WILLS AND OTHER THINGS

Published 30 Nov 2016
Michael Witts

Everybody should have a Will. A Will sets out where your assets go after your death. If you do not have a Will then you are said to die "intestate" and the Rules of Intestacy apply. This means your assets are distributed amongst various groups of people determined by legislation firstly, spouse, then children then parents then brothers and sisters etc. As soon as one of the beneficiaries in a class is identified the assets pass to that group and potential beneficiaries down the line obtain no benefit. If you want a say in how your assets are distributed then you should leave a current Will.

All Wills should revoke prior Wills. They should normally appoint an Executor, who is the person you want to carry out your wishes. There are formal requirements for execution of the Will including that it be dated and signed by you in front of two witnesses who must also sign. The witnesses to the Will should not obtain any benefit under the Will. An Executor can be a witness if they obtain no benefit under the Will. It is often easier just to find two independent witnesses who are not mentioned in the Will.

When a person dies with a Will we talk of obtaining a Grant of Probate in the estate. This is simply the administrative process of the Executor making an application to the Court by way of Summons seeking the Grant of Probate so that they can deal with the assets of the deceased. Although there are some filing and legal costs in obtaining a Grant of Probate the process is relatively straight forward and quite quick. It is important to remember there are no death duties, estate duties or inheritance taxes applicable in New South Wales and the transfer of property to a beneficiary attracts only nominal stamp duty of $50.00. Making a gift to somebody under the Will has certain benefits over making a gift during your life (an inter vivos gift). An inter vivos gift may raise issues to do with your pension entitlement and may trigger a capital gains tax event either for yourself or for the person receiving the property. Gifts during your lifetime should be made with Accountant's advice as to the financial impact of the gift upon yourself and the person receiving the gift. If a pensioner receives a gift under the Will then they must disclose this to Centrelink so that an adjustment can be made to the pension entitlement.

A Will operates on death. It disposes of the assets of the deceased person held at the time of death. It is important when drafting a Will to consider your circumstances now and into the future. It is not unusual for probate to be granted on Wills done twenty or thirty years before. The gift of specific assets (a property or a bank account or a vehicle) is at risk of failing if that asset is sold or no longer exists at the time of death. In general terms it is better to give a beneficiary a share of the total pool of assets rather than a specific asset. If you give a specific asset then in 20 or 30 years time it may not exist or it may have gone up or down in value such as to distort the distribution in your Will. These are matters for discussion at the time your Will is drafted.

It is a good rule to have a look at your Will every three to five years. It is important to ensure your Executor is still alive and capable of acting as Executor. It is not unusual to find that the nominated Executor has died or lost capacity. Appointment of more than one Executor is a wise step.

People often seek to pass their superannuation entitlement (which may be a significant asset) to certain nominated beneficiaries or groups of beneficiaries. It is important to note that generally superannuation will not pass under the Will unless the trustees are unable to find a dependent to receive the benefit. In general terms superannuation passes firstly to the person or persons nominated by way of binding nomination provided this nomination is in favour of a dependent and is current (no more than 3 years old). Secondly superannuation passes to dependants within the meaning of the relevant superannuation legislation (spouse and children) and thirdly, if the trustees are unable to make an determination to pay the money to a dependent then it will pass to the legal personal representative (the Executor) and only then becomes part of the Estate. There are significant tax implications for how and to whom the superannuation passes. If the superannuation passes to a financially dependent person, (typically a spouse) then the anti-detriment payment applies and there is no tax. If the superannuation passes to a non-financially dependent person or to the Estate then it will probably be subject to tax at a combination of 15c in the dollar and 30c in the dollar. If superannuation is taxable then this can be a very significant sum.

It is important to recognise you do not control where your superannuation is distributed. This is subject to a decision by the trustees of the relevant super fund who are governed by a trust deed. Doing a Will which says that I want my superannuation to go to my son and the rest of my assets to my spouse is doomed to fail as the most likely result is that the spouse will receive the superannuation (from the trustees) and the house (from the will). Careful consideration needs to be given to the question of superannuation at the time you make your Will.

During your life there are any number of disabling events which may render you incapable of looking after your own affairs either partially or totally. Strokes, accidents and dementia are common events which can render a person incapable. In these circumstances the person needs to have put in place, at an earlier time, an Enduring Power of Attorney and an Appointment of Enduring Guardian. If a Power of Attorney is to survive the incapacity of the person making the power of attorney then it needs to an "enduring" power of attorney. An enduring power of attorney must say on its face that it is to continue after the event of incapacity and it is necessary that the signature of the person granting the power be witnessed by a Solicitor who must also provide the relevant certificate. For practical purposes most powers of attorney which are done are in an enduring form.

Powers of Attorney deal with money and the practical side of your life. Guardianship deals with your person. If a person loses capacity and needs to be moved into assisted accommodation then it is only the guardian that can make that decision, whilst it is the attorney who can pay the bills. Somebody with a grant of power of attorney cannot make the decision to move a person into assisted care. Similarly the guardian can move you into assisted care but cannot attend to payment unless they have a separate power of attorney. In most cases if you need either a power of attorney or guardianship then you need both.

Powers of Attorney come in different forms and can commence at the happening of any number of events. Commonly powers of attorney are designed to operate when the person granting the power of attorney "needs assistance in managing their affairs". This is a decision made by the person who has the grant and does not generally require any medical certificate to trigger the operation. However there are a number of alternatives for the commencement of a power of attorney. Guardianship by contrast only operates in circumstances where the person granting the power loses capacity (ie becomes a person in need of guardianship). Since guardianship deals with accommodation, health care and medical consents it is generally the hospital, doctor or nursing home who say we need to talk to the guardian because they deem the person to have lost capacity. It is important that these things be put in place at an early time because after a stroke or an accident is often too late for these powers to be granted. In this circumstance it would be up to the family to make an application to NSW Consumer and Administrative Tribunal (NCAT) in its Guardianship Division. This just adds delay and uncertainty at a time of stress.