Estate Planning – new dangers
When I started drafting Wills in the 1980s:
1. A lawyer had no obligations to the beneficiaries (only to the Will maker – who is dead by that stage); and
2. Accountants and advisers had no obligation to warn a client to make a tax effective Will.
Whilst those obligations have existed for a number of years, it wasn’t until a few days ago in the Supreme Court decision of Calvert v Badenach that a legal obligation arose to warn the Will maker about potential changes to the Will. The facts of the case are simple:
1. Dad made a Will leaving the estate to his friend. He cut out his daughter.
2. Dad died. The daughter successfully had the Will amended by the courts.
3. The friend successfully attacked the lawyer, who prepared Dad’s Will, for not addressing the potential challenge.
Judge Tennent stated:
‘The solicitor had been retained by the testator to prepare his will. The solicitor knew that the testator was elderly, and that he wished to give the whole of his estate to a man who was not a relative. … he owed his client a duty to enquire as to the existence of any family members who could make a claim … There is no evidence that the client had engaged the solicitor to provide advice as to anything other than the making of the will. I infer that, if the solicitor had enquired about family members as he should have done, then the testator would have disclosed the existence of his daughter, and the solicitor would have advised as to the risk of successful proceedings …
This decision opens the floodgates. Many more cases will come before the courts. A lawyer’s failure to:
1. Recommend that the Will maker speak to the accountant and financial planner about taxation planning and asset protection.
2. Warn the client that ‘joint tenancy’ assets don’t get into your Will (rather they go to the survivor).
3. Inform that superannuation can’t be controlled by the Will (the super has to get into the Will first).
4. Alert that mistresses (that you don’t live with) and illegitimate children (that you don’t know exist) can claim on your estate.
5. Advise binding Financial Agreements (‘pre-nups’) don’t work at death.
6. Ensure the Will maker actually wears his reading glasses at the Will signing.
7. Address how the life insurance should be held.
8. Advise that a Doctor’s certificate is required to confirm that the aging Will maker had mental capacity.
In my 35 years of practice I have always undertaken Estate Planning with the ‘team’; the financial planner and accountant. This provides a great deal of protection to the client as the accountant and adviser have, in most circumstances, known the client over many years and bring their own professional disciplines to the Estate Planning process.