How is an Intestate estate distributed?

If you die intestate your assets will be distributed according to a legislated formula in the jurisdiction where you live, regardless of your wishes.

Under the laws of intestacy applying in NSW a beneficiary of those people who die without a valid Will must survive the intestate by 30 days to receive a benefit from the intestate estate.

The laws define a Spouse as a married person, or a domestic partner – which is someone of the same or opposite sex who has been in a de facto partnership of at least 2 years or a relationship that has resulted in the birth of a child. Multiple spouses are defined as any combination of a married person and/or domestic partner.

Issue are defined a person’s children, (and if the children are deceased) grandchildren and (if the grandchildren predecease the intestate) great-grandchildren.

Spouse and Issue

Therefore if you die intestate leaving a spouse and no children, or a spouse and children of one or more spouses the spouses inherit the whole of the intestate’s estate. However if there are children of an ex-spouse or ex-domestic partner – the estate is divided according to a formula between the spouse/s and children (this may include children of the intestate and current spouse/s as well as children of the ex-spouse or ex domestic partner)

If multiple spouses survive the intestate their entitlement to the deceased estate is shared either equally, according to a written agreement between them that has been submitted to the administrator of the estate, or in accordance with an order of the Supreme Court

Where the intestate is predeceased by a spouse and leaves issue, the issue share the estate base on the proximity of their family relationship. Therefore children of the deceased will all share in the estate equally, but if the intestate’s children are already dead, their children share the portion of the estate that their parent would have received. If any of those grandchildren had themselves predeceased leaving issue then their children will share what would have gone to their parent.

Other Relatives

 If the intestate does not have a spouse/s or issue then the Estate is distributed firstly to parents, then siblings, grandparents, aunts and uncles, then first cousins, if these have been exhausted the government has a right to the intestate’s estate however provisions enabling the petition to waive the governments right to the intestate have been expanded to include dependents, any persons who have a just or moral claim on the intestate, and any organisation (such as a charity, where the intestate did volunteer work or made regular donations) or person who believes that the intestate might reasonably have made provision for.

What is Intestacy?

You are considered to have died Intestate if you die without a Will or leave a Will deemed by the courts to be ineffective because it: fails to properly dispose of all your assets, does not met the legal formalities of being correctly signed and witnessed, or was made by someone who lacks legal capacity. Where part of the Will is valid but part is invalid a person is considered to die partly intestate resulting in greater difficulty than administering a fully intestate estate.

If you die and your family does not know that you have left a will or cannot locate it they would need to check your personal papers, bank, solicitor, accountant or all of these. In some circumstances they may need to advertise in order to try and locate it.

If a Will cannot be found your relatives will have to apply to the Court for an administrator to be appointed to administer your Estate. Courts have a broad discretion to appoint an administrator, in most cases whoever has the largest share in the estate is considered the most suitable. Administration of your Estate includes making funeral arrangements, collecting assets, paying any debts and taxes owed by the Estate and then distributing any remaining funds. As your assets will be distributed according to legislation the administrator must establish the next of kin.

Although you may feel that the Laws of intestacy may be suitable in directing your estate you have no control as to who benefits, as the estate must be divided in specific fixed proportions depending upon the family, or domestic relationship between you and your family members. In many cases a person who can prove that they are the de facto or same-sex partner will be considered to be the spouse of an intestate partner and may displace the entitlements of a spouse. In certain circumstances “Children” include illegitimate children.

If the next of kin is a child or an incapable person the Court may require  an administration bond to guarantee any loss should the appointed administrator fail to properly administer the estate. The bond is usually equal to the value of the estate being administered.

It should be noted that the assets of the intestate, such as a specific piece of jewellery, may have to be sold in order for the estate to be distributed under administration. You cannot rely on the laws of intestacy to provide specific gifts for friends, charities or to leave provision for pets. Therefore it is important to make a Will in order to leave provision to those people, charities or pets, that you want to, instead of leaving it to a predetermined legislative formula.

Brett Whiteley and the Kitchen Will

Australian Artist Brett Whiteley died accidentally of a drug overdose in June 1992 with an Estate worth $13 million. Due to his anger toward lawyers following a protracted and bitter divorce settlement he drafted a series of informal Wills that led to expensive litigation in order to clarify and settle his testamentary intentions.

