may have a right to litigation documents if they relate to management of trust estate. Other factors that the courts can consider are the confidential nature of the documents, the trustee’s obligations and the reason the information is being sought (e.g. is it just a ‘fishing expedition’). Ultimately, what needs to be shown for the beneficiary requires the trust documents for supervision and administration of the trust.

Recently, in Avanes v Marshall the Schmidt approach was used because the judge felt it did not represent a significant departure from the Londonderry Approach and should be adopted in Australia.

Summary:

In most circumstance, Trustees will be obliged to release trust documents when a beneficiary makes a request for information. When a dispute about access to information arises, the court will use its inherent jurisdiction to settle the matter. The approach used by the court could have a significant bearing on whether the beneficiary has access to the information in question. A beneficiary will have access to trust documents if the documents don’t contain confidential information of a third party or access is not at the discretion of the trustee. Qualifications like legal professional privilege, the confidential nature of the material, the trustee’s other obligations, and the reason for the information being sought, may all be used to determining this.

Please note that the above is general information and should not be relied upon as legal advice. All situations are different and legal advice must always be tailored to the specific situation.

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