Podcast: Dying Intestate and Contested Wills

Rebecca:

Welcome everyone to the Nicholes Family Lawyers podcast.  I’m Bec Dahl, partner at Nicholes Family Lawyers.  Today I am speaking with Andrew Simpson, Principal Lawyer at Maurice Blackburn Lawyers in Melbourne and head of the firm’s Wills and Estates Practice.  Andrew has more than 25 years’ experience in Estate Planning, Estate Administration and Will disputes.  He wrote The Plain English Guide to Estate Planning and The Australian Guide to Wills and Estate Planning.  Andrew continues to practise solely in Wills and Estates, to help clients create and document their estate planning, to assist families to finalise their estates and to challenge wills for people who have not been adequately provided for.  Welcome Andrew, it is a pleasure to have you here!

Andrew:

Thank you for having me.

Rebecca:

Now, Andrew, you know a lot about wills – really today, we are going to talk about people who don’t have wills or who have wills that can be contested and what can happen in this situation.  So one of the things we often get asked is: What is a family lawyer, what do you do? Is it divorce? And we have long explanations that we give to people.  So I am going to ask you the first question: what do wills and estates lawyers do and what sort of things do clients come to you for advice on?

Andrew:

Good question. The role of an estate lawyer is very broad and it can have a number of components to it. So at the front end we have the Estate Planning side of things.  So that is where we work with people to come up with their estate plan and then we document that into a will.  We also help them do things like Powers of Attorney and then confront end-of-life issues in relation to medical treatment and advanced care directives.  So that front-end part of it can be relatively straight-forward for most people or it can be quite complicated, where people have corporate structures like self-managed super trusts and blended families and this can become quite complicated.

So that is the front-end part of it what an estate lawyer does. The back-end of it is the estate administration when someone dies.  So you’ve got the estate itself, and as you alluded to in your introduction, we have also got the dispute side of it when things go wrong.  So an estate lawyer would cover everything, from the front-end to the back-end.

Rebecca:

And I guess, Andrew, like us as family lawyers, you are often dealing with people who are highly emotional, who have gone through a tragedy, and managing that human aspect side of it as well.

Andrew:

In fact, there is not a great deal of difference between what you do and what we do as estate lawyers, because we are dealing with people who are vulnerable, who are going through a stressful time, either at the front-end when they are trying to work out what they are going to do with their estate and for some people that is very complex because the family arrangements are difficult or they might be going through a health concern; right up to the back-end where we have families warring with each other about the estate or about who gets what or what should have happened that hasn’t, so you are absolutely right: we are in the midst of family crisis, no matter what we do.

Rebecca:

Wills are one of those things where people think: I must get around to that and lawyers are just as bad as anyone else!  But why is it important to have a will, should I take it off my sticky note and actually do it?  Is it really that hard?

Andrew:

Yes, the will is one of those things that sits on the To-Do list for ever, it seems. Research data shows that more than 50% of Australian adults do not have a valid will, and of that 50%, about 40% have no idea what happens to their estate if they die without a will. So there is knowledge about wills and estates out there, but a will is a very important document, and having a will, even if it is a simple one, will go a long way towards avoiding a dispute down the track. So a will firstly sorts out who the Executor is, putting someone in charge of your estate.  By appointing an Executor, you are removing a potential area for dispute.  And more importantly, the will sets out where the estate is going to be distributed and that is where we see most of the fun, in estate disputes, where people get that wrong.

So a will is a document which needs to come off the to-do list. What I would say is to be careful not to tackle it yourself.  We see a lot of do-it-yourself wills kits and what we generally find is that those wills kits fail to do what they are meant to do, for a number of reasons. Either they are not signed properly, so they might be invalid as a result.  Secondly, someone might try to give away an asset that they do not own, so they might not understand what they are doing. Thirdly, someone might forget to give away everything that they own, so they have left items that are undistributed.  We see some very messy home-made wills. The advice from a wills lawyer is to get it done, in most cases it does not have to be complicated, but get it done properly.

