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You Can't Build an Incontestable Will, However . .

Here are some steps you can take to make contesting a Will less likely

Image of people trying to break through wall with inscription Incontestable

Introduction

As we have already noted, you can’t build an incontestable Will, however,Image of Last Will and Testament that's incontestable in this article, we intend to explore the options available to you in making your testamentary wishes as air-tight as possible.

We shall be using Frank Hawkins (pseudonym) – the head of the family, his family, his business interests and the like as an example of what can/should be done to provide the best protection in ensuring that his wishes are carried out to the fullest upon his death, mental incapacity or permanent disability.

SPECIAL NOTE:

Even though Frank is the head of a very wealthy family, with business interests in both Australia and overseas, the recommendations herein can generally be applied by any family wishing to preserve their estate.

The Background of the Frank Hawkins Family Dynasty

Frank, 72 y.o., is a self-made ultra-high-net-worth individual (UHNWI) with a net investable wealth of around $AUD60 million. His wealth has been created through a combination of astute property investments, a business developed from the ground floor up that has become a highly successful franchise operation, plus investments in high-performing publicly-listed companies and precious metals.

Frank’s immediate family is his wife, Joanne (63 y.o.), his two daughters Elizabeth and Catherine (32 y.o. and 30 y.o. respectively), and two grandchildren – Frank Jr. and Chloe, Elizabeth being their mother. Additionally, there is a son, Joseph (36 y.o.), who, because of a history of substance abuse and criminal activities, has been estranged from the family for about a decade. His whereabouts is unknown.

Elizabeth, a real estate agency owner, is in a successful marriage with Peter whilst Catherine, a self-employed home interior decorator, is in a long-term same-sex relationship with Penelope.

Current Hawkins Family Business Structure & Estate Planning

Diagram of Hawkins Family Business Structure

 

Diagram of Hawkins Family Estate Planning Arrangements

Incontestable Will - Key Facts About Contesting a Will

Challenging a Will Vs. Contesting a Will

It is important to note that contesting a Will is different from challenging a Will.

When someone contests a Will, they are taking issue with the provisions of the Will (as opposed to the legal validity of the Will).

A person contests a Will because they claim that the terms of the Will are unfair. This is generally because the Will fails to make adequate provision for a family member of the deceased. A person who contests a Will on this basis is making a Family Provision Claim.

A disturbing fact is that some estimates suggest that up to half of all Wills in Australia are contested, usually by family members who believe that the deceased did not adequately provide for them.

The Grounds for Contesting a Will

According to all State Acts, the grounds for contesting a Will are in the following circumstances:

🔴 There is evidence of tampering or not properly executed

🔴 It was not the last Will drawn up by the deceased

🔴 The deceased was tricked or improperly influenced by another person

🔴 The deceased lacked sufficient mental capacity or understanding to create a Will

🔴 It does not give proper provision to family members and dependents

In order to write a Will that has little chance of being contested, the language in the Will must be clear and precise. If this is the case, and if there is an accompanying note to explain any reason someone was left out of the Will, the court will rarely interfere with the wishes of the deceased.

Challenging a Will

In most States and Territories, challenging a Will after probate must be done within six months. In some cases, the court may allow for a late contest, but this will be granted on a case-by-case basis and they would need the advice of a lawyer. In addition, the court fees for challenging a Will come out of the estate, so there is no cost for the person contesting.

Strictly, the executor’s commission must be authorised by the court. The executor’s commission is allowed if his or her conduct in the administration of the estate is correct in the execution of his or her duties. If there are any irregularities or misconduct, the executor’s commission may be refused. If the negligence was an honest mistake, the commission may be allowed, but if the negligence is significant, the commission may be reduced or in serious cases denied.

Who Is Entitled to Contest a Will

The first defence against all reasons to contest a Will is for the person writing the Will to write a separate explanation of why he or she left someone out of their Will or why only a token amount was given. This note will be taken into consideration by the court at the time the contest is filed.

Problems may also arise if a person changes his or her Will during a fit of anger that they may later regret. An eligible person may be cut from the Will that should be included. If a person has any idea to cut someone out or change their Will in any way, it is recommended that they wait for a few days and think about it before they make the changes official.

If someone wants to contest a Will successfully, there are certain things he or she needs to prove in order to be allowed to contest. Here are some of the most common laws in many States. First, the deceased must have resided in the State or Territory where the contest is being filed and has assets there.

The person contesting must prove that he or she is eligible to make a claim by being a designated Eligible Person. Each State and Territory has different categories of people who may contest a Will. Usually, a brother or sister of the deceased is not considered an eligible person. The only people who can contest a Will are the deceased’s spouse or former spouse, children, grandchildren, registered caring partners and dependents.

The person contesting must also prove that the deceased had a duty or responsibility to provide proper support and maintenance for the lifestyle he or she was used to during the deceased’s lifetime.

