In Re Oliver (deceased) [2016] QSC 264, Mr Oliver signed a will on 11 October 2011 that had been prepared by the Public Trustee (‘Will’). The Public Trustee had managed Mr Oliver’s affairs since 1990 as he suffered from severe and chronic schizophrenia most of his adult life. In fact, he had been confined to hospital from the time he was 19 years old until his death.

As he never married or had any children, Mr Oliver’s next of kin were his four siblings. However, the Will benefited Mr Oliver’s sister to the exclusion of his three other siblings (although one brother was a substitute beneficiary). After the Public Trustee applied for probate of the Will, Mr Oliver’s brother lodged a caveat against the grant being issued. Mr Oliver’s brother sought to have the Will declared invalid and, on the basis that there were no other wills in existence, be appointed as the administrator of Mr Oliver’s estate to be administered under the rules of intestacy.

In disputing the brother’s claim, the Public Trustee argued that the Will appeared on its face to be rational and it should therefore be presumed to be valid. While the Court accepted this argument despite the fact it excluded two siblings, it ultimately found in favour of Mr Oliver’s brother since the evidence of Mr Oliver’s schizophrenia sufficiently displaced the usual presumption of validity.

Critical to the Court’s decision were the following deficiencies on the part of the solicitor who prepared the Will:

• The solicitor’s note did not reveal whether Mr Oliver named all four siblings (or just some) or explain why Mr Oliver only wanted to benefit his sister. It did not appear from the note that the solicitor investigated whether Mr Oliver was aware of those who had claims on his bounty in accordance with the requirements for testamentary capacity as outlined in Banks v Goodfellow (1870); and
• Although the solicitor procured a doctor to complete a form at the time the Will was executed that answered questions about Mr Oliver’s testamentary capacity in line with the matters outlined in Banks v Goodfellow, the doctor’s answers were not helpful or responsive nor did the doctor state what involvement they previously had with Mr Oliver.

Because of the Public Trustee’s unsatisfactory solicitor notes and medical evidence, the Court was “not actually persuaded on the balance of probabilities that the deceased had capacity at the time he made the will” and accordingly declared the Will invalid. Following from this, the Court refused to order that the Public Trustee’s costs be paid from Mr Oliver’s estate since it “came to Court propounding a will which it could not prove because of its own default in documenting, by its solicitor and by the doctor it contacted at the time of making the will.”

Interestingly, although Mr Oliver’s brother was successful in having the Will declared invalid, the Court appointed the Public Trustee as administrator rather than him since they did not think he would rationally and impartially fulfil the duties of an administrator.

If you require legal advice about the validity of will or simply need assistance in preparing a will, please contact HPL Lawyers on (02) 9905 9500.

The post Will Made by Schizophrenic Man Declared Invalid by Queensland Court appeared first on HPL Law Group Sydney.

1. Background

Mrs Barakett died in 2013 survived by three adult sons. Her estate consisted of a house in western Sydney and term deposits totalling just over $200,000. Mrs Barakett made a will in 1974 appointing her oldest son (‘Lou’) as executor and left her estate equally between her three sons. Lou obtained probate of that will. Subsequently, Mrs Barakett’s other son (‘Tony’) sought to propound a will made by his mother three months before her death, which had been prepared by a solicitor (‘2013 Will’). The main difference between the 2013 Will and the earlier will was a clause permitting Tony to reside in Mrs Barakett’s house as long as he wished provided he paid all outgoings. Upon the termination of the right of residence, the house was to be divided between the three sons equally.

Lou contested the validity of the 2013 Will on the basis that his mother did not have testamentary capacity (i.e. the capacity to make a will) at the time it was made and did not approve its contents due to suspicious circumstances. At the time when she made the 2013 Will, Mrs Barakett was 98 years old, bedridden and dependent on Tony as her paid carer. The solicitor who attended Mrs Barakett’s house to obtain instructions for the will was accompanied by an Arabic interpreter who turned out to have qualifications below the minimum level of competence required for professional interpreting.

While the Supreme Court of New South Wales (‘Court’) acknowledged that Tony’s arranging of the 2013 Will to be made was a suspicious circumstance, the Court ultimately decided that the 2013 Will was in fact valid because the file notes of the solicitor who took instructions from Mrs Barakett demonstrated that she was able to give cogent instructions. The Court viewed the inclusion of the right of residence in the 2013 Will was a rational assessment of Tony’s needs since he had lived with Mrs Barakett for over 20 years and was unable to work. Although the Guardianship Tribunal had found in 2008 that Mrs Barakett lacked capacity to manage her financial affairs, this did not mean that she lacked testamentary capacity.