In May 1989, influenced by his acrimonious divorce proceedings, Whiteley instructed his solicitors to draft a Will he believed would protect his property from his ex-wife. In a later discussion with his sister Whiteley was disgusted that he had been charged $7000 for this Will, particularly when his sister had made her Will on a form she purchased from a Newsagent.

The January Will

In January 1991 Whiteley handwrote a Will leaving various gifts, establishing a travelling scholarship for young artists, and leaving the rest of his Estate to his daughter Arkie Whiteley. His Daughter and her boyfriend Christopher Kuhn were present when this was done and it was her recollection that the deceased had revoked his previous wills with this document. When Arkie asked if they should consult lawyers Whiteley said

‘No, it’s fine. I’m not going back to any bloody lawyer. No more bloody lawyers. They make a mess of everything.”

As his Daughter was a witness to the Will  the Witness-Beneficiary rule would preclude her from inheriting under that Will.

The Kitchen Drawer Will

His daughter’s then boyfriend Christopher Kuhn gave evidence that in April 1991 Whiteley could not remember where he put the January document so replicated  that document in front of Kuhn who then witnessed it. Whiteley then placed it in an envelope and taped it underneath the fourth drawer in the kitchen cabinet. Kuhn then made a note in an exercise book so he could remember where the Will was kept.

In November 1991 Whiteley told his accountant he had changed his Will, his accountant, (who was also named as an executor) expressed his concern as to the validity of the handwritten document and asked Whiteley to arrange for it to be checked by a solicitor. Whiteley said

‘I hate solicitors. They’re always ripping me off. If you think I should go I will.

However the Court accepted that following the execution of the Kitchen drawer document Whiteley’s intentions never changed and that he hadn’t made any other Will or destroyed or revoked the document which he had signed.

Following Whiteley’s death and funeral in June of 1992 Kuhn and Arkie Whiteley could not find the Will under the fourth drawer in the kitchen but there were remnants of the tape. Over the next few days the studio was thoroughly searched for the Will without success.

The litigation

The Court had to decide if the informal Wills were to be accepted for probate. As neither of the January Will or the Kitchen Drawer Will could be found and notwithstanding that Arkie Whiteley was the main beneficiary of the estate the court found that her evidence and that of Christopher Kuhn was compelling.

As the deceased was the cause of these proceedings the Court found that the cost of litigation for all parties was to be paid out of the Estate. Ironically the informal Wills mirrored the provisions of a Will that Whiteley instructed solicitors to draft and was executed in July 1988.

Creating a Will does not necessarily require a lawyer however there are formalities that must be met in order that the Will is accepted for probate. If these formalities are not met it may add to the difficulties your family face at an already stressful time.

Court recognises iPhone Will

Karter Yu took his own life on 2 September 2011. Shortly before he died, he created a series of documents on his iPhone, one of which was expressed to be his last Will, commencing with the words, “This is the last Will and Testament…” Yu formally identified himself, gave his address, and typed his name at the end of the document in a place where on a paper document a signature would appear, followed by the date, and a repetition of his address. The Supreme Court of Queensland was asked if the iPhone will satisfied the three conditions necessary before an order might be made under the Succession Act (the “Act”) to admit the Will to probate, and if it did, that probate be granted to his brother.

Although the iPhone document did not meet the requirements for a valid Will under the Act if the Court is satisfied that a person intended a document to form their Will, then the document forms a Will if in the Courts opinion it purports to state the testamentary intentions of the deceased person.

Does a document exist?

“Document” is broadly defined by law to include any disc, tape or other article, or any material from which writings are capable of being produced or reproduced, with or without the aid of another article or device.

The Court was satisfied that the record on the iPhone was a document for the purposes of the Act after accepting that the facts of the case were similar to those where a Microsoft Word document created on a laptop computer was considered to be a document by the New South Wales Supreme Court.

Does the iPhone Will express the statutory intention of the deceased?

The Court then had to decide whether the iPhone Will stated the intentions as to what should be done with a person’s property on that person’s death

On examination the Court found that iPhone Will did this. It dealt with the distribution of the whole of the deceased’s property, and named his brother as an executor (also nominating an alternative executor if his brother was unable to perform in that role) and gave authority to the executor to deal with the deceased’s affairs in the event of his death.

Did the deceased intend for the document to form his Will?

