Giving Your Children An Equal Inheritance in Australia May Lead to Litigation
Dividing your assets equally among your children after your passing may be contested in Australia. Depending on the needs of the individuals, “adequate provision” in Australia’s family provision law may require an unequal distribution of your inheritance to ensure the needs of certain family members are addressed, according to Max Williams, Special Counsel at de Groots Wills and Estate Lawyers. We spoke to Max about Australia’s family provision law, why it’s one of the most common forms of estate litigation and the key matters foreigners with Australian assets and Australians overseas should consider when completing their estate planning.
Name: Max Williams
Company: de Groots Wills & Estate Lawyers
Wills and Estate Specialisation: Estate planning, estate litigation based on Family Provision law
Operating Locations: Australia – New South Wales, Victoria and Queensland
Service Style: Efficient, proactive, communicative
Q: Can you tell us about yourself? How did you get into law and estate planning?
Max: I excelled in high school, and my family wanted me to pursue a challenging field like medicine. However, I wasn't interested, so we agreed on a double degree in law and communications. Initially, I didn't care much for law, but as I neared the end of my studies and got practical experience, I saw a future in it. I began my career as a lawyer at a small firm on the Gold Coast. There, I gained diverse experience in areas like criminal, family, and conveyancing law.
Later, I joined a bigger firm as a property and commercial lawyer. During that period, the lawyer in charge of wills and estates had recently left. Despite others not being interested, I stepped up as a junior lawyer to handle the wills and estates portfolio. This is where I discovered that I had a genuine passion for this field.
To enhance my knowledge and skills, I pursued a Master's degree majoring in wills and estates law. After graduating, I then became an Accredited Specialist with the New South Wales Law Society, which only about 5% of Australian lawyers have achieved.
Eventually, I transitioned to de Groots, a firm specializing in wills and estates law. This aligns perfectly with my interests, and I'm currently in my fourth year here, thoroughly enjoying my work.
Q: The wills and estates industry isn't commonly considered exciting, what drew your interest to this field?
Max: To me, this area holds significant appeal for a couple of reasons.
Firstly, it's a universally relevant field of law since everyone will eventually pass away.
One may never encounter family law or property law because one may never get a divorce or purchase a property. But wills and estates law touches everyone's lives, either through their own passing or the passing of someone they know. The skills and knowledge that I possess can genuinely benefit everyone.
Secondly, I appreciate working with regular people rather than businesses or commercial entities. My clients are families and people with loved ones to care for. What I do helps them ensure their family's future and provides them with a sense of security, especially since many people avoid thinking about mortality. Facing one's own mortality is a natural hesitation. When people engage in estate planning, they are forced to confront this reality, but being able to offer them concrete plans and documents to ease their worries brings me a deep sense of satisfaction.
Q: What does being an accredited specialist mean in Australia and how can someone become accredited? How is a lawyer with this specialization different from one without it?
Max: Specialist Accreditation is a recognition granted by fellow legal professionals in a particular field of legal specialization. The process is quite demanding. You need to have worked as a lawyer for at least five years, predominantly focusing on the area of law in which you are seeking to be accredited.
There are three evaluations: a written assessment, a written exam, and a face-to-face interview. At the end of the process, experienced specialists in that field will review and decide if you meet the high standards.
Q: What is the price difference between a specialist in wills and estates law compared to a general legal practitioner in Australia?
Max: The cost varies depending on the type of work.
For estate litigation, it's typically billed per hour. A specialist might charge between AU$500 and AU$800, which is higher than a general lawyer.
However, when it comes to estate planning, firms usually charge on a fixed fee basis. The distinction lies in the value and services provided by specialist firms compared to general firms. Specialist firms can offer a wider range of strategies and options.
For instance, we can incorporate special approaches for handling discretionary family trusts, something a general practice firm may not delve into. Many of our clients have these trusts because they are becoming more and more common. These family trusts are set up while you're alive and are separate legal entities. Having a watertight will for your other assets doesn't usually cover what happens with your trust-held assets.
It's a common misconception that a will encompasses assets held in a trust. General firms can also create excellent wills, but the loose end of what happens to the trust assets might remain untied. As a specialist firm, we have various strategies to help tie up these loose ends, ensuring that the trust assets end up where you intend them to go.
Simply put, you are not necessarily paying more to a specialist firm for the same work, but you are paying more because you’re getting more value, options, and strategies throughout the process.
Q: What services do you provide in the wills and estate space?
Max: We cover three main areas in our firm: estate planning, estate administration, and estate litigation. While I'm involved in both estate planning and estate litigation, my focus leans towards estate planning. In this role, I utilize tools like wills, enduring powers of attorney (EPA), appointments of enduring guardian, trusts, and binding death benefit nominations for superannuation.
[Enduring Power of Attorney (EPA) is a legal document that allows you to appoint a person or organization to have the legal power to make legal, financial and/or property decisions on your behalf when you lose mental capacity.
