Will in Contemplation of Marriage

WILLS

New South Wales

A full commentary on the law and practice as it currently applies to the drafting of wills and testamentary discretionary trusts.

BACK GROUND

A will is a document containing a person’s instructions as to how their property is to be distributed after their death.  Failure to make a will results in the distribution of the assets of the deceased being determined by statute. The law relating to wills in New South Wales is covered by the Succession Act 2006.

However, the issues arising from including or excluding children from former relationships in clients wills are now commonplace. This demands an understanding of the options and pitfalls inherent in some apparent solutions as well as the provisions of the Succession Act 2006 relating to family provision claims. These are discussed below.

The precedents also include a library of provisions covering less frequently used precedents including for example unusual execution clauses and the creation of life estates.

No form of codicil is included in the precedents as it is just as easy to redo the will avoiding any possibility of mislaying the second document or creating unforeseen inconsistencies through the use of different language in the two documents.

Because legislation such as the Trustee Act 1925 provides executors with wide powers of investment those powers have been omitted from the wills precedents as entirely unnecessary.

With specific bequests take care to identify what is owned by testators such as interests in companies, trusts and partnerships.

Any expenses of looking after personalty the subject of specific bequests,, such as warehousing and delivery costs are for the donee, not the estate. To avoid potential disagreement later and depending on the circumstances this should be clarified in the will.

In describing personal effects remember that it may be necessary to specifically include furniture and furnishings in sheds or detached flats and to include tools, plant and machinery such as ride-on mowers.

A release of debt is a legacy to the debtor. If releasing debt by will release the debtor and his estate, otherwise if the debtor dies before the testator the release fails and the debtor’s estate is liable for the debt.

It is important to be aware that if the will provides for a pecuniary legacy for the support of a beneficiary, the estate will be required to buy an annuity or set aside a fund sufficient for the income it earns to meet the liability. This can involve substantial capital cost to the estate as the court imposed terms are very conservative.

Testamentary capacity

Although not often an issue the first question the lawyer should consider is whether the testator has testamentary capacity.

The usual authority quoted concerning testamentary capacity is Banks v Goodfellow (1870) LR 5 QB 549 at 565. There Cockburn CJ said:

“It is essential to the exercise of such a power that a testator shall understand the nature of the act, and its effects; shall understand the extent of property of which he is disposing; shall be able to comprehend and appreciate the claims to which he ought to give effect; and with a view to the latter object, that no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties – that no insane delusion shall influence his will in disposing of his property and bring about a disposal of it which, if the mind had been sound, would not have been made.”

Testamentary capacity is not a matter of the opinion of the lawyer. If there are doubts then ask questions and take notes of the answers to them. It is for the court to decide capacity assisted by these notes.

It would be prudent, for example, for the lawyer to investigate capacity further if:

1. The testator appears to be a minor: request production of a driver’s licence or marriage certificate;
2. There is a clear and readily apparent indication that the testator may not have capacity – for example, if the testator gives one set of instructions, followed shortly by contrary instructions;
3. If the testator has suffered some trauma (known to the lawyer) that could later be alleged to affect capacity.

In the last two instances, rather than proceed with preparing a draft will, the lawyer might request the testator’s consent to obtaining a medical practitioner’s report as to capacity  preferably obtaining this by way of affidavit or statutory declaration.

It can be explained to the testator that the request for the medical opinion is to ensure that the testator’s will and intentions are not later challenged on the grounds of incapacity.

Take note that the medical practitioner will view any request for an opinion from a medical viewpoint rather than a legal viewpoint unless the reason for which the opinion is sought is clarified.

If a client does not have capacity, but a will is required, the lawyer may wish to consider a will authorised by the court: see ss 18-26 Succession Act 2006.

An excellent publication on capacity, including matters to be raised with the will maker’s medical practitioner,  is “When a client’s capacity is in doubt: A Practical Guide for Solicitors”, a copyright production of the Law Society of New South Wales (2009).

Testamentary capacity of a minor

Minimum age for making a will is 18, as prescribed by Succession Act 2006 – Sect 5 Minimum age for making a will. This is the age under which someone is deemed a minor and therefore lacks legal personality and capacity.

