Court rewrites Will to save tax – a novel remedy for crazy people
Each of the States and Territories allow the making, revoking and varying of a Will. But only if you lack testamentary capacity:
- South Australia: section 7 Wills Act 1936 (SA)
- ACT: section 16A Wills Act 1968 (ACT)
- New South Wales: section 18 Succession Act 2006 (NSW)
- Queensland: section 21 Succession Act 1981 (Qld)
- Western Australia: section 40 Wills Act 1970 (WA)
- Northern Territory: section 19 Wills Act 2000 (NT)
- Tasmania: section 22 Wills Act 2008 (Tas)
- Victoria: section 21 Wills Act 1997 (Vic)
1. Use a POA to rewrite a Will?
Question: Our client is threatened by divorce. His dying dad is leaving everything to him. His dad has Alzheimer’s disease. Can we use a Power of Attorney to rewrite the Will or can we get the Court to alter the Will as per the Matsis Case? This stops the wife getting her hands on her father-in-law’s wealth as well.
Answer: POA’s are limited to decisions about property and financial matters e.g. opening a bank account or selling property. You cannot use a POA to amend or create a Will.
2. But the Court can change your Will – before you die, if you are of unsound mind
However, in Australia, the Supreme Court can make or alter a Will. This is where the Will-maker, while still living, lacks testamentary capacity. Like your client’s dad.
In Re Matsis the court was happy to insert a Testamentary Trust into the existing Will for both asset protection and to avoid de facto death duties. In contrast, the court in Hausfeld v Hausfeld refused to ‘authorise an alteration to the Will to defeat creditors.’
In Hausfeld’s case, the son was pursued by creditors. Dad was dying. The son urgently asked the court, to alter dad’s Will so his wife, instead, got the assets. Thus keeping dad’s estate out of the clutches of the son’s creditors. If of sound mind, dad would have gleefully altered his Will – the court admitted as much. However, the court stated that ‘people should pay their debts’ and thus, refused to amend dad’s Will. I cannot reconcile the two cases. Matsis allows you to amend the Will to avoid tax and protect assets; Hausfeld does not.
Dad’s assets shouldn’t be lost to creditors of another person (his son). By the court refusing to amend the Will, it allowed a third party to pay the debts of another person. This is moral turpitude.
Later cases restrict Hausfeld’s case to its actual facts. Thankfully, we are seeing the courts – Re Matsis and Gau v Gav – placing greater emphasis on the Will-maker’s “likely” wishes.
Hausfeld is now bad law. Your client has a good chance of success.
How do I get the Court to make a Statutory Will?
For the court to make a statutory Will:
- the person lacks testamentary capacity
- the person is still alive (i.e. not yet dead)
- the proposed Will, alteration or revocation accurately
reflects the likely intentions of the person if – they had
testamentary capacity and made a Will
- it is reasonable in all of the circumstances that the
Will be made
When do you need a Statutory Will?
- dementia and the old Will is out of date
- injury at birth, especially if there is a large compensation award
- laws of intestacy are unfair (e.g. parents split)
- old Will mentions a specific gift such as a home, which is already sold
- tax benefits with 3-Generation Testamentary Trusts
- the Wills lacks a Divorce Protection Trusts
- escape 32% tax on superannuation
- old Will is damaged, not correctly signed or in doubt
Does your Will contain Protective Trusts?
At Legal Consolidated (and my old Brett Davies Lawyers), our Wills contain Protective Trusts. This ensures that bankrupt beneficiaries get nothing from your Will. Therefore, the trustee-in-bankruptcy can’t get their hands on the assets. When the beneficiary comes out of bankruptcy they then get the gifts from the Will. This ensures the Will-maker’s true intentions are met.
For further information contact Legal Consolidated, your accountant or adviser.
Better to build a Will before you become of unsound mind
It costs a lot of money to go to Court. Better to build your Will while you are of sound mind. Don’t wait. You can lose mental capacity at any age. E.g. car accident.
Re Matsis; Charalambous v Charlambous  QSC 349
Hausfeld v Hausfeld  NSWSC 989
Gau v Gav  QCA 308
Doughan v Straguszi  QSC 295