Rebecca:

Following on from what you said about a lot of people not knowing what will happen to their property if they do not have a will, often people think it goes to the government, people think all kinds of things!  So if people don’t have a will and they died “intestate”, firstly what does that mean, and secondly,  what will happen to their assets?

Andrew:

Dying intestate means that you die without making a will – often people think it means you die in another state, eg NSW or Qld, so we have to correct that!  So this creates a series of events that need to be dealt with: firstly, you do not have an executor, so you have a period of nothingness where no one is authorised to do anything. Someone needs to put up their hand and offer be appointed as the administrator of the estate.  That’s the first area of dispute as you might have more than one person wanting to be the administrator, so you might have family members arguing over who should do it.  Then secondly, you have the question of who gets it – we don’t have a will that governs the distribution of the estate, so who will get it.  We have a section in an Act of Parliament that sets out a hierarchy of provision, which is like a formula that determines who gets what. This formula is rigid and often does not bring about an outcome which the will-maker would have wanted, if they had put it into writing.   So you are stuck with a formula and in some cases, that might bring about an OK result.

Rebecca:

Does that cover people who don’t have a will at all, but also those people who have tried to do a home-job which has not quite worked out? Are those people considered to be intestate as well?

Andrew:

Absolutely spot-on. So you may have a will, but you might have forgotten to distribute something, you have a will which deals with part of the estate, but you also have an intestacy for the other part of the estate.  Those intestacy rules would cover that part of the estate that fails to be distributed under the will.

Rebecca:

1. You mention a formula: what if someone was to pass away and they did not have a partner or children or other relatives that are around or that they know about, what happens to their possessions?

Andrew:

Well, the formula goes down a fair way, so if you die without a partner and without children, you then go up to your parents, so if you have living parents, they would share part of your estate.  If you don’t have parents, partner or children, then you head out to your siblings and if you don’t have siblings, you go to grandparents, if you have them, or aunts and uncles; it stops at first cousins.  So basically, the formula will trace the family until it hits the category and stops there with that level of relative.  If we get down past first cousins and we still have not found anybody, then it stops there and the estate goes to the government.

Rebecca:

Right, so there is some truth to that popular idea, so it is going to be pretty down the line before that happens?

Andrew:

Correct.

Rebecca:

If someone does die with a spouse or a domestic partner, and they are prioritised in that hierarchy, does that partner get everything if they are intestate, or does a part go to a partner, and a part go to the children, how does that work?

Andrew:

In Victoria it all depends on the nature of the family structure, so if you have a surviving partner and children who are also the children of that relationship, the partner receives everything.  And for most people, that is great, it will work OK. Where we see trouble is where you’ve got a blended family, a second relationship where the children are not the children of the surviving spouse.  In that scenario, the formula says that the surviving spouse gets a lump sum of about $400,000 up front, which is known as a statutory legacy and then they get 50% of the rest of it, and the children share the other 50%.  This is the legislature’s attempt to provide for everybody in a scenario which is not ideal.

The problem with that kind of distribution is that if the family home for example is owned by the deceased and the surviving partner’s entitlement to the estate does not take up the whole value of the property so all of a sudden they have an interest in their property along with their several kids who are saying: we love you, but we want the house sold, so you’ve got this push-and-shove over what happens to the house: you know, we want our bit but you have to buy it from us, so it gets very messy.

Rebecca:

OK, now Andrew, one of the things I do in my spare time is I watch really terrible midday movies and in some of these there is a child whose rich parent dies and the child says: I didn’t get anything, I should have been left all the money so I want to make a claim.  Now is my education from midday movies correct and can people do that?

Andrew:

Absolutely, so if a child is left out of an estate, so if the will is silent about what that child receives, yes, they have a right to challenge, but you made reference to that long-lost child who is very wealthy, so in most jurisdictions it is kind of based on need, so the law says, and most people are comforted by this, the law says as will-makers, we have a right to leave our estate to whoever we choose to, but the law also says that there are some qualifications to that.  The law says that there is a category of people for whom we have an obligation to provide for, and the extent of that obligation varies according to what the financial position of that particular person is.  If it is a very wealthy child, the law will say, as a will-maker, and if the child is very wealthy, you don’t need to provide for them because they don’t need it.