Black Sheep of the FamilyThis brings us to the topic of the “black sheep” in a family. In our Introduction to this article, we referred to Frank Hawkins’ son, Joseph (36 y.o.), who, because of a history of substance abuse and criminal activities, has been estranged from the family for about a decade with his whereabouts being unknown.

Claims often come about because certain relatives or family members are not properly provided for in someone’s Will, or at all. In many instances (but not always) the “black sheep” of the family who is a social misfit and receives a government pension and has little or no relationship with the family generally, is usually the most qualified person to bring a claim under the legislation.  As unfair as this may seem, and in many cases where a parent or parents choose to not make provision for such a child, more often than not the person effectively cut out of the Will will have a very strong claim against the estate.

Not only does this fly in the face of the express wishes of their deceased parent but it also causes inevitable friction with the siblings who have done the right thing with their lives and have been dutiful children. It is understandable that many people consider not even bothering to do a Will if it is possible that beneficiaries who they do not wish to provide for can bring a claim against their estate after they pass away.

As a side note – sometimes family members bring claims against the estate purely to cause as much disruption and stress to their fellow siblings and/or family members and with a view to ensuring that the resultant legal costs soak up as much of the estate assets as is possible. Mind you, it is highly likely that a Court would not take kindly to this approach!W

How to Minimise the Chances of Someone Contesting a Will In Australia

There is no one way to make it as difficult as possible for some to contest a Will. Nevertheless, there are means available to you which are very likely to put a stop to such an event occurring. NOTE: Throughout this article we have made the assumption that Frank’s wife – Joanne Hawkins, has been very well provided for in a manner that befits her status as wife and family business partner in the event of Frank’s demise before hers.

The over-arching tactic is to structure your assets so that they don’t form part of your estate.

Accordingly, there is a multitude of options for you to explore. These include:

Inter vivos Transfer of Assets:

Here we shall use the example of the Frank Hawkins family and business structures to demonstrate possible (and viable) solutions.

Frank Hawkins can consider transferring certain assets to his daughters, Elizabeth Jones and Catherine Hawkins, during his lifetime. NOTE: Some consideration would need to be given to Catherine’s relationship status to ensure that such assets would remain in the family bloodline in the event of Catherine’s demise.

This transfer of assets could include gifting assets such as property, investments, or valuable personal belongings. By transferring assets while he is alive, Frank can clearly demonstrate his intentions and reduce the likelihood of contestation after his passing.

Strategic Ownership Arrangements:

Frank can review the ownership structure of his assets and consider beneficiary designations where appropriate. For instance, if Frank owns real estate, he may choose to add his daughters as joint tenants with rights of survivorship. This option would help ensure that the property automatically passes to them upon his death, bypassing the need for it to be included in his Will and potentially contested by estranged relatives.

Life Insurance Arrangements:

Frank can review his life insurance policies and ensure that his daughters are designated as beneficiaries. Life insurance proceeds typically pass directly to the designated beneficiaries outside of probate, reducing the risk of contestation. By confirming beneficiary designations and keeping them up to date, Frank can provide for his daughters without leaving room for challenge.

Restructure Asset Ownership:

Frank can work with legal and financial advisors to restructure his assets in a way that minimises the risk of dispute. This may involve consolidating assets, transferring ownership to his daughters or trusts, or establishing co-ownership arrangements with clear documentation outlining his intentions. By restructuring assets thoughtfully, Frank can help deter potential challenges to his Will.

Superannuation and Binding Death Benefit Nomination:

If Frank has any retail superannuation funds assets, he can make a binding death benefit nomination specifying his wife – Joanne Hawkins, his daughters, Elizabeth Jones (Nee Hawkins) and Catherine Hawkins as beneficiaries.

However, the situation is quite different with the treatment of the Hawkins Family Superannuation

As the Act (SISA) allows for up to six beneficiaries of an SMSF, the grandchildren Frank Jr. and Chloe can also be included as beneficiaries. This ensures that his superannuation benefits will be distributed according to his wishes and reduces the risk of contestation by estranged relatives.

The Use of Business Wills in Succession Planning

Image of a Business Will documentA Business Will should not be confused with an individual’s Will that is executed in terms of the Succession Act 2023 (SA) or other similar Acts in the various States and Territories of Australia.

A Business Will refers to a succession plan for your enterprise. It is also known as a buy-and-sell agreement as it will express the wishes of the business owner as to who will take over their share in the business and at what price. It is important that your Will speaks the same language as the future of your business. 

Many business owners appreciate the importance of having a succession plan or business Will, but executors will often find some Wills difficult to implement because they simply do not contain enough detail about how to deal with certain issues. Also, often there is not enough cash in an estate to fully implement the Last Will and Testament – even if the business owner had millions of dollars worth of assets.

Sole proprietors or business owners in a partnership should pay special attention to detail of their succession plans and the liquidity of their assets, as this will determine the extent to which any inheritance will be possible. 

