heirs & successes

I read an interesting article about the challenges that Millennials face managing their estate planning needs.

In the United States the parents of Millennials will transfer approximately $30 trillion dollars in the next 30 years. Which should spark discussions amongst families about business succession and estate planning.

Estate and Succession planning with parents & grand parents could be difficult. However it is important for Millennials to have a discussion about whether their parents have a Will and who has been named as executor. It is much easier to have discussion about such matters when people are alive than in the alternative.

As far as Millennials are concerned when thinking about their Will they need to honestly ask, “What happens if…”? “Who should receive my assets? Spouse? Siblings? Friend? Charity?” “Who should be the executor of my estate?” Again the answers to these questions are personal and cannot be answered definitively as right or wrong.

In the article there is a discussion as to when these questions should be asked. Most people believe that many of life’s milestones, such as a marriage, home purchase, or birth of a child, the death of a family member or divorce should be triggers for these discussions. However we have discussed that a Will is a living document that should be created early in a persons life and be updated fairly regularly to reflect your life changes Advisors can help millennials plan for and respond to these life events.

 

Abraham Lincoln, the sixteenth president of the United States was shot while watching a play on April 14 1865 and died the following day. As a lawyer, President, and at the age of 54 when average life expectancy was a little over 40 you would think that he would have made a Will – yes like a lot of people Abraham Lincoln hadn’t made a Will and died intestate.

On April 15, 1865, Lincoln’s son, Robert, contacted one of his fathers former law partners, 1860 Campaign manager, and family friend Justice David Davis of the United States Supreme Court, and asked him to take charge of his father’s affairs.

On June 16 letters of administration were issued to Davis, who took the oath to “well and truly administer the estate,” and signed an administrator’s bond for $160,000, as surety.

Mrs. Lincoln was entitled to one-third of the personal property and to chattels & an allowance sufficient to maintain her and her children for a period of a year. No record of a widow’s award is found in the estate papers, although she probably received the chattels to which she was entitled.

Davis initially reported that he believed the Estate was worth $85,000 and would be divided between Lincoln’s widow and his two surviving children. The estate was eventually settled in November of 1867, with a value of $110,296.80 to be divided into three equal shares.

The message to take from this is that you should make a Will as Administration of an estate is usually more difficult than seeking probate – and will make a difficult time for your family and friends even more so.

Where the language of the Will may apply equally to two or more objects or people (equivocation) Courts are permitted to look at direct evidence of the intention of the Will maker. It should be noted that in most Australian jurisdictions, if the will is ambiguous, legislation allows the Court to take into account the intentions of the Will maker to construe a Will.

Inez Barbetti died of chronic lymphatic leukaemia in October 2002. She was a widow and had no children. Barbetti’s parents and eight siblings predeceased her, however she had nieces and nephews who received legacies under her Will.

Several months prior to her death Barbetti instructed her solicitors to prepare a Will, which was executed on 12 August 2002. The Will required her executor to sell her property and distribute the proceeds to friends and family members. A niece received some of her household goods with the bulk of them going to “The Salvation Army (Western Australia) Property Trust”.

Barbetti’s estate was distributed except for a gift of around $200,000 made to “The Leukaemia Research and Support Fund Western Australian Division”.

The executors of the estate could not find an entity called “The Leukaemia Research and Support Fund Western Australian Division”, however there were several organisations with similar names. The Leukaemia Foundation of WA Inc. (“the Foundation”) and The Children’s Leukaemia and Cancer Research Foundation Inc. (“the Children’s Foundation”) both claimed to be entitled to the gift in the Will.

The executor asked Barbetti ‘s friends and family who the intended gift was for, but she was a private person and did not discuss her charitable bequests. The executor was no clearer as to whether she wished the money to be left to research into childhood or adult leukaemia.

Extrinsic Evidence

The Court gave consideration to whether the intended beneficiary was misdescribed. The Court had to first be satisfied that one of the organisations was the intended beneficiary of the gift, or the gift would fail. As there was a degree of ambiguity in the language used by  the Will maker, extrinsic evidence was used to ascertain the intention of the deceased.