Rebecca:

So they don’t get to have a crack, just by virtue of being the child.

Andrew:

Correct, so yes, they would be an eligible applicant so they are in the category of people who can challenge, but they would probably fail at the hurdle of establishing that they have some need.

Rebecca:

If someone came to you for advice in that situation and said to you that they want to make a claim, what would your advice be – do you say to everyone, go for it, it’s worth having a try or do you have to be really considered about who is making a claim against an estate?

Andrew:

The first thing we would do would be to work out when the death was and when probate was granted, because there are entitlements, if it is still within 6 months of the date of the grant of probate because that is the time in which we can challenge the will. Secondly we would establish whether they are eligible: if you are a child, then you would get over the first hurdle of eligibility without any hassle.  The next line of enquiry is: tell us a bit about yourself, what was your relationship like with mum or dad. Did you care for them, did you have a strong relationship with them, did you help build up their wealth, did you contribute to the asset pool, and then you would look around the family: who else is there, who else has a need, who else will be competing with you for a claim and then we would ask them what their financial position is. At this point we need to establish that they have a financial need; a financial need is a relative concept – you can’t look at every case using the same kind of formula when it comes to financial need because if it is a very big estate and there is lots to go around, courts tend to be a bit less worried about the relative financial needs of the parties, if will be enough to share.

If the estate is very small, all of a sudden that question about financial need is much more important. Financial need does not mean that you are destitute, either.  You have a family home and a little bit of super, you can still be held to be in financial need because you cannot eat your house!  If you are retired and you have very little super, but you still may have 20 or 30 years to live, then you are going to be able to demonstrate some need into the future so we would require all those numbers, and look at the facts.  Health comes into it, too.  Are you going to need health care or aged care into the future? All of these things impact your future financial needs.

Rebecca:

So if a judge is deciding one of these cases where someone has brought a claim against an estate, are there other things that they look at apart from financial need, or is this the one determining aspect?

Andrew:

No, it is a major aspect but it’s not the only aspect.  In the relevant section of the Act, the Court will look at things like the nature of the relationship and the length of it, so if you are talking about a partner, how long was the relationship; if it is a child, what was the quality of the relationship.  In a lot of cases that we see, there has been an estrangement, for example, so maybe the mother has fallen out with the child, and those estrangements can last 20 years even – that is relevant.  But one thing we point out is that Courts are loath to attribute blame to one party where there is an estrangement.  So estrangement itself is not a killer to a claim; it might reduce the extent of the moral obligation but it won’t eliminate it completely because there are two sides to every story in a family, as you would know from a family law perspective.

Rebecca:

And one person is not there to tell their side of the story, in these cases.

Andrew:

That’s a really good point. In estate litigation matters, the star witness is not there to tell their story.   You raise an interesting point: at the front end of the process, we were talking about estate planning.  If a will-maker is excluding someone, we suggest to them that they go into great detail in an affidavit, even, explaining why.   So when we get to the back-end where we have fighting about who gets what, we actually do have something from the deceased explaining why they have done it. So the nature of the relationship, the strength of the relationship, contribution to the building up of the asset pool.  If a child has helped pay off the house or has given money to mum or dad during their lifetime, that is all relevant. And as I mentioned before, who else is around, if there are siblings who have competing needs, then that is all relevant as well.

Rebecca:

And talking about children bringing a claim against their parent’s estate, can grandchildren or nieces or nephews or other relationships bring estate claims in the same way?

Andrew:

In Victoria, we have a fairly narrow category of eligible applicant; to cover off the grandchildren, they are actually eligible under the Act, but it is very rare to be successful in a grandchild’s claim.  You would only be successful there if you could demonstrate that the grandparent really assumed the parental role for that grandchild; raised them as their own, so they would need to be financially dependent living in the household with the grandparent. But over and above that, you will have a struggle.

Nieces and nephews, you would generally not bring a claim.  We do have this category “member of the household” so if you were living with the deceased as a “child” you might have a claim, but very rare.  Mainly limited to spouse, children and step-children, these are the most common eligible applicants.