Few sole proprietors realise that when they die, their business ceases to exist. As such, executors of the estate cannot keep the business running as if nothing has changed. So the Last Will and Testament must make provision for someone to take over the business while the estate is being wound up – or effect a buy-and-sell agreement with a third party, or else the business will be forced to shut its doors. 

A partnership will be automatically terminated even if the other partner plans to continue with the business. The deceased partner’s estate must be wound-up, and the executors may not transfer the business assets to the other partner if there is not enough cash in the business or no buy-and-sell agreement in place.

The lack of a good succession plan or an incontestable Business Will can have severe consequences in terms of employment stability for staff, outstanding tax matters, and current lease agreements or contracts.

Business owners should enlist the help of their financial and legal advisors to assist in creating a compliant and incontestable Business Will so that any potential shortfalls in terms of procedure and financial requirements can be identified and corrected before it is too late.

SMSF Wills Use in Wealthy Family Succession Planning

Succession Planning is a key issue for wealthy business families. As such, it makes sense to explore all options in an effort to ensure that maximum protection against having someone contest a Will.

All of the foregoing are fundamental “fixes”. The following is an “outside the box” remedy employed by Accredited SMSF Advisers (such as Tony Skinner from Wealth IQ).

KEY NOTE: An SMSF Will, is a suite of six binding directions and distribution of death benefits which includes a special purpose SMSF testamentary trust which is created from the SMSF Will and NEVER from the Will. This affords protection from family provisions litigation that may take place in relation to the deceased member’s Will. Please read on for further insights on the benefits of an SMSF Will….

What is an SMSF Will?

Image of client signing his SMSF Will in the company of his adviserAn SMSF Will is an important legal document that becomes part of the governing rules of the fund detailing how a member seeks to provide superannuation death benefits to their dependants, non-dependants or legal estate in the event of their death. There are a range of possibilities in an SMSF Will including:

🟢 the provision of a superannuation lump sum — by way of cash or specific assets to dependants and/or the deceased member’s legal estate;

🟢 the instalment of the Executor as Trustee or director of the Fund’s corporate trustee;

🟢 revocation of prior BDBN’s and estate planning directions;

🟢 the payment of a superannuation income stream to dependants (as defined for taxation purposes) of a deceased member subject to SISA;

🟢 the payment of a reversionary superannuation income stream to a dependant subject to SISA. A reversionary pension is the continuation of an existing superannuation pension that was payable to a deceased member of the fund;

🟢 the payment of an adult child dependants benefits directly to the child or to a SMsf Testamentary Trust to protect the benefits and protect from any legal challenge to the estate;

🟢 where a member of a SMSF has more than one superannuation interest in a fund consisting of varying tax-free/taxable components — the choice of allocating from these interests to various dependants and non-dependants;

🟢 the appointment of an adviser or accountant to administer the SMSF estate.

Note: An SMSF Will is a defined set of procedures and requirements purpose-built into an SMSF trust deed to allow a member to provide specific benefits, assets, and otherwise direct what is to happen to their superannuation benefits in the event of their death. Not all superannuation fund trust deeds have the capacity to offer comprehensive and strategic SMSF estate planning or an SMSF Will.

Further, as the SMSF Will is governed by the SISA, if there is a breach by an existing trustee or an adviser to the SMSF, there is recovery action for loss or damages by any dependant concerned. If the breach was fraudulent there is potential five years imprisonment.

An SMSF Will is strong, safe, and secure.

"The Protector" - The Ultimate Succession Planning Tool

Lawyers and specialist asset protection and estate planning advisers, Abbott & Mourly have developed “The Protector”, a family wealth protection package, available on LightYear Docs. These same advisers are also the creators of the SMSF Will as detailed above.

Our next post (coming soon ), will give you a full insight into what “The Protector” is and how it can work for you.

Meantime, please feel welcome to contact Tony Skinner if you would like to discuss this succession planning innovation or any other relevant issues of importance to you.

Summary

We hope that by now, you have a much better understanding of the factors affecting the contestability of Wills and their relevance to the succession planning process PLUS why it’s so important for family businesses to get it right. If you’re still having trouble making sense of all the information we’ve given you here, we encourage you to talk with an experienced estate planning adviser about how they can help you achieve your succession planning objectives.

As stated above, our forthcoming Part 2 of this series will be focusing on “The Protector”.

How FBA Can Help You With Your Succession Planning

At Family Business Advisory (FBA), our purpose is to help family businesses succeed on a sustainable basis. As such, we provide you with access to specialist family, business and technical services with a goal being to generate opportunities for families in business.

In order to complement our own particular specialised skills, over the past several decades, we have developed a network of trusted, professional advisers in such areas as:

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Moreover, we work at all times to give you peace of mind and proactive support to help navigate any changes in the market brought about by legislative changes, geopolitical events and general market conditions – all to maximise your personal wealth and security.

These services are provided by FBA, in association with the Wealth IQ Group.

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