However, a minor may make a will in contemplation of marriage – s 5(2)(a) Succession Act 2006 and the Court may authorise a minor to make a will Succession Act 2006 – Sect 16 Court may authorise minor to make, alter or revoke a will.

Additional questions to ask the testator when taking instructions

Have any orders or binding agreements affecting assets been made pursuant to the Family Law Act 1975 (spouses or de facto partners) that are still subsisting and/or will affect asset distribution?

Has the will maker made a will in another jurisdiction regarding assets in that jurisdiction?  If so, by this will, does the will maker intend to revoke all wills in all jurisdictions?

A valid will

A will, apart from one made in special circumstances such as by defence personnel on active duty, is only valid when:

1. It is in writing, and
2. Signed by the testator, whether or not at the foot of the instrument, or
3. Signed by any other person in the testator’s presence and under his directions, and
4. It appears from the will that the testator intended to give effect to the will by signing it, and
5. The signature must be made or acknowledged by the testator in the presence of two or more witnesses present at the same time who must attest and sign the will in the presence of the testator.

It is not necessary for the will to have an attestation clause.

Execution of a will is governed by Succession Act 2006 – Sect 6 How should a will be executed?

The formal requirements can be dispensed with by the court Succession Act 2006 – Sect 8 When may the Court dispense with the requirements for execution, alteration or revocation of wills?

Persons who cannot see cannot witness wills Succession Act 2006 – Sect 9 Persons who cannot act as witnesses to wills

Beneficiaries witnessing wills may avoid gifts see Succession Act 2006 – Sect 10 Can an interested witness benefit from a disposition under a will?

Revocation see Succession Act 2006 – Sect 11 When and how can a will be revoked?

Alteration of a will Succession Act 2006 – Sect 14 How a will may be altered

Revival of revoked will Succession Act 2006 – Sect 15 How a revoked will may be revived

Will by person without testamentary capacity Succession Act 2006 – Sect 18 Court may authorise a will to be made, altered or revoked for a person without testamentary capacity.

A will can be rectified by the Court Succession Act 2006 – Sect 27 Court may rectify a will.

Informal wills

At the time of taking instructions, you should consider the need for an informal will if the circumstances suggest that the client may lose testamentary capacity or die before a formal will can be executed.

An informal will pursuant to section 8 of the Succession Act 2006 can be created by having your client sign each page of the instructions. It is also a good idea for the practitioner to witness the client’s signature by signing as well.

Revocation, marriage and divorce

The first provision in a will is the usual revocation of previous testamentary acts.

Marriage

Marriage revokes a will unless made in contemplation of marriage. Those who make wills  while in a de facto relationship may not intend to marry. However, the precedent will provides that it is made in contemplation of marriage to avoid an unintentional revocation if they subsequently marry. It also provides that the will is not void if the marriage does not take place.

However, every will maker will have his or her own requirements, frequently including a provision that a substitute beneficiary is to inherit if the contemplated marriage does not take place within a certain period of time. Make sure that in drafting this provision terms which are vague or uncertain are avoided.

Succession Act 2006 – Sect 12 Effect of marriage on a will

Divorce or annulment

Unless a contrary intention is expressed in the will the result of divorce is that gifts to a former spouse are revoked and the subject matter passes as if the spouse predeceased the testator and any appointment as executor is taken to have been omitted from the will.

Succession Act 2006 – Sect 13 What is the effect of divorce or an annulment on a will?

Revival of a revoked will

Such a will may be revived by re-execution or by executing a document or codicil showing an intention to revive the earlier one in full or in part.  It is taken to have been executed on the day it is revived.

See s 15 Succession Act 2006 How a revoked will may be revived.

Executors and trustees

The appointment of the executor is usually straightforward and they are usually the major beneficiaries. A minor can be appointed as an executor but is not entitled to a grant if still a minor at the time of death of the testator. Leave will be reserved for the minor to prove on attaining their majority.

The court may grant administration with the will annexed to the guardian of the minor or such other person as the court thinks fit.

There is no limit to the number of executors that can be appointed but no company can be an executor other than a trustee company.

Where beneficiaries do not take their gifts straight away, for example because they are under 18 years old, or have another legal disability such as mental incapacity, the executor has continuing obligations until those disabilities are overcome and must act as a trustee of the estate. For that reason, the precedent wills refer to executors and trustees.

