24 September 2020

Do I need a Will and how do I make one?




Written by Daniel Bennett

Too many Australians fail to properly consider whether they need a will. They assume they don’t either because the assets they have are minimal or the rules of intestacy will carry out their intentions anyway. Perhaps they may simply be afraid to actually think about the topic at all.

The answer might be no, but have you come to that answer knowing exactly what would happen when you die with or without appropriate estate planning in place? Do you know, or have you simply assumed, how the rules of intestacy would apply to your circumstances? Do you know that your superannuation does not automatically form part of your estate? What do you expect to happen to jointly owned property or bank accounts? Are you aware of what kinds of claims your estate might have to defend and who may be eligible to make such claims?

The more likely answer to the question is that you should have at least a valid will. If not only to ensure that your estate is left to those you intend and in the way you expect, but also to ensure that the decision has been made with the best taxation and asset protection strategies in mind. You might also want to avoid the unfortunate litigation that can often arise regarding burial rights and who will become the testamentary guardians of your infant children.

What are the requirements of a valid will?

In New South Wales, according to s. 6 of the Succession Act 2006 (NSW) (“the Act”) a will is not valid unless:

  • It is writing and signed by the testator or by some other person in the presence of and at the direction of the testator;
  • The signature is made or acknowledged by the testator in the presence of 2 or more witnesses present at the same time; and
  • At least 2 of those witnesses attest and sign the will in the presence of the testator (but not necessarily in the presence of each other).

Who can be a witness?

There are benefits having the drafting (or another) solicitor as one of the two witnesses to your execution of the will. Doing so will ensure the best chances that the formal requirements are complied with. Further, should the will ever be challenged, for example due to a lack of testamentary capacity of the testator, a solicitor ought to have undertaken the necessary steps in determining the testator’s capacity and should have files notes to that effect. In the event of contested probate proceedings that solicitor would then be a required witness in the proceedings.

That said, there is no formal requirement that a solicitor be a witness to the will in order to comply with s. 6. Your witnesses should be independent (not a beneficiary under the will or your spouse) and over the age of 18.

What if these requirements are not met?

Where a will fails to satisfy these formal requirements all hope is not lost. Pursuant to s.8 of the Act it is possible for a Court to dispense with these formal requirements where the document or part of the document in question purports to state the testamentary intentions of the deceased person and has not been executed accordingly.

There have been a number of interesting decisions as to probate of informal wills in the past few years in different Australian states, including where an unsent text message, an audiotape, a videotape or a DVD recording have been accepted by the Court as the testator’s last will ( for example, see decisions such as Cassie v Koumans [2007] NSWSC 481, Treacy v Edwards; Estate of Edwards (2000) 49 NSWLR 739 and Re Nichol; Nichol v Nichol & Anor [2017] QSC 220).

For such order to be made in New South Wales the Court must be satisfied that the person intended it to form his or her will or to form an alteration to his or her will. The Court would need to look at any evidence relating to the manner in which the document or part was executed and any evidence of the testamentary intentions of the deceased person, including evidence of statements made by the deceased person.

Should I simply prepare my own informal will?

Unless your circumstances are such that you are moments from death and unable to contact a solicitor or to otherwise prepare a formal will, no.

At the planning stage and where no such dire circumstances exist, it should not be your intention to rely upon the Court’s ability to grant probate in respect of informal wills. Doing so will expose you to significant risk that your testamentary intentions are not carried out if the Court is not ultimately satisfied that such document forms your testamentary intentions due to the obvious evidentiary considerations underpinning the provision.

DIY Will Kits: Don’t do it

You may appreciate the need for a will but consider a Do It Yourself Will Kit to be the way to go. Do so at your own peril. Such approach might very well see the formal requirements of s. 6 complied with. However, in our experience, this approach carries obvious and significant risks in the event that:

  • Execution is not properly carried out, including where the will has not been properly signed in the presence of two witnesses, or subsequent changes are made to the original document after execution.
  • The executors or beneficiaries are identified incorrectly.
  • The witnesses are also beneficiaries under the will.
  • The will is lost.
  • You misunderstand what actually forms part of your estate, including with respect to superannuation and jointly owned property or bank accounts.

