Australia: Who needs a statutory will?

IN BRIEF

In a previous article, we examined how statutory wills are able to be used for asset protection and tax minimisation purposes. In this article, we outline the types of people for whom an application for a statutory will might be made and then consider the prevailing issue of testamentary capacity, a lack of which must be established before the Court will consider ordering a statutory will.

What is a statutory will?

To recap, a statutory will is a will that is authorised and ordered by the Supreme Court for a person who lacks 'testamentary capacity', ie, a person who does not have the capacity to make a will for themselves. The Court's power to order a statutory will, or to amend or revoke an existing will, is governed by Division 2 of Part 2.2 of the Succession Act 2006 (NSW) (Act).

Who might need a statutory will?

There are three main classes of people for whom an application for a statutory will is likely to be made:

  1. Lost capacity: where a person previously had capacity but then lost it as a result of an accident or through illness.
  2. Nil capacity: where a person (including a child) has been mentally incapable since birth.
  3. Minors with prior testamentary capacity: where a child had capacity but subsequently lost it before attaining the age of 18 years. An example of this might be a teenager of 16 or 17 years who suffers a severe and permanent brain injury as a result of a car accident.

How do I know if someone has testamentary capacity?
The legal test for assessing testamentary capacity is whether the person, at the time of making a will, understands:

  1. the nature of a will; and;
  2. the effect of making a will.

In determining whether the person understands the nature of a will, some of the considerations are whether the person:

  • understands that their will comes into effect after they die;
  • understands what assets or property they own and can leave under their will and, in general terms, understands the value of those assets; and
  • knows that they can change or revoke the will at any time if they have capacity.

In determining whether a person understands the effect of a will, some of the considerations are whether the person knows:

  • that when they die their property will be given away to the people they have named in their will;
  • who would normally be expected to benefit from their will; and
  • which family members or friends may claim benefits from their estate.

The assessment of testamentary capacity is complex and highly specialised area of expertise and should always be carried out by a solicitor with experience in this area of law. In some cases, medical evidence is required to establish that a person has testamentary capacity.

What are the benefits of a statutory will?

A statutory will can provide some certainty to family members or others in the life of a person, that their testamentary intentions can still be fulfilled even if they lack the capacity to make a will.

For example, a statutory will prevents a person's estate from passing under the intestacy laws (which determine the distribution of an estate where a person dies without a will). This is particularly relevant for people lacking capacity as they often have people in their lives (such as a long term carer, housekeeper or friend) who do not fall within the classes of people eligible on intestacy as provided in the Act but who might have been the object of a gift in that person's will (if the person could make a will). As a result, those classes of people would miss out entirely from a share of the estate on an intestacy.

Further, if the person does not have any people in their life who are eligible on intestacy, their estate will pass to the Crown (ie to the State government). A statutory will can prevent this happening.

A statutory will can also prevent a person's estate passing to someone who, in all probability, would no longer have been a desired beneficiary of that person's estate if they had the capacity to make a new will. The most prominent example of this was in the case of Maria Korp, who was found unconscious in the boot of her car. She had suffered a severe brain injury and lacked capacity to make a will. At that time, it was suspected that her husband had attacked her and was involved with her death. Mrs Korp's existing will gave her whole estate to her husband and appointed him an executor. Just prior to her death and while she was in a coma, the Court approved a new will for Mrs Korp which removed her husband as executor and beneficiary.

When will the Court order a statutory will?

Assuming the Court is satisfied that a person lacks testamentary capacity, the key consideration for the Court in determining whether it will order a statutory will is whether the proposed will (or alteration or revocation of an existing will) is, or is reasonably likely to be, one that would have been made by the person if he or she had testamentary capacity.

This will vary depending on the circumstances of the case and the evidence available for the Court to consider. Critically this does not necessarily require that the will be in the best interests of the beneficiaries under the will or even in the best interests of the person making the will. It simply means, is it likely that the person would have made the proposed will if they had the capacity to do so.

It is worth noting that a statutory will may deal with all or part of a person's property. Dealing with only a part of a person's property may be appropriate in circumstances where that person already has a will which would produce, in part, an unsatisfactory outcome for the person on their death if the will was not amended.

Who can make the application for a statutory will?

Anyone can approach the Court to make the application, however the person making the application must, unless the Court otherwise orders, provide the Court with detailed reasons for making it. A checklist of the other information required to accompany the application is set out in section 19 of the Act.

As with commencing any legal proceedings, we advise consulting with a specialist lawyer to discuss whether making an application for a statutory will is a suitable estate planning strategy.

For more information please contact:

Angela Harvey, Partner
Phone: +61 2 9233 5544
Email: axh@swaab.com.au

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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