An Appointment of Enduring Guardian allows you to appoint someone to make lifestyle and health decisions for you if you lose mental capacity.
Both the EPA and appointment of enduring guardianship are akin to Singapore's Lasting Power of Attorney (LPA). However, these documents differ across Australian states due to varying state laws and rules.
Superannuation is a retirement savings system in Australia, where your employer adds money to your super account while you work, and it's meant to support you financially during your retirement.]
Superannuation is a big subject in Australia. A binding death benefit nomination allows you to choose who will receive your superannuation when you pass away, which is often part of estate planning. Like trusts, superannuation isn't necessarily governed by your will. A binding death benefit nomination is similar to a will but requires a specific form to be used. We also have unique strategies in place that can try to minimize tax around superannuation where it's self-managed. When we meet clients in person, we can explain these unique strategies in depth for their situation.
I'm also a lecturer at The College of Law Australia, where I teach about Family Provision, which is also where most of my litigation work revolves around. It is an aspect of estate litigation in Australia, where certain persons challenge wills on the basis that the deceased person did not adequately provide for them.
Own assets in Australia and want to know how to estate plan for them?
Book an appointment with Max from de Groots now
Q: Can you tell us more about the Family Provision law in Australia and why it’s important to consider that in estate planning?
Max: Family Provision Law in Australia is a law that ensures that the estate of a deceased individual provides sufficient support to their family members. People can go to court if they think they didn't inherit enough from an estate to meet their needs.
It's a misconception that anyone can contest a will due to inadequate provision; that's not the case. These court applications, called Family Provision applications, have different rules depending on which Australian State we are talking about. Each State’s jurisdiction has specific criteria for those eligible to file a Family Provision application. Typically, this includes spouses, children and dependents, but the exact list varies in each jurisdiction. For instance, stepchildren don't have the automatic right to make a Family Provision application in New South Wales, but they are allowed in Queensland.
Another misconception is that it's always fair to divide a parent's estate equally among all their children (or unfair to divide the estate unequally). The law states that each person's situation must be individually evaluated. If parents specify in their will that they're dividing everything equally, one child could challenge this if they feel they haven't been provided for adequately. While claims can come from various family members and relatives, most often we find it's adult children who make such claims.
Q: In Singapore, mental incapacity is probably the more common reason to challenge a will. Why is it more common to use family provision laws to challenge a will in Australia?
Max: Compared to challenging a will based on mental incapacity, which requires medical and other professional evidence, making a Family Provision application is much simpler and the evidence is laxer. You mainly need to show your financial situation, which is simpler to demonstrate. Going to trial can be expensive; legal costs for both sides can exceed AU$100,000, and certainly for smaller estates it’s not going to be feasible, so settlements often happen during the compulsory mediation rather than via a full trial.
On the other hand, as mentioned, proving mental incapacity or undue influence can be tough. Suspicion of unreasonable actions isn't enough; solid evidence is needed, and it's uncertain how such cases will end.
Still, it's becoming common to see both contested probate and Family Provision causes of action running together nowadays.
Q: Do you offer a basic estate plan package and how much does it cost?
Max: Our basic package covers a simple will (appointing executors and naming a few beneficiaries), along with an EPA and appointment of enduring guardian. The cost starts at AU$1,800 for individuals and AU$3,000 for couples. Prices vary based on each client's unique situation. Even if two clients receive the same documents, they may be charged differently. Factors like urgency or complex wealth can influence pricing due to additional care and risk assessment needed.
Q: What are a few typical challenges that your clients encounter?
Max: Many people don't realize that a will doesn't cover assets not owned in their personal name, like trusts, companies or superannuation. Online wills are increasingly popular, but they are not usually going to be able to deal with these types of assets. This is why it's crucial to consult a specialist. They can help you develop strategies to manage these assets properly, structure the will to fully provide for beneficiaries, considering aspects like asset protection and tax savings, and offer tailored advice based on individual circumstances.
A growing trend in Australia is the rise of blended families, where a couple can not only have children that they have together, but also children from their previous relationships. The challenge is ensuring provisions for a spouse while also providing for children from a previous relationship. Engaging a specialist in this case is particularly useful in helping you find a solution that balances the interests between the various family members.
Q: What type of trusts are common in Australia? Why and when do people use such a trust?
Max: Testamentary trusts are quite common nowadays, and many clients have probably heard of them, even if they don’t fully understand them. When we talk about a testamentary trust, we mean a testamentary discretionary trust, which is set up in your will, usually adding a few extra pages to it.
[A testamentary trust is established under a will and and takes effect only upon the settlor's passing.]
For these trusts, having sufficient wealth is key. The trust would typically need to receive at least half a million dollars or more for it to be relevant. People opt for testamentary trusts to safeguard beneficiaries, even though they don't personally benefit from the trust. For instance, if a beneficiary goes through a divorce, the assets won't usually be at risk of going to their ex-spouse. However, merely having money doesn't mean it's suitable for everyone. Some clients can afford it but don't see its value, so they opt not to use it.
