Wills

A will is a document which sets out how the person making the will (a testator (he/him) or testatrix (she/her)) disposes of their property at the time of their death.

Your executor(s) are responsible for the administration of your will.

In their simplest form, a will may facilitate the disposal of your assets to your surviving partner and/or children.

More complex wills involve specific gifts of assets to certain beneficiaries and may even involve the creation of testamentary trusts (the settlement of property into trusts for certain beneficiaries).

It is important to understand that the terms of you will does not necessarily cover all assets in which you may hold an interest. For example:

• jointly owned assets may result in ownership interests transferring to a survivor on death
• the distribution of superannuation entitlements are not ordinarily governed by your will
• persons with assets located outside of Australia may find that an Australian will does not take effect in relation to foreign property
• assets held in companies, partnerships or trusts may require more advanced planning techniques to facilitate the transfer of control and enjoyment of indirectly held wealth

DID YOU KNOW: there is a very limited list of countries which have signed and given effect to the Convention providing a uniform law on the form of an international will (Washington DC, 1973) – and that list does not presently include the UK, USA, China or India

Advanced estate planning and succession arrangements

Effective estate planning involves more than making a will.

In an ideal situation, appropriate estate planning arrangements are made during the testator’s life and in their will which cumulatively result in no challenge being made against the testator’s estate. That is to say, there should be no disappointed beneficiaries, or if there are any, the likelihood of a challenge should be reduced by putting assets beyond their reach or otherwise making it uncommercial for eligible persons to make a claim.

It is impossible to guarantee that the terms of a will are drafted to put them beyond the reach of potential claimants of an estate. However, effective estate planning should achieve the following objectives:

• continuity of ownership and operation of family assets
• tax efficiency during life and after death for the testator and their beneficiaries
• to the fullest extent possible, asset protection from creditors and claimants

At VanderFox, we don’t just draft a will on your behalf – we assess your past, present and future circumstances and those of persons entitled to make a claim upon your estate.

Estate planning may involve:

• identifying the nature and extent of the risk of your will being challenged
• a detailed review of the tax profiles of assets and holding structures in private wealth settings
• undertaking transactions during your lifetime in order to mitigate against risks of claims made against an estate
• creating holding structures and other arrangements intended to operate beyond death
• the liquidation and re-investment of assets before or after death

Enduring powers of attorney and appointment of enduring guardians

A will only takes effect on a person’s death.

For situations where a person has not died but is unable to make their own decisions, the two instruments that are used in Australia are:

• powers of attorney
• appointments of enduring guardians

A power of attorney (POA) provides the selected person(s) with the power to make legal and financial decisions on behalf of the individual making it (the donor) and may be created in two forms. An attorney must act in the best interests of the donor.

A general POA is used when creating temporary powers under certain conditions. Some examples of where general POAs may be helpful include situations with foreign or collective investment interests.

In contrast, an enduring POA is intended to become effective under certain conditions and remain permanently in effect. In estate planning, enduring POAs are set up in advance so that your trusted attorney(s) are given the power to manage your legal and financial affairs before you lose the capacity to do so.

An appointment of enduring guardian (AEG) is an instrument which gives the guardian the power to make health and lifestyle decisions on your behalf.

Whilst there are “default” guardianship powers which may be exercised in the absence of an AEG, the problem arises where persons entitled to exercise those default powers disagree on the health and lifestyle decisions to be made on behalf of an incapacitated person. In the event of such disagreement, it would become necessary to apply for guardianship orders in an appropriate forum. Therefore, an AEG ensures your appointed guardian(s) can make health and lifestyle decisions free from interference.

Family provision claims

Poor estate planning often results in a will being susceptible to challenge; this is because wills are inflexible instruments which do not evolve over time to meet the needs of all eligible persons who may be entitled to bring a claim against an estate.

In Australia, the Courts hold the power to set aside a will to ensure eligible beneficiaries are “looked after”.

A will may be set aside for a number of reasons, but the most common reason is due to the failure by the deceased to person to make adequate provision to one or more beneficiaries.

This naturally creates a tension between several competing interests:

• the right of the testator to have their testamentary wishes carried out
• the right of an eligible person to be adequately provided for from the testator’s estate

In this context, competing family provision claims should be carefully assessed; the Court will not always make family provision orders, and parties to an estate dispute share a common interest in ensuring the preservation and conservation of the estate in minimising legal costs of an estate dispute (which ordinarily are paid out of an estate) so that more assets are available distribution.