The Court took into account the surrounding circumstances including Barbetti’s connection to Western Australia; that she died of leukaemia; that a member of her family circle who was also a beneficiary named in the Will, had received benefits from an organisation involved in leukaemia services and research; more importantly the extrinsic evidence showed no indication that she wished to assist research into childhood leukaemia.

The Court after viewing the extrinsic evidence in this context clarified the ambiguity in the Will and concluded that this was a case of misdescription, and that the deceased intended to benefit the Foundation.

Courts have stated the object of construing a will is to ascertain the Will maker’s intention as expressed in the will itself. The fundamental rule in construing the language of a will is to give effect to the intention of the Will maker, such intention being gathered from the language of the Will, read in the light of the circumstances in which the Will was made – i.e. what are the ‘expressed intentions’ of the Will maker.

The overriding consideration is the language used by the Will maker and the Court can neither ignore the plain meaning of words nor unnecessarily introduce words to give effect to an intention that is not expressed. The Court shall construe the Will on the basis of what is expressed in the terms of the Will.

There is a presumption, although not a strong one, against intestacy. If possible, on a fair and reasonable construction, the Will should be construed so it is a valid Will rather than leading to intestacy or partial intestacy. However, the Court cannot, in order to avoid intestacy, misconstrue the language of the Will.

The Will must be read as a whole, if particular expressions are found that are inconsistent with the intention, though not sufficient to control it, such expressions must be discarded or modified. If the intention of the Will maker cannot be found in the document itself, extrinsic evidence of circumstances may be given so the Court can try to find what the Will maker has written, but not what they intended to write.

The ‘armchair principle’, allows a court to consider the Will makers factual circumstances (their property, family, acquaintances and friends) when the will was made. But the armchair principle cannot be stretched to give words or phrases a meaning where essentially the court is making a fresh will.

The ‘armchair principle’ does not allow the Court to take the Willmaker’s intentions into account. If after the admission of this factual evidence the words still remain ambiguous, then except in the case of equivocation (where the language in the will may be applied equally to two or more people or two or more things) no further evidence will be admitted and the gift will be void for uncertainty.

In most jurisdictions legislation has been passed that expressly permits the use of extrinsic evidence, including evidence of a Will maker’s intention, to clarify a will.

 

 

It has been reported that the fastest growing type of family unit in Australia is a single person living alone.

If you don’t have children or obvious heirs, documenting your wishes and making them accessible will help ensure those wishes are fulfilled should something happen to you. In some circumstances people without children need to plan more carefully as their will can easily be overlooked.

Regardless of what you intend to do with your estate be it leaving money to charity, a pet, or friends and relatives you should prepare a Will, as a minimum. As far as planning for other important events in your life it is never too early to prepare documents to cover things such as health care directives (often called living Wills); organ donation and arranging insurance cover for loss of income or permanent disability.

It is important that you discuss your wishes with someone in order that they are able to act on your behalf in the event of an emergency. This requires you to identify the person in your life that you can trust to make medical decisions for you in the event that you lack the mental or physical capacity. (Remember that person may not seem the most obvious to be making decisions in the event of an emergency.)

Importantly regardless of what you wish to do with your estate it is important to formulate and communicate to those closest to you a definite plan for your wishes in order that those wishes are met

One of the principles that Courts apply when construing Wills is if the effect of a gift in a Will is quite clear any subsequent ambiguous words cannot have the effect of reducing the scope of the clear gift.

Leo Aubrey was a newsagent. He owned the family home at 81 Harris Street, Harris Park, along with other properties. He died leaving a Will naming his widow, Mildred Maria Wilson, as executrix, and his daughter, Helen Kathleen Wilson and Wife as beneficiaries.

Leo Aubrey’s Will was a short poorly drafted document. The Court believed that it had been prepared using a form that can be purchased inexpensively from a newsagent.

Leo directed that his wife, Mildred was to have full use of the family home and that upon her death the family home was to become the property of his daughter, Helen  Wilson.

The following provision was the basis for litigation

“The remainder of my real and personal possessions is to become the property of my wife Mildred Maria Wilson. I also direct that my wife Mildred Maria Wilson is at liberty to dispose of any portion of my estate if she thinks it is advisable with the exception of course the property known as 81 Harris Street, Harris Park.”

