We commonly believe that having a Will allows you to decide what will happen to your assets when you die. Your Will is a significant legal document for both your Estate Planning and End of Life Planning. Most of us believe our last Will and testament will be implemented as stated, but this may not be the case.
REASONS WHY YOUR LEGAL WILL COULD BE CHANGED
There are various reasons your Will can be changed, below are the reasons why this may occur:
- the Will could be outdated and not representative of the current family situation
- a person has left a Will that only deals with part of the estate
- beneficiaries may want to reorganise the distribution of the property or any real estate to minimise tax issues
- providing for increased flexibility, access or usage of their inheritance
- the executor ( the person appointed to administer the assets of the estate) in a Will, may propose that the assets be re- distributed other than what the original Will stated. For this to occur the consent of all beneficiaries is required
- the executor of the Will is not carrying out the person’s wishes or is involved in misconduct
- the beneficiaries do not consider they have received a fair share of the estate and they want to make a claim and
- if a Will is considered not to have taken into account any beneficiaries current situation, their desires or needs, they may take action to have the Will modified or altered.
HOW DOES THIS LEGALLY HAPPEN?
After the death, one beneficiary of the Will (or other interested parties) can make a claim or inform the executor they plan to begin a Family Provision application due to their disappointment with the Will. Once this occurs the beneficiaries may consent to alter the distribution of the estate under the Will and enter into a Deed of Family Arrangement. If an agreement is reached by all the beneficiaries, this will avoid court proceedings being commenced.
The Deed of Family arrangement rewrites the Will by mutual agreement. The reason most people would enter into this Deed of Family arrangement is to either avoid or minimise a claim against the estate. By, undertaking this action it will also alleviate the estate being tied up in the legal process for months or even years. This will also reduce the cost of the estate and stress on all the beneficiaries.
If this occurs several points need to be considered:
- it is recommended that legal advice is sought on the actual wording of the Deed to make sure it’s legally binding
- the Deed must be signed by all the concerned parties including the executor of the estate
- this Deed (terms of the agreement) should be submitted to the court to ensure certainty.
OTHER IMPORTANT POINTS TO CONSIDER – DEEDS
- the Deed must be entered into before the administration of the estate is complete. Like most aspects of the law there are certain exceptions on which a court may consider applications after the event
- the Deed must have been entered into in order to settle a claim to take part in the estate and
- the distribution of the assets of the estate to any beneficiary must only be as stated in the terms or conditions of the Deed.
SEEK LEGAL ADVICE
It is important to seek both legal and financial advice about any possible taxes such as:
- stamp duty implications or concessions that may be available in relation to assets bequeathed in a Will
- in relation to the Australian Income Tax Assessment Act requirements. This is to make sure the legislative requirements are satisfied to confirm there are no undesirable capital gains tax consequences of entering into the Deed arrangement
- there are Australian Taxation Office Rulings (TR 2006/14) that offer further guidance for making certain the Deed will be covered by exemptions. (Sect. 128-20(1)(d)(i).
DIFFICULTIES WITH BENEFICIARIES AND CLAIMS ON YOUR WILL
A proactive approach would be that the person making the Will attempts to have all the beneficiaries to your legal Will agree in writing to their percentage share or entitlements to the assets of the estate. Also, it would be ideal to have all the nominated beneficiaries agree that they would not contest the Will. Developing a Deed in this manner would require the person making the Will and all the beneficiaries to seek independent legal advice before signing the document.
In Victoria and Queensland, this type of Deed will not be binding, as a person cannot sign away their rights to bring a family provision claim against the estate at a later date. The Deed will not be enforceable on the parties so the beneficiaries can still make a claim on the Will. Whilst in New South Wales, it’s possible to apply to the court for an order approving the Deed.
Other potential disadvantages would be that once the person writing the Will discloses what they are considering providing to each of the beneficiaries, there is the potential that the beneficiaries may:
- not satisfied with what they perceive they deserve in the proposed Will, or
- once a beneficiary has sought legal advice informing them of the legal possibilities, they may become unhappy with the motives of the person making the Will.
These actions may cause beneficiaries not to sign the proposed Deed of Family Arrangement. They may become resolute in their decision to make a claim against the estate or imply that they would after the person making the Will has died.
The financial circumstances of the beneficiaries may alter dramatically from the time of signing the Deed to the Will being read.
This would make the prior arrangements in relation to the distribution of the estate as stated in the Deed contrary to what the person making the Will was hoping to achieve. The development of any such situations would provide the grounds for at least one of the beneficiaries to make a claim against the estate.
THE SOLUTION IS GOOD LEGAL ADVICE?
Therefore, there are several possible drawbacks in relation to attempting to develop a Deed whilst the person is still alive.
So regrettably, the final wishes of the person making the Will can be changed. In their attempt to alleviate any problems arising with the Will, could cause further family issues. The wishes that were set out in a Will may not be carried out as first thought.
The Law in relation to Wills in Australia are different in every state, so it is important to ensure that you receive the correct legal advice about your Will.
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