An executor cannot be appointed on the basis that he is the holder for the time being of some position, for instance the president of the Law Society.

A clause in a will that purports to require an executor to appoint a particular firm of solicitors to act on behalf of the estate is not binding.

Foster v Elsley (1881-2) 19 Ch D 518
Nowakowski v Gajdobraski Vic Sup Crt 12/4/96

An executor is not obliged to accept office.

Executors are entitled to apply to the court for commission.

In the precedent wills gifts to executors are expressed not to be dependent on them accepting office.

A trustee cannot buy trust property unless all beneficiaries agree or there is an express power in the will or the consent of the court is obtained.

Solicitors as executors

It is common for solicitors to be named as executors in their clients’ wills. An executor is entitled to charge executor’s commission in the following cases:

• If there is a clause in the will authorising executor’s commission;
• If a court authorises executor’s commission;
• If all beneficiaries, being legally competent, authorise executor’s commission.

Executor’s commission is regarded as a gift and the solicitor should not witness the will.

If the will does not authorise an executor or trustee to charge for work performed in carrying out the office, that person will be unable to claim fees because of the equitable duty of fiduciaries to act gratuitously. Therefore if the will appoints a lawyer, or an associate of that lawyer, as executor that person can only charge the usual professional fees if a charging clause is included in the will.

The client must be specifically and fully informed in writing about any entitlement of the practitioner or an associate to claim commission, of the inclusion in the will of any provision entitling them to charge legal costs, and the fact that the client could appoint an executor who might not claim for commission.

Before including a commission or charging clause, the solicitor needs to be mindful of:

• the provisions in theNew South Wales Professional Conduct and Practice Rules 2013, which incorporate the Australian Solicitors’ Conduct Rules June 2011;
• the necessity to fully inform the client in writing before he/she signs the will, and obtain the client’s informed consent;
• the attitude of the courts, as succinctly expressed inRe McClung (dec’d) [2006] VSC 209 – namely, that this is ‘not a position which the solicitor should seek’ and ‘to request inclusion of a charging clause so wide as to enable the solicitor to charge for all executorial functions is not reasonable unless the solicitor ensures that the will provides that such charges may be made in lieu of entitlement to commission and the full import of the clause is explained to the client’.

If the solicitor is to receive further benefits beyond commission and costs under the will then the testator must receive independent advice on those gifts.

Failure to comply with the strict rules reprinted below may amount to professional misconduct or unsatisfactory professional conduct.

Rule 12 Professional Conduct and Practice Rules

Rule 12 states:

12.1 A solicitor must not act for a client where there is a conflict between the duty to serve the best interests of a client and the interests of the solicitor or an associate of the solicitor, except as permitted by this Rule.

12.2 A solicitor must not exercise any undue influence intended to dispose the client to benefit the solicitor in excess of the solicitor’s fair remuneration for legal services provided to the client.

…

12.4 A solicitor will not have breached this Rule merely by:

12.4.1 drawing a Will appointing the solicitor or an associate of the solicitor as executor, provided the solicitor informs the client in writing before the client signs the Will:

(i) of any entitlement of the solicitor, or the solicitor’s law practice or associate, to claim executor’s commission;

(ii) of the inclusion in the Will of any provision entitling the solicitor, or the solicitor’s law practice or associate, to charge legal costs in relation to the administration of the estate; and

(iii) if the solicitor or the solicitor’s law practice or associate has an entitlement to claim commission, that the client could appoint as executor a person who might make no claim for executor’s commission.

12.4.2 drawing a Will or other instrument under which the solicitor (or the solicitor’s law practice or associate) will or may receive a substantial benefit other than any proper entitlement to executor’s commission and proper fees, provided the person instructing the solicitor is either:

(i) a member of the solicitor’s immediate family; or

(ii) a solicitor, or a member of the immediate family of a solicitor, who is a partner, employer, or employee, of the solicitor.

12.4.3 receiving a financial benefit from a third party in relation to any dealing where the solicitor represents a client, or from another service provider to whom a client has been referred by the solicitor, provided that the solicitor advises the client:

(i) that a commission or benefit is or may be payable to the solicitor in respect of the dealing or referral and the nature of that commission or benefit;

(ii) that the client may refuse any referral, and the client has given informed consent to the commission or benefit received or which may be received.