When Mildred Wilson died the executors of her will sought clarification of this provision in Leo’s Will. Mildred’s executors argued that all property or the proceeds of the sale of the property went to Mildred under Leo’s will. Her daughter Helen claimed that it passed to her under the following provision of her father’s will:

“I also direct that upon the death of my wife Mildred Maria Wilson all of that portion of my possessions remaining is to become the property of my daughter Helen Kathleen Wilson”.

However Leo had given Mildred the power to dispose of any portion of the estate during her lifetime for her own benefit.

When the Court considered the will as a whole, the intention of the Will maker is to give the Mildred an absolute interest in the residuary estate; the direction that she is at liberty to dispose of any portion of it she thinks “advisable” confirms this. Therefore the ultimate direction in favour of Helen must be void.

In December 1911 following the death of their mother George, John, and Catherine Hendry started an agricultural partnership. Catherine was declared insane in 1927 and John died Intestate in July of 1929. Isabella, who was John’s next-of-kin , took over his interest in the partnership. George died in September 1955 leaving a will dated 19th August 1929.

In his will George bequeathed “all my livestock” to his nephew Gordon Hendry. He left the remainder of his estate which he described as “all my real estate” to be sold by his executor the money raised to be distributed to the sons of my cousin in equal shares and “the residue of my personal estate” to be sold and the money raised to be held in trust for Isabella Hendry”.

The Executors of the Will sought the determination of the court as to the proper distribution of the estate given that he owned neither livestock nor real estate.

Where the executor or beneficiaries are unsure of the meaning of the Will they may have to seek guidance from the Court as to how to distribute the assets in the Will. In some instances there could be difficulty construing the meaning of certain words in a Will or if the Will mentions ‘my nephew Paul” and the Will maker has two nephews named Paul.

As the Will maker has died it can be difficult for their intention to be established. As a Will is a written document the court has to weigh up the actual intention or the expressed intention of the Will maker is what the court should seek

The will must be construed as a whole with courts seeking to identify “the basic scheme which the deceased had conceived for dealing with his estate and then, so to construe the will as, if .. possible, to give effect to the scheme”

Courts do not construe intention from the point of view of the person on the street. If Courts were to do this they could compound problems by construing the intention of the Will maker and then adopting that interpretation legally.

In construing George Hendry’s intention the Court had to determine what the testator meant by his words in his will and in the light of the circumstances as they existed immediately before his death. The Court concluded that George was dividing what he had into three parts, and that he was disposing separately of his partnership interest in livestock, the net proceeds of his partnership interest in land, and of the net proceeds of the value of his interest in any personal property other than livestock.

 

 

Michael Hutchence, the lead singer of the band INXS, was found dead in a Hotel room in Sydney on November 22, 1997. His death was ruled a suicide.

Hutchence had made a Will the year before he died, in which Amnesty International and Greenpeace were each to receive $US250, 000, his daughter Heavenly Hiraani Tiger Lily, was to receive 50 per cent of his estate, with the rest split equally between his partner, Paula Yates, his mother, father, brother and sister.

Eight years after his death, and despite having a fortune estimated at between $10 and $20 Million, the executor’s report on the late singer’s estate claimed that after the sale of artworks, real estate, guitars, a Harley-Davidson, a jeep and other items, and the outgoings of the estate, including $670,000 in legal fees, there was nothing for the beneficiaries.

It was reported that the assets of Hutchence estate did not include three Gold Coast properties worth more than $10 million, a villa in France, a house in London, a development in Indonesia, a string of luxury cars, or ongoing royalties from INXS.

In the years before he died Hutchence structured his financial affairs to minimise tax and to reportedly secure himself against

“(a) his ‘thieving relatives’, (b) his ‘girlfriends’, and (c) in the event he married, his wife/ies (sic).”

It would appear that Hutchence hid assets in a complex array of companies and trusts that were ultimately controlled by the “Vocals Trust” of which Hutchence was not the beneficiary.

