Will drafting considerations
Everyone wants to make sure that when they pass away, their family and loved ones are adequately taken care of. However depending on the situation, giving a lump sum to a beneficiary may not necessarily be a good idea. This is especially true of beneficiaries who are young, or have a drinking or gambling habit.
Depending on the situation some testators often put restrictions on the disposal of the estate. Some of these restrictions include putting the estate in trust, and for the funds to be released when the beneficiary reaches a certain age. Another example is the provision of a yearly annuity to the beneficiary.
While these are good ideas, they raise some problems that need to be addressed. Having too many terms or conditions in the Will raises the risk of the court considering that the testator is controlling the estate from beyond the grave, essentially taking away the beneficiary’s ability to exert some measure of control on their finances.
In addition to this, the testator must also give some consideration to if the beneficiaries are being adequately provided for. It is useless to have many terms or conditions in the Will, only to have them overturned because they do not adequately provide for the beneficiaries.
The recent case of Hoolahan v Scali [2010] NSWSC 1349 is a good example of what may happen if the above principles are not adequately considered.
The estate in this matter was valued at $15 million dollars. The testator provided $100,000 to his wife in a one-off (but indexed) payment. In addition to this, he provided for a $45,000 per annum annuity to her (indexed), until she reached the age of 70. The annuity was further reduced as she got older. In the Will, the testator noted that he had considered that his wife would also receive significant superannuation benefits and that she would receive the matrimonial home.
A letter enclosed with the Will explained that the testator had provided for her in this way because he wanted to protect her from others who may pressure them for money. The testator also criticised his wife for having a drinking and gambling habit.
These terms were a shock to the wife, who had been married to the husband for 30 years.
The wife brought proceedings before the court, challenging the Will. She argued that the amount provided for her was inadequate to continue her standard of living, and that the testator’s fears of her drinking and gambling habit were unfounded. She sought the entire estate. The defendants, who were the executors of the estate, argued that the terms of the Will were protective in nature.
The court considered that the provisions were plainly an attempt by the testator to control the estate after his death. The court found that the diminishing annuity was inappropriate and that the Will left her with no control over her financial situation. However, the court thought that it was also inappropriate to award the wife with the whole of the estate as there were other beneficiaries. In the end, the court ruled over the Will and allocated the wife with a $2.7 million dollar property, the boat, and $4 million dollars.
Caring adequately for your family and loved ones is a serious consideration when drafting your Will, and this includes making sure that they are taken care of for the rest of their life. However, when drafting a Will, care must be taken that the Will does not exert too much control, or that beneficiaries are not provided for adequately as a result.
Everyone wants to make sure that when they pass away, their family and loved ones are adequately taken care of. However depending on the situation, giving a lump sum to a beneficiary may not necessarily be a good idea. This is especially true of beneficiaries who are young, or have a drinking or gambling habit.
Depending on the situation some testators often put restrictions on the disposal of the estate. Some of these restrictions include putting the estate in trust, and for the funds to be released when the beneficiary reaches a certain age. Another example is the provision of a yearly annuity to the beneficiary.
While these are good ideas, they raise some problems that need to be addressed. Having too many terms or conditions in the Will raises the risk of the court considering that the testator is controlling the estate from beyond the grave, essentially taking away the beneficiary’s ability to exert some measure of control on their finances.
In addition to this, the testator must also give some consideration to if the beneficiaries are being adequately provided for. It is useless to have many terms or conditions in the Will, only to have them overturned because they do not adequately provide for the beneficiaries.
The recent case of Hoolahan v Scali [2010] NSWSC 1349 is a good example of what may happen if the above principles are not adequately considered.
The estate in this matter was valued at $15 million dollars. The testator provided $100,000 to his wife in a one-off (but indexed) payment. In addition to this, he provided for a $45,000 per annum annuity to her (indexed), until she reached the age of 70. The annuity was further reduced as she got older. In the Will, the testator noted that he had considered that his wife would also receive significant superannuation benefits and that she would receive the matrimonial home.
A letter enclosed with the Will explained that the testator had provided for her in this way because he wanted to protect her from others who may pressure them for money. The testator also criticised his wife for having a drinking and gambling habit.
These terms were a shock to the wife, who had been married to the husband for 30 years.
The wife brought proceedings before the court, challenging the Will. She argued that the amount provided for her was inadequate to continue her standard of living, and that the testator’s fears of her drinking and gambling habit were unfounded. She sought the entire estate. The defendants, who were the executors of the estate, argued that the terms of the Will were protective in nature.
The court considered that the provisions were plainly an attempt by the testator to control the estate after his death. The court found that the diminishing annuity was inappropriate and that the Will left her with no control over her financial situation. However, the court thought that it was also inappropriate to award the wife with the whole of the estate as there were other beneficiaries. In the end, the court ruled over the Will and allocated the wife with a $2.7 million dollar property, the boat, and $4 million dollars.
Caring adequately for your family and loved ones is a serious consideration when drafting your Will, and this includes making sure that they are taken care of for the rest of their life. However, when drafting a Will, care must be taken that the Will does not exert too much control, or that beneficiaries are not provided for adequately as a result.
Want to know more about estate and succession planning?
For more information regarding our estates and succession planning services, including will preparation, powers of attorney, enduring guardianship, obtaining probate or letters of administration, and managing deceased estates, please use the quick enquiry form found on this page or call our office on 02 9687 8885. Our experienced estates lawyers look forward to assisting you with your estate and succession planning requirements.
This website is proudly supported by Phang Legal. This article was posted by Kenneth Ti, associate solicitor at Phang Legal.
Tags:
beneficiary,
case study,
deceased estate,
estate,
family,
family provision,
legal,
Probate,
superannuation,
supreme court,
testator,
will,
Will Drafting,
Wills & Probate,
Wills and Probate
Related posts