12.4.4 acting for a client in any dealing in which a financial benefit may be payable to a third party for referring the client, provided that the solicitor has first disclosed the payment or financial benefit to the client.

Multi-jurisdictional estates

Many immigrants to Australia may have property in other jurisdictions. Appointing executors over the whole of the estate wherever situate may be the most convenient. Grants of probate can be resealed if the foreign property is held in another of Her Majesty’s dominions or can be recognised in the foreign jurisdiction where the property is held.

Where it is possible that the foreign estate may claim inheritance duties over the Australian property – even though this is unenforceable under private international law – appointing separate executors for the foreign assets may avoid a conflict with the state from which the grant is necessary.

Burial and cremation

Following the appointment of executors the client often provides instructions as to burial or cremation such as:

• I wish to be cremated and have my ashes deposited at or scattered over …
• I wish to be buried at …
• I declare my body to be available for anatomical therapeutic medical or scientific purposes.
• I wish my body to be used for medical education or research by the University of Sydney.

Guardianship

Whether or not to include a provision appointing guardians raises difficulties. Most often the decision is made not to appoint guardians, as the children will go to the family best able to care for them which is unknown at the time of making the will. In the event that an intractable dispute arises then the Family Court makes the final decision in the best interests of the children.

If it is desired by some means to prevent a former spouse from having the children remember that a testamentary guardian acts jointly with a surviving parent. Guardianship of Infants Act 1916 s13.

Under family law legislation each parent has the full responsibility for the long-term care and welfare of their children.

If it is decided to appoint guardians, then also authorise the trustee to provide sufficient funds for the children’s care, upkeep, education and advancement in life.

Dispositions of property

Disposition of property is the area in which true complexity can arise. The precedent wills have been drafted to keep the interpretation of the will as straightforward as possible. So, for instance, rather than grapple with the statutory rules of substitution and accrual the wills spell it out. If for instance the beneficiary of a bequest does not survive the testator then the bequest is said to fall into residue. If a member of a class predeceases the testator then the survivors are said to inherit.

The statutory provision is set out below for those interested.

Succession Act 2006 – Sect 41 – Dispositions not to fail because issue have died before testator

The statutory provisions apply to children or issue. They protect a gift to children or issue of the testator from lapse if they die before the testator, themselves leaving issue. A gift to issue not determinable on or before death does not lapse but takes effect as if the beneficiary dies immediately after the testator.

Further if no accrual provision is used in a gift to a class equally or in equal shares then if a member of the class dies before the testator Succession Act 2006 – Sect 31 Effect of failure of a disposition provides for it to go to residue. If there is no residual gift could result in a partial intestacy.

Where the order of death is unknown the presumption is that the eldest died first: Conveyancing Act 1919 – s 35 Presumption of survivorship. The court may of course conclude otherwise.

The will precedents deal generally with these problems by providing that all beneficiaries must survive the testator by 30 days and that a gift does not vest if the beneficiary does not achieve an age specified in the will. For the legislative position Succession Act 2006 – Sect 35 Beneficiaries must survive testator by 30 days and Succession Act 2006 – Sect 41 Dispositions not to fail because issue have died before testator.

A problem arises if spouses die together having both made the same bequest. An identical bequest intended to vest under the will of the survivor might unintentionally vest twice if neither of them survive to take the whole of their spousal estate thereby creating an unintended double benefit. Hence the wording of the bequest clause in the precedent.

It is to be remembered that ‘children’ do not include stepchildren.

Delegation of testamentary power under common law  was not effective as a testator could not get others to decide how to dispose of assets. However, a testator could  make a gift to charities to be selected by the executors. In so far as it relates to a power or trust this rule against delegation has been repealed by s 44 of the Succession Act 2006 effective from 1 March 2008. If it is intended by will to create a power of appointment or a testamentary discretionary trust care needs to be taken to consider the stamp duty and capital gains tax implications as the normal rules do not apply and any transfer to a beneficiary may attract both a stamp duty and capital gains tax liability.

Take care to ensure that gifts to pensioners do not adversely affect their social security entitlements. The anti avoidance provisions in the social security legislation make the use of trusts and companies ineffective for protecting those entitlements. However, with the present changes to the legislation relating to superannuation, an opportunity arises to make gifts to a superannuation fund with members enjoying more lenient social security entitlement tests.

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