Contact a solicitor of our Wills and Estates Team to further discuss your estate planning needs at your earliest convenience.

20 August 2020

Spousal Maintenance Applications or Adjusting Existing Spousal Maintenance Orders in Light of COVID-19




Written by Jessica Swain

The economic impact felt by many Australians as a result of COVID-19 has had significant financial implications for many families.  These challenging financial circumstances may be increased if you have recently separated from your spouse or partner.

Pursuant to Section 72 of the Family Law Act 1975 (“the Act”), parties to a marriage have a right to make an Application for spousal maintenance following the breakdown of their marriage.  Spousal maintenance can also be sought by one party following the breakdown of a de facto relationship pursuant to Section 90SE of the Act.

The right to spousal maintenance involves a “threshold test” which involves:-

  1. If one party to a marriage is unable to support himself or herself “adequately” due to:i. Care and control of a child of the marriage;
    ii. Age, physical or mental incapacity for appropriate gainful employment;
    iii. Any other adequate reason; and
  2. The capacity of the other party to pay the maintenance sought.

As a result of COVID-19, many people have experienced a loss of employment, loss of investments such as rental income or a reduction in business revenue. In light of the ongoing economic uncertainties during the COVID-19 pandemic, it is important that clients who have recently separated from their spouse or partner, have adequate financial support and are aware of options available to them.

If the threshold test is met, spousal maintenance can be paid by way of interim spousal maintenance, lump sum or on an urgent basis.

Lump Sum Spousal Maintenance

Pursuant to Section 77A of the Act (parties to a marriage) and Section 90SH of the Act (parties to a de facto relationship), lump sum spousal maintenance may be ordered where one party who is to provide maintenance does not have the income to make payments periodically and on an ongoing basis to the other party.  This may be a lump sum payment by way of cash or transfer of property.  In the event this lump sum Order is made, the Court must specify the portion of the property which is referable to the spousal maintenance being received by the party in need.

Interim Spousal Maintenance

Orders for interim spousal maintenance are made pursuant to Section 74 (for parties to marriage) and Section 90SE (for parties to a de facto relationship) of the Act and may be ordered in circumstances where a party requires maintenance immediately following the breakdown of the relationship or marriage.  Importantly, an Application for interim spousal maintenance cannot be made until both parties have filed material before the relevant Court including a Financial Statement and Affidavit outlining their respective financial positions and evidence as to the proposed payer’s capacity to pay spousal maintenance.  An interim Order is a temporary Order that can be put in place for a fixed period (reserving the liberty for the applicant to apply for an Order for the payments to continue), until a lump sum payment or transfer of property can be made, the matter is resolved between the parties on a final basis or the matter is listed for hearing before the Court in relation to that issue.

Urgent Spousal Maintenance

Where it appears to a Court that a party is in immediate need of financial assistance, but it is not practical to determine what (if any) Order should be made, the Court can make payment of a periodic payment of periodic spousal maintenance or other sums pending resolution of the proceedings pursuant to Section 77 of the Act (for parties to a marriage) and Section 90SG of the Act (for parties to a de facto relationship).

Urgent spousal maintenance Applications are heard before the Court at a time when not all evidence is at hand.  In other words, an Application for urgent spousal maintenance is made in emergency circumstances where there is an obvious need but not time for the parties to provide evidence in support of the claim for spousal maintenance.

