Celebrity disputes over estate assets may seem irrelevant to most of us, but they remind us that:
- almost everyone has an estate which must be distributed after they die; and
- a lack of estate planning creates difficulties.
The estates of ordinary Australians are at risk and it's an important time to ask yourself whether your own will, and those of your clients, are in order.
An extraordinary example - under US law
In 2007, Anna Nicole Smith died in tragic circumstances while a dispute continued as to whether she had inherited the estate of her extraordinarily wealthy husband. (His will had intentionally omitted any reference to her. That matter is still before the courts.)
Her own will:
- provided that her estate was to be held in trust for her son Daniel until he became an adult; and
- was silent about any spouse or future children - such as her baby daughter, Dannielynn.
However, as Anna Nicole's son Daniel had died before she did, lawyers argued that Anna died intestate - that is, without a will, because her only beneficiary had predeceased her. Therefore, they claimed her entire estate should be held in trust for her baby daughter (as her next of kin).
What would have happened under Victorian law?
In Victoria, the law safeguards children which would have meant that Anna Nicole's estate was to be held on trust for her daughter. However, a de facto partner who could establish a de facto relationship with Anna Nicole at the time of her death would inherit:
- the deceased's personal items and
- one-third of the balance of the deceased's estate (children are entitled to receive the remaining two-thirds).
Although this law goes some way to protecting a de facto partner, the deceased may have wanted her children to receive the entire estate (rather than having to share any of it with such a de facto partner).
Jurisdictional differences from state to state
Each Australian state has different inheritance laws. Generally, issues about a person's estate will be determined according to the laws of the state in which the person resided.
Safeguarding a minor - setting who will be responsible
A minor (being a person under 18) is unable to administer their own estate (whether or not the estate is received by inheritance). In Australia, this role would most likely pass to the minor's legal guardian. Parents can address this by nominating a guardian in their wills.
Can Anna Nicole's estate continue the dispute about her husband's estate?
At the time of Anna Nicole's death, she was contesting the will of her deceased husband. Can that action continue? If this had happened in Australia, the general position is that the right to commence an action to contest a will (and make a family maintenance claim) is lost when the person contesting the will dies. The right to make a claim can only be inherited by an executor of the estate if the claim had already been brought. In Victoria, the issue of whether an appeal could be continued by an executor once commenced is unclear as this issue has never arisen.
What does this mean for your estate and your client's estates?
While inheritance law remains relatively unchanged in Australia, the emergence of new family structures and relationship categories makes the law potentially complex to interpret and apply. High profile estate disputes serve as a timely reminder to make sure your own estate - and the estate of your clients - is in order. The key element is having up-to-date wills.
Time spent planning now can save beneficiaries from the expense and anxiety of contesting an out-of-date will later.
Many different life events should cause people to turn their minds to reviewing their wills. The main events include:
- the death of any beneficiary
- the birth or adoption of any children or grandchildren
- marriage, separation, divorce, remarriage or entering into a new defacto relationship
- acquisition or disposal of significant assets
- relocation to another state
- a transfer of assets to companies, trusts or superannuation funds
- a change in personal circumstances if there are no dependants
- an employment or super fund change which may require beneficiaries to be nominated.
If you would like more information concerning this topic, or estate planning generally, please contact the Private Client Services team at Maddocks on 03 9288 0555.