Wills & Estates

Estate planning essentials

Good estate planning requires consideration of various matters and making plans to assist with managing your affairs before and after you die.

When we refer to Estate Planning most people think only of making a will, which has effect only after you die.

But the concept also includes consideration of what happens if you need help before you die looking after your finances or your personal welfare.

Even those with simple family structures and modest assets should plan how their legal, financial and health affairs are managed if they are incapacitated as well as how their estate will be distributed after they die. It can save a lot of problems to organise your affairs in advance.

What is a Power of Attorney?

Appointing someone under a power of attorney allows you to appoint someone to assist you with your financial and legal affairs. It does not remove your right to deal with your own financial affairs but does allow your appointed attorney to act for you. You are able to revoke your appointment of a Power of Attorney if appropriate and of course as circumstances change you may need to make changes.

There are two types of Power of Attorney appointments.

• A general power which often is given for a specific purpose and for a limited time. If you lose mental capacity this appointment ceases to operate;

and

• An Enduring Power of Attorney which is intended to operate indefinitely even if you lose mental capacity.

You can place conditions on the appointment of your power of attorney including when the power should commence and what limits are placed on the attorney’s ability to act when managing your finances.

It is important you choose someone trustworthy and reliable as your attorney and you can if you wish appoint more than one person and or a substitute person if your principal appointed attorney is unable to act for any reason.

The appointment in particular of a Power of Attorney is important.

Appointing a trusted person under a Power of Attorney is beneficial even if you are not elderly – people of any age can suffer unexpected health conditions, injuries and accidents whereby they need assistance with financial and legal affairs either in the short term or indefinitely.

What Could Go Wrong If You Do Not Have Adequate Estate Planning Documents?

Our firm came across a situation where a married couple jointly owned their home, the wife developed Alzheimers disease which rapidly progressed and she could not understand or therefore sign legal documents as she had lost mental capacity.  She was no longer safe at home, ‘wandering off’ and getting lost. Leaving the stove on and so forth.

The husband wanted to raise funds for his wife’s care in a newly built, well-appointed private nursing home facility in the area close to where they resided. He thought that to fund the care arrangements he might obtain finance over the jointly owned home or sell and downsize. The couple did not have any Power of Attorney appointments. He could not mortgage or sell their jointly owned house without his wife’s informed consent.

His only option was to apply to the NSW Civil & Administrative Tribunal Guardianship Division for a financial management order. This delayed plans for sale of property and derailed the private care arrangements the husband was organising. Particularly because it also raised the issue that the wife had not appointed an enduring guardian either and so the husband also had to apply for a guardianship order which required some examination of the plans he proposed for her care.

The Tribunal has a duty to protect a vulnerable person and must be satisfied any appointment of either a financial manager or guardian is in the interests of the person in need of care. In such cases other ‘interested persons’, which can include family members or health professionals dealing with the family, are notified of the application for comment. In this particular case the wife’s sister who had not communicated with the couple for some 15 years and lived several hours away, contacted the Tribunal to vent her dislike of the husband.

A temporary order was made for the NSW Trustee to be appointed to allow some investigation before a final hearing when a decision was made to appoint the husband as both financial manager and guardian of his wife. The process added complications and costs which caused added distress.

What is an Enduring Guardian?

Appointing someone as your Enduring Guardian allows the appointed person to make lifestyle, health and medical decisions on your behalf if you lack capacity to make those decisions yourself. A guardian acts as a substitute decision-maker and may consent to medical and dental treatment and living arrangements.

The appointment also authorises health care professionals to share your personal information with your guardian. If a person has not made advance arrangements, it can lead to problems about who is authorised to speak to hospitals and health professionals on his or her behalf. In such cases, an application to the NSW Civil & Administrative Tribunal to appoint a health guardian may be necessary.

Most people would prefer to choose in advance who is best placed to assist them if needed, so it makes sense to prepare these documents and pre-appoint those you know and trust to take charge of your financial and health affairs if the need arises.

When do you need to make a Will?

A will operates to give your appointed executor the right to make relevant decisions after you die for example it allows your executor to make arrangements for your funeral and to finalise your bank accounts, credit cards, sell or transfer a motor vehicle or terminate leases and utility accounts. Even if you do not have many assets, it is important to appoint someone to take care of all the details large or small involved with sorting out your estate, accessing your home, finalising electricity accounts or phone accounts and disposing of your possessions.

If you have more substantial assets then a Grant of Probate may be necessary.

If you die without a will then it is likely an appropriate person will be obliged to apply for Letters of Administration which is a more complex process therefore usually more costly.

What is meant by Probate or Letters of Administration?

When you die if you own a house or shares or have savings of any substance, it takes a grant of Probate or Letters of Administration to have the right to dispose of your assets. The banks or Lands Registry or Share Registry and so forth must be satisfied that you are the lawfully appointed person to whom they can release the estate assets.

With the exception of small estates, an application is made to the Supreme Court for a Grant of Probate (where there is a will) to confirm the appointment of the executor named in the will. Where the deceased did not leave a will, the application would be for Letters of Administration; asking the court to appoint an approved person as administrator of the estate.

The formal appointment by the court is important to protect the proper distribution of estate assets according to either the terms of the last valid will made by the deceased person or the laws of intestacy (if there is no valid will).

Formal appointments may not be required if the estate of the deceased is not substantial but will be required to deal with real property (houses or land) and any other assets of substantial value.

What is a valid Will?