Variation to Existing Spouse Maintenance Order

In the event that one party has had a reduction in their income or earning capacity, and there is a preexisting spouse maintenance Order in place, pursuant to Section 83 of the Act (in married couples) and Section 90SI of the Act (in de facto relationships), the Court has power to discharge, suspend, revive or vary a spouse maintenance Order.  In order for the Court to be satisfied that there should be a modification made to an existing Order, it must be found that one of the following applies:-

  1. That, since the Order was made or last varied, the circumstances of a person for whose benefit the Order was made have changed, the circumstances of the payer have changed, or
  2. The cost of living has changed to the extent as to justify a modification of the spouse maintenance Order; or
  3. If the preexisting Order was made by consent, that the amount ordered to be paid is not proper or adequate; or
  4. That material facts were withheld from the Court that made the Order or from a Court that varied the Order on material evidence previously given before a Court was false.

Every matter is different and will depend on the unique circumstances of the case as to whether someone is entitled to spousal maintenance and what type of spousal maintenance may be ordered.

In the event you have separated from your spouse or partner recently and are questioning whether you are entitled to receive or should pay spousal maintenance, particularly in light of financial circumstances as a result of COVID-19, please do not hesitate to contact the Family Law Team at Uther Webster & Evans Pty Ltd on (02) 9290 1177 so that we may assist you with your query.

 

27 July 2020

A liquidator has made a demand on you for payments that you have received that they say are unfair preferences. What can you do?




Under Sections 588FE and 588FA of the Corporations Act 2001 (Cth), a payment constitutes an unfair preference and is a voidable transaction if:

  1. the company and you were both parties to the transaction;
  2. the transaction occurred within six (6) months of the commencement of liquidation;
  3. the company was insolvent at the time of entering into the transaction, in that it could not pay its debts when they fell due; and

the transaction resulted in you receiving from the company, in respect of an unsecured debt that the company owed to you, more than you would have received from the company in respect of that debt, than if the transaction was set aside and you were to prove for the debt in the liquidation of the company.

There are however a number of options available in responding to the liquidator and/or defending proceedings by a liquidator for unfair preferences.

There are several defences that may be available and reasons why you should not be required to pay back to a liquidator an amount.

Some of these include:

  • where you are a secured creditor because:

    i. you may have a charging clause or an equitable interest over real property owned by the company;

    ii. you may have a security interest such as under a Retention of Title clause which has been registered on the PPSR; oriii. you may be the beneficiary of a common law lien which is not required to be registered on the PPSR.

  • the statutory defence contained in Section 588FG (1) of the Corporations Act 2001 (Cth) which is commonly known as the “good faith defence.” This defence is essentially that you were not aware that the company was insolvent at the time it made the payments to you. To succeed on this defence, the onus is on you to establish:

    i. that you had no reasonable grounds for suspecting that the company was insolvent or would become insolvent as a result of making the payment/s (i.e. the subjective test); and

    ii. a reasonable person in your circumstances would not have reasons to suspect the company was insolvent or would become insolvent (i.e. the objective test).

In addition, another defence that may be available is called the “Doctrine of Ultimate Effect.” In Beveridge v Whitton [2001] NSWCA 6 it was argued by a liquidator that an accountant’s audit of an insolvent company’s books, prior to that company being placed into liquidation, that the payment of those fees being the professional fees for the accountant constituted an unfair preference. In the NSW Court of Appeal, the Court determined that the payment of those fees was not an unfair preference because:

  1. the accountant only accepted the engagement to do the work on the proviso fees were paid speedily;
  2. the value of the services should be treated as the price charged for them;
  3. that it was not the case that the failure to show any quantifiable addition to turnover or inventory meant that the services supplied were without value, or that a payment made for them necessarily decreased the company’s assets; and
  4. the doctrine of ultimate effect does not depend on a transactions ability to improve or worsen a company’s position, but rather it was the ultimate effect of the transaction itself that is relevant.

This defence may be useful in circumstances where the company was insolvent, a liquidator can prove that you knew the company was insolvent and where the goods or services provided (that the payments were for) were of substantial benefit to the company.

