Will-Making and Estate Planning
In May this year, the High Court of Australia handed down the judgement in the case of Badenach v Calvert [2016] HCA18. The case highlights the difference between ‘Will-Making’, and ‘Estate Planning’.
The case involved the step-son of a deceased testator bringing a claim for negligence against the testator’s solicitor, who had prepared and witnessed the testator’s last Will.
The Will of the testator provided for the entire Estate to pass to his step-son arising from a long de facto relationship. This was in accordance with the testator’s instructions, which is to say the Will properly achieved what the testator intended and had instructed his solicitor to do. Unknown to the solicitor, the testator had a daughter from an earlier relationship.
He had not seen his daughter in many years.
He had no relationship with her at the time that the Will was drafted, or at the time he died.
For whatever reason, he did not mention her to his solicitor when giving instructions to prepare a Will; the solicitor did not ask.
Upon the death of the testator his daughter brought a claim against the Estate under the Testator Family Maintenance (TFM) provisions of the Administration and Probate Act. The daughter successfully argued that the provision for her under the Will – or lack of it – was ‘inadequate’. The claim had the effect of diminishing the assets that the step-son received.
The testator and his step-son owned two properties as tenants-in-common, equally. Because the properties were owned as ‘tenants-in-common’ his 50% interest formed part of his Estate. This increased the size of the Estate which, in turn, made it a bigger target to challenge. Central to the claim of negligence brought by the step-son was the failure of the solicitor to advise the will-maker of the options available to him during his lifetime to reduce the size of his Estate prior to his passing, and consequently reduce the likelihood of a successful claim.
The step-son argued that by failing to enquire from the testator about potential claimants the solicitor had failed to give his options to reduce the risk of the daughter’s claim. This argument was unsuccessful at the (initial) trial stage. It was then successful on appeal. The solicitor appealed to the High Court. The High Court found that the solicitor did have a responsibility to advise the client of the possibility of a challenge against his Estate. However, the duty did not extend to how to avoid a claim during his life.
Importantly, given the will-maker’s lack of knowledge about his daughter’s whereabouts or circumstances, the solicitor would not have been able to advise the testator as to the likely success of the daughter’s claim. Also critical to the final judgement was the lack of evidence about what actions the Testator would likely have taken had he been advised about the possibility of a claim from his estranged daughter.
There is a distinction between Will-Making, and Estate Planning.
The preparation, and subsequent execution of a Will, is just one aspect of Estate Planning. From a solicitor’s standpoint Estate Planning involves taking instructions from clients as to all their assets, their financial resources including superannuation, assets held in family trusts of which they may be a beneficiary, together with details of the family circumstances so as to identify any possible claimants against the Estate. For the client’s part, it is important to provide solicitors with full instructions as to each of these matters.
Clancy & Triado Lawyers advise clients as to all potential claimants against an Estate, and the likely success of any claim. Clancy & Triado Lawyers may advise as to the options available to a testator during their lifetime to safeguard or mitigate against future claims. This may be done with financial or accounting advice, as there may be duties, such as stamp duty, or capital gains tax, for example.
For clients, you should provide your solicitor with too much information rather than not enough. Only in this way will you be assured that all aspects of your Estate Planning, including the Will, are in order. You will also then be aware of the effect of future financial decisions on Estate Planning and your intentions. It is recommended that you review Estate Planning matters with your solicitor at least every 5 years, or as your circumstances change.
This may not mean a new Will each time.
It will ensure that you feel secure you’re your intentions will be given effect upon your passing.