The Court then considered whether Yu intended the iPhone Will to form his Will, simply stating his testamentary wishes is not sufficient. In order to satisfy the provisions of the Act there must also be the intention that the Will be legally operative so as to dispose of the person’s property upon that person’s death. The Court held that the document satisfied that requirement.

Although in most Jurisdictions there are laws that enable a Court to consider an informal document as a Will. The  factors in this decision do not mean others can do something similar and expect it to be valid. Your Will should be prepared and executed in accordance with the formal requirements to save the time and expense of legal action not to mention the additional stress to your family and friends at an already difficult time.

Informal Wills – No Jacket Required

Most jurisdictions have requirements that must be met in order to have a formally valid will. This is an attempt to prevent fraud, undue influence, substitution or mistake from occurring due to the fact that the person who created the document is not available to be questioned when an executor is applying for probate. I had an earlier post discussing formalities

In some jurisdictions Courts can decide to admit into probate a document that does not meet the formalities required for a Will if it is satisfied that the deceased intended the document (or part of the document) to constitute, amend or revoke (whether fully or partially) their Will.

Courts have taken a broad definition of ‘document’ Including a tape recording, video recording, and recently a message created on the electronic notepad of an iphone by the deceased person being admitted as a will. However these are exceptional and usually,the court admits a written document that fails to meet the formal requirements of a Will (for example it is incorrectly witnessed).

To assist in making this decision the Court may take into account that at the time the document was created the deceased intended that it would constitute their Will including any actions or statements that were made by the deceased around the time that this document was created.

Who is a Testator?

A Testator or Testatrix is a person who makes or has made a will; or a person who has died leaving a will. If a person dies without having made a will they are said to have died intestate.

In order to make a valid will there are certain formalities that are prescribed by law. A testator must be of sound mind (have testamentary capacity) when making a will. In part to ensure that a testator is of sound mind, there are legal requirements that when the testator signs a will it is in the presence of several witnesses.

Similarly the testator must have the requisite intention to make a will, if there is no intention there can be no will. A person who is unable to understand that they are signing a document that will distribute their property following their death is said to lack the testamentary capacity to create a will.

A testator also should be making the will without duress and free of coercion from other persons. If this is not the case, a court may later void all or part of the will.

Video and the Testator

Wai Fun CHAN, an 85-year-old woman with eight children living throughout the world, died with property in NSW and overseas on 27 June 2012, leaving a formal will dated 6 March 2012.

After the formal will was prepared and executed she was dissatisfied with it and as she was unable to return to her solicitor for the preparation of a written codicil made a short oral statement on a DVD recording on 8 March 2012 in the presence of one of her children and that child’s spouse. The testatrix commenced her statement by recording the date it was made and stated she was “of a clear and sound mind” followed by a series of short, considered, statements.

Although she was warned that a video recording might not meet the legal requirements for a formal will. She wished to speak to her children granting each of them a legacy over and above any provision made for them in her formal will.

The application for a grant of probate by the executors of the formal will, together with the video will as a codicil was accompanied by a certified transcription of the video will in the original Chinese, and an English translation of that transcription.

The Court found that the video will does not comply with section 6 of the Succession Act 2006 NSW (“the Act”) because it is not “in writing and signed” by the will maker nor “signed” by any attesting witness. The Court found that the DVD is a “document” and was satisfied that the will maker “intended it to form an alteration to… her will” satisfying the requirements of the section 8 of the Act.

Howard Hughes & the Mormon Will

Howard Hughes the billionaire aviator, industrialist and filmmaker died in April 5 1976, at the age of 70, without a will. Hughes’ assets were governed by the Summa Corporation, and were valued at more than $2 billion. At the time of his death no one was certain if Hughes had left a will, and as he resided in several cities probate was opened in Houston, Las Vegas, and Los Angeles.

Summa conducted an extensive search, but failed to discover a valid will. However an unsigned carbon copy of a 1954 will was presented to a probate court as the best available evidence of Hughes’ intentions. Summa argued that although a written will could not be found, Hughes’ wished to leave his whole fortune to the Howard Hughes Medical Institute in Florida.

Some days after Hughes’ death Spencer W. Kimball, president of the Mormon Church received a letter enclosing a an unwitnessed document dated March 19, 1968 and signed Howard R. Hughes. This document immediately raised suspicions because it was totally out of character for the increasingly neurotic Hughes to sign any document. However there was conjecture among a number of handwriting experts as to whether the document was in Hughes’ handwriting.