2. Family provision application

In addition to propounding the 2013 Will, Tony applied for further provision from his mother’s estate on the basis that the right of residence and third share in the estate was not adequate provision for his proper maintenance. Tony sought an additional $125,000 and a ‘Crisp’ order that would provide alternate accommodation for him should he vacate the house for any reason.

At the time of the hearing, Tony was in receipt of the aged pension and had under $9,000 in savings, an old car and nominal household goods. In contrast, at least one of his brothers was comfortably better off than Tony (Lou did not disclose his financial circumstances). The Court summarised Tony’s circumstances as follows:

“ He has few financial resources and no earning capacity. He has not done well in life and suffers from some mild mental disability. He has no prospect of work. He is 69 years of age. His mother maintained him by providing accommodation for him. Household expenses were also paid out of his mother’s income. There is no-one else liable to support him.”

Notwithstanding Tony’s strong financial needs, the Court dismissed his claim for further provision. Although the Court admitted that the earlier will did not adequately provide for Tony’s needs, the 2013 Will did make adequate provision through the inclusion of the right of residence:

“ The provision of rent-free accommodation is a valuable benefit. I do not think that an interest that might be described as a “portable life interest” whereby Tony could require the house to be sold and the proceeds applied in providing him with alternative accommodation for his life is necessary to provide such adequate provision for his proper maintenance and advancement. If he chooses to leave, or has to leave, the Cobb Avenue property, it can then be sold and he will be entitled to one-third of the proceeds of sale…The pension is adequate for his day-to-day needs which are not extensive.”

The Court further recognised that, despite Tony having an extremely close relationship with his mother later in life, his two brothers had substantial claims on their mother’s estate arising not from financial need but from their upbringing, filial relationship and their attention to her.

3. Implications

This case shows that the Court will be reticent to award more than an equal share to adult children in modest estates even when a child has a greater financial need. The Court places strong importance on the competing claims by a deceased’s children even if they are financially better off. This decision also demonstrates that adequate (and further) provision for adult applicants may not always be pecuniary and can consist of simply allowing an adult child to reside in their parent’s house.

The post Barakett v Barakett: Dependent Adult Son Denied Further Provision from Mother’s Estate appeared first on HPL Law Group Sydney.

Earlier this year, the Federal Government introduced a compulsory withholding tax scheme for transactions involving the transfer of Australian real property (e.g. residential and commercial land, buildings and leases). The intention of this scheme is to assist with the collection of capital gains tax payable by foreign residents.

1. How does the CGT withholding scheme work?

Under the scheme, any acquirer of Australian land needs to pay 10% of the value of the property (usually the purchase price if parties are unrelated and dealing at arm’s length) to the Australian Taxation Office (‘ATO’) before acquiring the property if:

• the value of the property is $2 million or more;
• the transferor does not prove that they are not a foreign resident by providing to the acquirer a Clearance Certificate issued by the ATO, which is valid for 12 months; and
• a party has not successfully applied to the ATO to have the withholding amount varied (e.g. when there is a capital loss expected or where only one of multiple transferors is a foreign resident).

In other words, unless the transferor provides the acquirer with an ATO Clearance Certificate, the acquirer must pay the withholding amount to the ATO regardless of whether the transferor is actually a foreign resident. Interestingly, the obligation to pay the 10% withholding amount falls on the acquirer of the property rather than the owner or transferor. This means that an acquirer of property is liable for penalties and interest should they fail to pay the ATO the required amount before they acquire the property.

2. How does the scheme affect the administration of deceased estates?

An unintentional result of the scheme is that it required personal representatives (i.e. executors and administrators) and beneficiaries who acquired property worth at least $2 million from a deceased person to pay the ATO 10% of that value.

It therefore comes as welcome relief that the Deputy Commissioner of Taxation has recently issued a determination that the withholding amount is automatically varied to nil where, as a result of the death of an individual:

• the personal representative acquires property following the death of the individual;
• a beneficiary obtains ownership of the property by way of direct transfer from the deceased or by transfer from the personal representative; or
• a surviving joint tenant acquires the deceased joint tenant’s interest in the property.

The post Deceased Estates Relieved From Foreign CGT Withholding Tax appeared first on HPL Law Group Sydney.