Wills and Estates Law Update: capacity & the importance of updating your will

Legal Capacity

Solicitors often need to consider the issue of capacity when a client makes a Will or gives an enduring power of attorney. Under the new Powers of Attorney Act (Bartier Perry Bulletin January 2004) solicitors are required to explain the nature and effect of the power of attorney to the donor and satisfy themselves that the donor has the mental capacity to give the power of attorney.

The Law Society of NSW has issued guidelines for determining the level of competence required for granting an enduring power of attorney. These guidelines provide a definition of the competence required, some suggestions for questioning to explore a client's capacity and outline the options for capacity assessments by a medical practitioner or other health professional.

It has been suggested that legal capacity issues are becoming more common as a result of Australia's ageing population and the increase in disability from age related conditions such as dementia.

Legal capacity is important and impacts upon many areas including:

  • The solicitor/client relationship
  • Planning for incapacity
  • Dealing with the effects of incapacity during a person's lifetime
  • Challenges to Wills after death on the basis of a lack of testamentary capacity

Keeping a Will up to date

The ever increasing trend towards volatility in relationships highlights the importance for regular reviews of Wills and estate plans. In our practice we recommend that Wills and estate plans be reviewed at regular intervals and particularly if a major change occurs to any of the following:

  • Revenue law
  • Composition of family
  • Spouse or partner
  • Assets over which the Will maker has ownership, management or control and in particular if that asset is the subject of specific provision in the Will.

A recent decision of the Supreme Court of New South Wales clearly demonstrates the advantage of reviewing a Will as personal circumstances evolve.

In Hoobin v Hoobin [2004] NSWSC705 (6 August 2004) the deceased testator remarried 3 days before he died and was survived by a wife and 5 children of a former marriage. The deceased had known his second wife for about 6 years prior to his death and had lived in a domestic relationship with her for about 4 years prior to the marriage.

Following the deceased's death his widow applied for Probate of a Will made prior to the marriage in which she was appointed executor and except for some specific legacies was the recipient of the major part of the estate.

In that document the testator described the wife as "his de facto spouse." There was a statement in the Will that no provision was made for his children but there was no statement of reasons for their exclusion.

One of the issues determined in this case was whether the Will made prior to the marriage was revoked by the deceased's subsequent marriage. The effect being, that if the Will, not made in contemplation of marriage was revoked, the deceased would die intestate and the estate would be distributed according to the laws of intestacy.

White J. found:

"... I am not satisfied that when he made his Will the deceased had marriage to the plaintiff consciously in mind as a possibility. At that time he was not looking beyond his impending hospitalisation, from which he did not expect to emerge"...

Accordingly the Will was revoked by his marriage and the estate distributed according to the laws of intestacy. This meant that the widow received less than if the Will, of which she was the main beneficiary, had been admitted to probate.

The lesson to be drawn from this case and others is that Wills and estate plans must be reviewed particularly when there are changes in family dynamics.

STEP Industry Survey 2004

The Society of Trust and Estate Practitioners (STEP), a global association of multidisciplinary professionals in the area of trusts and estates, has published the results of its first ever STEP industry survey. The results, which reflect the view of STEP members worldwide, were interesting. Some of the survey questions and results are as follows:-

What are trusts used for?

  • estate planning (35%),
  • tax mitigation (25%),
  • asset protection (20%),
  • confidentiality (14%),
  • employee benefit trusts (6%).

Which types of trust work do you believe will increase in the future?

  • estate planning (70%),
  • asset protection (49%),
  • tax mitigation (35%),
  • confidentiality (8%),
  • employee benefit (7%).

Our experience suggests that these figures are comparable to the situation in Australia. It is interesting to note that there is evidence that civil law jurisdictions are making their own progress towards recognition of trusts by fiduciary vehicles of their own. It will be interesting to see how the concept of a trust is embraced by the member nations of the European Union.