Rebecca:

As a family lawyer I wonder whether you have cases where perhaps a marriage has ended and there is a new partner, and there are then competing claims from a former spouse and a current partner against a will?

Andrew:

Yes, that is an interesting point.  One of the eligible applicants under the family provision legislation is a former partner who has actually not yet done a property settlement and who is eligible to actually bring a family court proceeding, so in that scenario, where you have both a widow and also a former partner involved in the same dispute. It is pretty rare for that to happen but it is possible. So you can have a range of different eligible applicants or even beneficiaries who are trying to protect their rights under a will involved in litigation.

Rebecca:

What is the process in these sorts of disputes, so is it a matter that you file an application, then everyone is in court giving evidence or are there mediations, or do they have to go to court: what are some of the ways that these are resolved?

Andrew:

As with most litigation, these things are complex, stressful and time-consuming, so we suggest to people, the best thing to do is to try to get to the negotiating table as quickly as you can, that is best for everybody, and we are required to do that under the Civil Procedure Act.  So you would file a proceeding to preserve your rights, under the originating motion of the court and then you would file an affidavit that sets out the nature of your relationship with the deceased and then you would file some fairly detailed information about your financial position and your health. Eventually, the other side of the dispute gets to respond to your claims and then you end up in mediation, which is compulsory in this jurisdiction, so this is an excellent idea.  As in the family law context, we are fighting about people’s money – we are not fighting with a bureau that has deep pockets, we are fighting over a family asset pool which has been generated over a long period of time and it’s finite, it cannot go on for ever. So we have a mediation and this is where most of these matters resolve.

Rebecca:

Which is good as we are dealing with emotions and families and fighting it out in court never seems to improve those relationships.

Andrew:

No it doesn’t.  I say to people when they come to see me at the start of a process: there are a couple of things you need to consider, firstly how much do you value your family relationships, do you still want to have dinner with your brothers and sisters. If you do, this could be a problem for that process because family relationships fracture in these kinds of disputes. The other thing I say is to be careful about how far you push this, you need a strong claim, we may need to run it through trial and will do so if we have to, but nobody wants to see the lawyers become another beneficiary of the estate, people are not happy for lawyers to take the inheritance, so the quicker you get to an outcome, the better for everybody.

Rebecca:

Well, Andrew, before we finish, I’m going to ask you a question that people ask me all the time: why on earth would you be a family lawyer, when it is all full of emotion, people fighting over their own family and stress; I think the same question could be asked of wills and estate lawyers, so what is it about this area that keeps you involved over all these years?

Andrew:

A good question, for me I think it is about the diversity of what we are asked to do, we’ve got the front-end process which is the estate planning side of it which is actually quite creative.  You may be confronted with a client who has a lump of asset, and doesn’t really know what he/she wants to do with it, who may not even fully understand how they even own it, and what the structures are, so you help them to understand what their assets are and then you help them navigate through a process of working out how to distribute that after death. For me, that is very satisfying, you take a client who doesn’t really know what they are doing, and you put them through a process and so at the end, they have peace of mind of knowing that they have a process which has been planned and it is ready to go and I can live the rest of my life in peace. Clients leave that process, more often than not, saying that it was not nearly as hard as it was supposed to be, I was expecting more difficulty than that.  So that is rewarding.

At the other end of the process, particularly when you are challenging wills, you get the opportunity to change someone’s life for the better; often applicants in family provision claims have had a very difficult life, they may come from a fractured family in which relationships have been difficult for many years, so at the conclusion of an estate dispute it is quite rewarding to give someone a large sum of money sufficient to change their life.  Often they have gone from very little to suddenly having enough to pay off their house, or just to keep financial pressures away from them, so it is very satisfying.

Rebecca:

Andrew, thank you for joining us today, that was a really interesting discussion and I think people will find it very useful. Lesson learned, do a will and do it properly is the take-away for me today.

Andrew:

Very good advice and the other bit of advice is that it is not that complicated, it can be quite straightforward, so don’t be afraid of the process.

Disclaimer: Nicholes Family Lawyers intends the information provided in this podcast as general information only, please contact Nicholes Family lawyers if you require specific information and advise in relation to any family law matter.