A trust occurs where a person or company (trustee) agrees to hold and manage assets or property in a way that will benefit someone else (beneficiary), under this relationship the trustee has a ‘fiduciary duty’ to the beneficiary. It is the existence of this relationship that forms a trust. A deceased estate is a trust, and the executor is the trustee who manages the property and assets of the deceased prior to distributing them to the beneficiaries named in the Will.

However trusts are usually governed by a written trust deed, stipulating the rules for its maintenance, the rights and obligations of all parties, and how income from the trust’s assets is ‘distributed’.

In establishing a trust Hutchence could legally minimise tax and protect his assets from creditors as property and assets moved into a trust become trust property. What seems unusual is that Hutchence transferred his assets into a trust where ultimately he was not the beneficiary. Hutchence had to trust that those who he effectively transferred his assets to would act in his interests.

We have included information about trusts, as they are another way that you can plan for your future. It should be noted that Trust law is complex and expert advice from an accountant, lawyer or both should be sought if you are considering setting one up.

The reality is that Wills are far more than tools for the allocation of assets, they are estate planning documents. For example a Will maker can nominate guardians for their children, name executors as their legal representative in order that their wishes are met after death, including their funeral arrangements, and disposal of their body. In the surveys done in the Families and generational asset transfers: Making and challenging wills, report the majority of will makers focused on asset distributions.

Only Twenty four per cent of Will makers included funeral instructions. Sixty nine percent of Will makers with financial dependents included guardianship instructions, this means that 31% of respondents with financial dependents had not updated their wills to provide for their dependents!! If a Will maker, in casual conversation to relatives and friends , makes their wishes known about who will have guardianship of their dependent children, they should update their Will to formally clarify the issue so their loved ones have certainty at a difficult time.

Wills are only one part of the plan for end of life decisions. We have discussed the need for adequate insurance and superannuation previously but documents like Enduring Powers of Attorney (EPAs)  enable you to appoint a substitute financial decision maker in the event of incapacity, and and Advance Care Directives (ACDs) allow you to make health decisions in advance. There has been considerable promotion of these documents over the past decade, however uptake still remains comparatively low compared with Wills.

The Families and generational asset transfers: Making and challenging wills found that even when a person had a Will drafted professionally completion rates for EPAs (30%) and ACDs (14%) was still low.

It is important that you plan for your future by taking out insurance, managing your superannuation, preparing and updating your Will and having EPAs and ACDs because we cannot escape the vicissitudes of life but we can plan so that those around us do not have to suffer unnecessarily at these difficult times.

 

Richie Benaud, was an Australian cricketer and Broadcaster who, became Australia’s Test captain and the first player to reach 200 wickets and 2,000 runs in Test cricket. He has been described as “perhaps the most influential cricketer and cricket personality since the Second World War.”

Benaud married Marcia Lavender in 1953, the marriage lasted 14 years and produced two sons, Gregory and Jeffery. In 1967 he divorced Marcia and married Daphne Surfleet who remained his wife until his death in April this year.

Benaud’s ex-wife Marcia and her son Gregory are contesting his Will in the NSW Supreme Court.

NSW law provides that a former spouse of the deceased may be eligible to apply for family provision without having to meet any further criteria of eligibility.

The law defines a dependant as including the child, and a former wife or husband of the deceased person, and gives the Court scope to assess if adequate provision for the proper maintenance, education or advancement in life of the person has not been made by the will of the deceased person.

It was reported that in Greg’s opinion, that the action was not a money grab but the will did not provide adequate provision for his mother Marcia, who hadn’t spoken to Benaud for 20 years and wasn’t invited to his funeral.

Factors relevant to a claim by a divorced wife include the culpability of the deceased in relation to the grounds of the divorce, the length of time from the separation of the spouse and the course which the lives of the two spouses have followed since separation.

Benaud wrote of his divorce from Marcia: “My wife and I had been separated for over two years and I was divorced for desertion”. Marcia and Gregory live together in a Department of Housing property in Erina, on the Central Coast.

Benaud’s estate includes pension funds in Australia as well as property trusts and managed investment funds and He and Daphne had property in Coogee and Beaulieu-sur-Mer in the south of France where they spent much of the year when Benaud worked in England.

The Court has ordered Daphne to produce a list of her assets, liabilities, income and expenditure and financial documents relating to Benaud’s superannuation.