A valid Will sets out who should benefit from your estate when you die and who will be responsible for administering it – your executors / trustees. If you have young children, you can nominate a guardian to make decisions for their care and welfare.

What is intestacy?

If you do not leave a Will when you die, then the laws of intestacy apply and your estate will be distributed in accordance with a statutory formula. The problem with this formula however is that it may not reflect a person’s real intentions or take into account specific circumstances. Dying intestate (without a Will) does also add to the expense of administering and finalising an estate as evidence generally has to be provided about searches for a will or to prove relationships and file evidence on this issue.

Preparing a Will is like taking out an insurance policy to protect your family and your assets. Wills should be reviewed and updated when significant changes in your life occur, for example marriage, divorce, or a substantial change in financial circumstances.

What are the duties of executors and administrators?

Executors and administrators are the legal personal representatives of a deceased person and have significant legal responsibilities. They must ensure they are protected from potential liability in the event of a claim against the estate.

In addition to the practical matters after a person dies such as arranging a funeral, executors and administrators must identify, secure and protect estate assets, pay estate debts and distribute the proceeds of the estate in accordance with the Will or the laws of intestacy. During this process, they may need to deal with accountants, financial institutions, real estate agents and brokers, usually with the guidance of the lawyer acting for the estate.

Executors and administrators often need to consider matters outside their area of expertise, such as whether there are any tax implications on the sale or transfer of assets, the order of payment of debts, the preparation of estate tax returns. Obtaining professional advice and guidance in these areas is essential.

Are there any time limits to worry about?

An application for a Grant of Probate should be made within six months of the date of death of the deceased or an explanation is required for the delay.

Beneficiaries of Estates often complain if they think there is delay in distributing the estate but care must be taken by the executor or administrator as the Succession Act does specify that an estate should not be distributed earlier than six months from the date of death of a person.

Further, distribution should not generally occur until at least 28 days from publication of a notice on the court website of a formal notice of intention to distribute the estate. This allows notice to be given to possible creditors of the estate to make a claim for payment of any bona fide debts of the deceased or due from the estate including tax.

Also as explained separately there is a period of 12 months to bring a family provision application.

Can a will be challenged?

Yes; sometimes the validity of a will is challenged. This can be a complicated process and delay a Grant of Probate especially if the challenger lodges a caveat against the grant of probate. One basis for the challenge might be that the will maker lacked mental capacity but more often the challenge is based on a family provision claim.

What is meant by a Family Provision Application?

Family provision applications are another problem that can arise in administering an estate. Certain persons, based on relationship or dependency on the deceased, may be eligible to make an application for family provision; meaning they want to receive a benefit (or a greater benefit) from the estate, based on their needs.

A family provision application can be made up to 12 months after the date of death of a person, so executors should take care to determine if any such claim is likely and this might further delay estate distribution until after the 12-month period has expired or after any Family Provision claim is finalised.

Who is responsible for estate debts?

An executor does not automatically become personally responsible for the debts of the deceased but must be careful to follow the rules, and pay the debts of which they have notice from the estate assets and follow the rules to give any creditors the opportunity to make a claim for their due payment. It is important not to distribute the estate too early in breach of the requirements set out in the Succession Act.

If an executor ignores the rules and distributes the estate early without taking account of debts or tax issues, they may become personally responsible for payment of the debt unless they can persuade the beneficiaries to give back assets to make payment.

If the estate is insolvent, that is, it does not have enough money to pay all creditors, appropriate consideration must be given to priority of payment to secured or unsecured creditors or adjustment of payments. The executor does not have to pay the debts if they administer the estate responsibly.

Is management of all Estates complicated?

Not all estates are complicated but certainly there are rules and regulations to consider and procedures must be properly followed.

Are there costs associated with Probate or Administration?

Our firm charges according to the fee scale which applies in NSW up to obtaining the Grant or Letters of Administration and disbursements (money we pay out on your behalf) are in addition to that scaled fee (for example court filing fees or copies of any necessary searches which might be required). The Supreme Court charges a filing fee for applications filed for probate or administration.

After the Grant of Probate or issue of Letters of Administration for ongoing work required our firm will invoice on an itemised basis. We provide a Cost disclosure to clients estimating fees and disbursements after we receive instructions from clients and before they confirm that we should proceed to act on their behalf. The costs and disbursements incurred of managing a deceased estate are able to be paid or reimbursed from the estate assets before final distribution.

Do you need legal help and assistance with estate planning and or acting on a deceased estate?

Generally, people will benefit from a proper understanding of what is involved in preparing wills and estate planning documents rather than just seeing the process as ‘filling out a form’ or ‘doing a will kit’.

Similarly, it is our experience that mostly people do need help managing a deceased estate and applying for a Grant of Probate, especially if applying for Letters of Administration and thereafter administering the estate.

From time to time we have been consulted by persons who started acting for themselves but became ‘tangled’ in the process and needed assistance to resolve problems created, such as the need to provide evidence requested by the court or to answer questions raised by the court or properly establishing what are the assets and liabilities of an estate.

At M Duncan & Associates we are very experienced in assisting clients with estate planning and estate management. We understand that after the loss of a loved one it can be hard to focus on all the issues necessary to wind up the estate, pay liabilities and dispose of assets. We aim to guide clients through the often-complex processes required to administer and finalise an estate as sensitively as possible.

If you need any assistance contact one of our lawyers by email at [email protected]  or call 02 9699 9877.