It is important to remember that in circumstances of a demand made by a liquidator that these matters are often open to negotiation and the cost involved in defending litigation brought by a liquidator will often exceed a settlement amount which could have otherwise been arrived at had you instructed solicitors to negotiate and defend the claim on your behalf.

If you require further information regarding any of the defences available to a demand or proceedings bought in relation to a preference payment, you should contact Uther Webster & Evans.

18 June 2020

Powers of Attorney: The Golden Rule




Written by Robert O’Harae

Powers of Attorney: The Golden Rule

A Power of Attorney is a legal document that allows the person making the Power of Attorney (referred to as the principal) to nominate one or more persons (referred to as attorney or attorneys) to act on the principal’s behalf.

An Enduring Power of Attorney grants an attorney authority to manage the principal’s legal and financial affairs including buying and selling real estate, shares and other assets as well as operating the principal’s bank accounts and spending money on their behalf, even after the principal has lost the capacity to make financial decisions for themselves. Typically, a letter from the principal’s treating general practitioner or geriatrician should be obtained to confirm that the principal has lost capacity to manage their financial affairs and this can be a condition of the instrument being operable.

It is not surprising that with a position of such importance and trust, an attorney must only act only in the best interests of the principal. This means an attorney must:

  1. Avoid doing anything as an attorney which would mean that their own interests conflict with the principal’s interests;
  2. Obey the principal’s instructions while they are mentally capable and any directions set out in the Power of Attorney document;
  3. Act according to any limits or conditions placed on their authority within the Power of Attorney document;
  4. Not give gifts to themselves or to others, enabling them to benefit from the principal’s finances unless it is specifically authorised to do so. Even if authorised, any gift must be seen as reasonable in the circumstances;
  5. Keep their finances and money separate from the principal’s; and
  6. Keep accurate and proper records of their dealings with the principal’s finances or property.

The importance of these obligations were brought to light in the recent case of Case 662814 concerning Westpac Banking Corporation which came before the Australian Financial and Complaints Authority (AFCA).

In this instance an elderly person in their nineties opened a Westpac bank account and their daughter was added as a signatory to that account. In July 2019 (about 4 years after the account was opened) the elderly person and the daughter requested a withdrawal of $100,000 in cash. A few days after that request was made, the elderly person was admitted to hospital. On that occasion Westpac refused to provide the money to the daughter after her parent’s admission to hospital.

Shortly after Westpac declined the transaction, a Power of Attorney was made by the elderly person appointing their daughter as their attorney.

Using the Power of Attorney, the daughter sought to withdraw $800,000 from her parent’s Westpac account to purchase gold bullion. The daughter informed the bank that the gold was to be purchased in her sole name and not in the name of her parent, effectively transferring the value of the funds to the daughter.

Westpac again blocked the transaction and made direct enquiries with the parent, who when questioned by the bank seemed unsure, uncertain and lacked understanding of the requested transaction to purchase gold bullion.

Following Westpac’s blockage of the transfer, the daughter brought a complaint to AFCA who upheld the bank’s actions.

AFCA found that Westpac had a duty to exercise reasonable care and skill in carrying out transactions for its customer, particularly if the customer is vulnerable.

AFCA considered that the ninety-year-old bank account holder was vulnerable to potential elder and financial abuse by their daughter. Within its decision, AFCA advised noted that “financial firm employees may be in the best, and sometimes the only, position to recognise financial elder abuse when it occurs. Financial firm employees need to be encourage to trust their instincts”.

This case illustrates the importance for those considering making Power of Attorney of choosing the right attorney to appoint due to the importance of that appointment and the trust required within the role. Further, it highlights the diligence the employees of banks and other institutions should exercise when receiving instructions from an attorney under a Power of Attorney.

UWE advises on the preparation and implementation of Power of Attorneys as well as recovery against inappropriate transactions. Please contact us on (02) 9290 1177.