This document known as the Mormon will named a number of beneficiaries including Melvin Dummar. Dummar claimed that he picked up the hitchhiking Hughes in 1968, loaned him a quarter, and dropped him off, although Dummar later admitted that his story was false.

In a further complication Hughes had three maternal second cousins who under Texas intestacy law would inherit if there was no valid will. Twenty-three of Hughes’ maternal and paternal relatives combined to fight Summa. In June 1978, after a seven-month trial, a jury decided that Hughes did not author the Mormon will. As no valid will was discovered, the court awarded the Hughes estate to the billionaire’s surviving relatives appointing one of them to administer the estate.

The legal battle over the Hughes estate was not settled for 34 years. If Hughes had completed a will the expense and rancor that followed his death may have been avoided.

Will makers Testamentary Capacity

A person making a Will must have testamentary capacity at the time that it is made (or at the time that the instructions are given) in order for the will to be valid. The test for establishing whether a testator has mental capacity to write a Will was established in Banks v Goodfellow.

John Banks, the Will maker had been confined to an asylum for some years.  After discharge, he continued to suffer from delusions; notably, he was of the belief that a man called Featherstone Alexander was persecuting him.

Banks prepared a Will leaving his estate to his niece, Margaret Goodfellow.  Margaret died intestate, two years after Banks and her estate passed to her half-brother, who was not related to the Will maker.

John Banks junior, the son of the Will maker’s half-brother, then contested the will.  He argued that Banks senior did not have testamentary capacity. The Court found that Banks’s will was valid, and although he suffered from mental illness which caused delusions it did not influence his decision regarding who should benefit from his estate.

Under the Banks v Goodfellow test, the Will maker must:

  • understand the nature and effect of a will
  • understand the nature and extent of their property
  • comprehend and appreciate who has a reasonable claim on their estate
  • be suffering from no disorder of the mind or insane delusion that would result in a gift that would not have been made under normal circumstances

It is important to note that it is a low threshold test, as it is the belief of Courts and Governments that a person’s right to make a will should be upheld whenever possible. This is reflected in the idea that there may be a ‘lucid interval’ where a person suffering from a mental illness may have will-making capacity.

Ruling from the Grave part 2

In last Fridays post we discussed a Court overturning a Will makers wishes under Family provision legislation. However, as a general rule, Courts are reluctant to deny a person’s testamentary wishes.

Patrick Carroll (“Mr. Carroll”) died on 16 April 2012. He made his will on 15 December 2011 (the “Will”). His children are Jehovah’s Witnesses, and he did not approve of their adherence to that faith. In his will made on 15 December 2001 Mr. Carroll made the gifts conditional upon them attending his funeral (the “Attendance Condition”) and, becoming a Roman Catholic within three months of his death (the “Baptism Condition”). Each of the Children attended his funeral. None of them has become a Roman Catholic.

The Children were the product of a “mixed marriage” between Mr. Carroll who was a Catholic and his ex wife Lillian who was Anglican. His oldest child Anthony was baptized as an Anglican but Mr. Carroll did not raise his children as Catholic, they did not attend Mass, and were not enrolled in Catholic schools.

Mr. Carroll and his wife separated in 1959. The Children continued to live with their mother. Around the time of the separation, Lillian became a Jehovah’s Witness. The children were all subsequently baptised as Jehovah’s Witnesses and continue to remain active members of their congregation. Apart from Anthony there is no evidence that any of the Children had undergone any form of baptism prior to becoming Jehovah’s Witnesses. Mr. Carroll was very unhappy with Lillian and the Children becoming Jehovah’s Witnesses.

Each of the Children attended Mr. Carroll’s funeral, however none of the Children has become baptised into the Catholic Church, either prior to the expiration of three months after Mr. Carroll’s death or since that date.

A Court will try to uphold conditions in the Will except where they are uncertain or impossible to satisfy, are contrary to public policy, or both. The Children argued that these conditions, particularly the Baptism Condition, were uncertain, impossible or contrary to public policy. The New South Wales Supreme Court concluded that the requirement for each of them to become a Roman Catholic is a condition precedent (where an event must occur before a beneficiary can receive a gift)  which is not void for uncertainty, impossible or contrary to public policy.

None of the Children became a Roman Catholic within three months of Mr. Carroll’s death; therefore their respective shares in his estate shall be divided among the other beneficiaries in accordance with the terms of the Will.