Additionally, there needs to be a sufficient number of beneficiaries, often family members. These trusts are often set up for adult children as primary beneficiaries, then their own children, and so on. However, if you have only one child without children of their own, the trust's utility might be limited. It's more effective when there will be multiple beneficiaries through generations.
Sometimes, it's not just about wealth or number of beneficiaries, but about the beneficiary's circumstances. This applies when a parent is making a will for a child with special needs, like mental disabilities, addiction, etc. In such cases, the trust protects the inheritance from the beneficiary themselves, as they might not be able to manage the money well.
Q: How much does including a testamentary trust cost?
Max: Including up to three testamentary trusts in our basic package, which includes a will, EPA and appointment of enduring guardian, would raise the starting cost from AU$1,800 for individuals to AU$4,000, and AU$3,000 for couples to AU$7,000.
Through our related company, de Groots Guardian Services, we can serve as trustees for testamentary trusts, especially for beneficiaries with disabilities. We don't usually charge a commission (percentage of assets), unlike some trust companies. Instead, we bill based on the work required, as some trusts might have substantial wealth but need little management, while others might have less wealth but more involved work.
Curious about whether you should include a trust in your estate plan for your Australian assets? Book an appointment with Max from de Groots now
Q: What should foreigners with Australian assets and Australians living overseas keep in mind when planning for their estates?
Max: If you're a foreigner with assets in Australia, the first crucial step is ensuring the validity of your will.
Ensure Your Will is Valid In Other Jurisdictions
While you might have a valid will in your home country, the criteria for a valid will vary between jurisdictions. Our general advice is that you should always have a will in each jurisdiction that you own assets in, so if you own assets in Australia, it's advisable to create a will here.
Additionally, there might be specific regulations and factors that are relevant here but not in another country. As specialists, we will help you highlight these matters to you.
Because Australia is part of the Commonwealth, we have resealing laws. If someone passes away with a will probated in a Commonwealth country, we can reseal it in Australia, providing an automatic advantage. However, if the will was created in countries like China or the United States, we can't reseal it. In those cases, you would need to meet Australia's will validity requirements.
Location of Assets
For Australians living abroad, there could be tax ramifications, primarily related to income tax and where you earn your income. However, from a succession perspective, the focus is on asset ownership. If you've moved abroad and taken your wealth with you to another country, it's usually less concerning. Yet, if you're working in another country while retaining assets in Australia, proper estate planning, like using wills, remains important.
Another important consideration is that if you choose to create a will for each country where you have assets in, ensure that the wills from different countries do not nullify or invalidate each other.
If you don't have a will but own assets in Australia and other countries, your domicile (the country you consider as your permanent place) may become crucial. This becomes significant for tax purposes and estate litigation, particularly when determining which jurisdiction’s Family Provision law is applicable.
Q: What are some of the upcoming trends in the wills and estates area in Australia?
Max: I'm drawn to this area of law because it remains relatively stable. Unlike some fields that experience yearly changes, wills and estates law sees fewer modifications. In New South Wales, our most significant change recently has been transitioning all probate applications online, marking the largest shift in about 15 years.
Occasionally, you might hear whispers about the government considering reintroducing estate tax, especially near election times. Unlike many countries, Australia currently doesn't have estate tax, meaning you don't need to give a portion of your estate to the government. While we do keep an eye on potential tax changes, we don't let tax considerations dominate our approach. Our main focus is ensuring the rightful individuals receive your wealth.
Q: Anything interesting about you?
Max: I've been a huge fan of Batman since I can remember. Over time, I've gathered a substantial collection, with many items gifted by my family, friends, and colleagues who know about my Batman fandom. This fascination stems from a few reasons. Firstly, I grew up with Michael Keaton playing Batman in Tim Burton's blockbuster films. That was before the avalanche of superhero films nowadays, so as the main superhero on the big screen at the time, Batman was a big part of my childhood.
Secondly, I'm drawn to Batman's human side; he lacks superpowers but uses his tragic past (the death of his parents) to make a positive impact on the world rather than turning into a supervillain.
This interview has been edited for length.
What is Family Provision Law in Australia?
Family Provision Law in Australia is a law that is designed to ensure that the assets of a deceased individual provides adequate support to their family members.
Am I eligible to file a Family Provision Application?
In Australia, the rules for Family Provision applications vary by state, with each state having its own specific criteria for eligibility to file such applications.
Speak to Max Williams from de Groots here to inquire more.
If I have a Lasting Power of Attorney (LPA) in Singapore, do I need an Enduring Power of Attorney (EPA) in Australia?
While Singapore's LPA is similar to Australia's EPA, LPAs are generally not recognized in other countries and vice versa. However, please consult a professional on whether this is the case and decide if you need an LPA (or one that's equivalent) for your specific country outside of Singapore.
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