Peter Allsopp, Legal Writer-Lexis Nexis Australia
The extraordinary nature of the COVID19 global pandemic has highlighted the importance of having an up to date Will to ensure that the testator’s estate is distributed in accordance with their wishes.
Although COVID 19 has led many jurisdictions to change their rules for witnessing documents to maintain social distancing, the fundamental requirements for making formal testamentary documents remain the same. This article sets out key issues to bear in mind when taking a client’s instructions to draft a will that will minimise the risk of challenges being made to the validity of the will.
A person making a Will must have testamentary capacity at the time that it is made (or when the instructions are given) for the Will to be valid. The test for establishing whether a testator has the legal capacity to write a Will was established in Banks v Goodfellow.
Under the Banks v Goodfellow test, the person making the Will must:
- understand the nature and effect of a Will;
- understand the nature and extent of their property;
- comprehend and appreciate who has a reasonable claim on their estate; and
- be suffering from no disorder of the mind or insane delusion that would result in a gift that would not have been made under normal circumstances.
The test imposes a low threshold, consistent with the view of courts that a person’s right to make a Will should be upheld whenever possible. This is reflected in the idea that there may be a ‘lucid interval’ where a person suffering from a mental illness may have testamentary capacity.
Even though a person has testamentary capacity to make a Will, factors like age, illness or fragility can make the person vulnerable to the undue influence of relatives, caregivers and others hoping to profit from the Will.
Undue influence can render a Will voidable. To prove undue influence, it must be shown that the Will resulted from the exercise of that power to overbear the will of the testator.
However, Will making involves decisions about relatives and family members who have a close relationship with the testator. In assessing whether the behaviour is one of undue influence, you should be mindful of the motives of relatives or friends who attend client meetings with an elderly testator who is making provision for them in their Will.
Estate v Non-Estate Assets
In the initial interview with a client making a Will, consider what assets can be gifted under a Will and assets that cannot be gifted as part of the estate.
Survivorship provides that where property is held between two or more people as joint tenants, the interest of the deceased person passes directly to any surviving joint tenant or joint tenants regardless of what is stated in the individual's Will.
Where property is held as tenants in common, on the death of one of the owners, that person's share passes to his or her estate and is distributed according to the Will.
A member of a superannuation fund can nominate who will receive their superannuation benefits in the event of the death. A binding death benefit nomination directs the trustee to pay any death benefit to the nominated beneficiaries. If the binding death nomination is invalid (eg because it has lapsed), the trustee has discretion whether to pay the death benefit to the member’s dependants or estate.
Dependants includes the member’s spouse, children of any age, and any person who was in an ‘interdependency relationship’ with, or was financially dependent on, the member at the time of the member’s death.
A trust is a relationship where the trustee as the legal owner of the trust property is under an obligation to hold property for the benefit of the beneficiaries. The terms of the obligation are defined by the terms of the trust deed.
The proceeds of a life insurance policy are usually held with a nominated beneficiary. Any benefit will pass to that person upon the death of the policyholder.
Mutual Wills arise where two (or more) people make an agreement as to the disposal of their property through Wills and each has, under the agreement, executed a Will.
Mutual Wills are often made in second or later marriages and where there are children from earlier relationships. They provide a mechanism for protecting the property brought into a marriage, usually to benefit children of prior relationships, while allowing the survivor enjoyment of the property during their lifetime.
When one party dies without having revoked his or her Will, the survivor is bound to give effect to the party’s agreement. Any property must be disposed as agreed with the deceased. This is achieved by way of a constructive trust.
Witnessing a Will
The requirements for executing a formal Will are largely the same across all states and territories:
- the document must be in writing;
- the document must be signed by the testator with the intention that the document is to be their Will;
- the testator’s signature must be witnessed by two other people who must sign the Will; and
- the witnesses must be mentally competent and able to confirm that the testator’s signature was genuine.
Formal v informal Wills
In some jurisdictions, courts can accept a document that does not meet the legislated formalities required for a Will (for example the document is incorrectly witnessed) if satisfied that the document reflected the testamentary intentions of the deceased.
In making this decision, the court may consider any actions or statements made by the deceased which would indicate that, at the time the document was created, the deceased intended that it would constitute their Will.
Courts have taken a broad definition of 'document'. A tape recording, video recording, and even a message created on the electronic notepad of an iPhone have been admitted as a Will. In practice it is safer to prepare a formal written document in order to protect your client’s estate.
Family provision claims
An eligible person can apply to the courts for a share, or a larger share, from the estate of a deceased person if they believe they were left without adequate provision.
The court assesses the circumstances at the date of the hearing, not the date of death, and can consider community standards as a measure of what’s right and appropriate. Although each situation is unique, the court will consider the applicant’s current and future financial needs, age and relationship with the deceased and the size and value of and any contributions the applicant made to the deceased’s estate.
In circumstances where the deceased has dealt with or disposed of their assets while they are alive so the assets are not part of their estate, or the assets have been distributed from the estate, the court may designate such property as ‘notional estate’ of the deceased person to make family provision orders.
A testator should revisit their Will regularly so it reflects their intentions and changing circumstances. The fundamental reason that documents purporting to embody the testamentary intentions of the testator are so highly scrutinised is that the testator cannot be cross-examined as to their validity when they come into force.