What is a Caveat?

A caveat is a type of statutory injunction preventing the registration of particular dealings with real property (i.e. real estate). It is a formal public notice or warning advising that there is an interest on the property for a particular reason.

The word caveat means ‘beware’ and lodging a caveat warns anyone dealing with the property that someone claims a priority interest in that property. The person lodging a caveat is a caveator.

Reasons for Lodging a Caveat

If you have a genuine interest in land (such as a registered mortgage), you may lodge a caveat to prevent registration of another dealing and protect your legal position. This is known as a caveatable interest.

Caveatable interests include:

  • a registered or equitable mortgage
  • a transfer
  • a purchaser under an agreement for sale
  • a tenant (in certain circumstances);
  • a registered proprietor and
  • contractual rights.

In NSW, the Real Property Act 1900 governs caveats. When a caveat is lodged at NSW Land Registry Services (NSWLRS), it prevents the registration of further dealings on the property’s title until the caveat:

  • is formally withdrawn by the caveator;
  • lapses;
  • is removed by a court order; or
  • the caveator consents to a registration by another party dealing with the property’s title.

Anyone with an interest in land or who wishes to claim an interest may lodge a caveat. A caveat can also be lodged by someone with an Australian court order restraining a registered proprietor from dealing with the property.

In NSW lodgement of caveats is electronic by a subscriber to PEXA (such as a solicitor or a licensed conveyancer).

What Detail Does a Caveat Require?

In NSW, when lodging a caveat, you need to include:

  • the caveator’s name and residential address or registered office, including an address for service of notices;
  • the name and address of the registered proprietor (we suggest that you do a title search to ensure the correctness of the information);
  • reference details for which the caveat relates;
  • particulars of the legal or equitable estate of interest;
  • a verified statutory declaration; and
  • the signature of the caveator, lawyer or another agent of the caveator.

What if I Incorrectly Lodge a Caveat Without a Caveatable Interest?

Only someone with a caveatable interest can lodge a caveat. Lodging a caveat without reasonable cause is a serious matter. A court may order you to compensate anyone who suffers a financial loss as a result of your incorrect caveat.

Challenging or Removing a Caveat

Ways in which a caveat can be challenged or removed include the property owner issuing a lapsing notice and the caveator submitting a withdrawal of caveat form.

0 Comments

Parents lending to their children

Parents making loans to children

To protect your loan to your children do a legally prepared loan agreement.

A Loan to my child seems harsh

There is nothing wrong with helping your children financially. It is becoming increasingly popular to help out children with a home deposit, but giving away the money has real risks. With loans to children, don’t rely on a verbal agreement. A loan agreement protects the money in case for example:

1. a child divorces;

2. a child goes bankrupt;

3. a child develops a drug dependency or a mental illness; or

5. you run out of savings to pay for assistance required in your old age

Documenting loans to children

Rather than giving your children money, why not lend them money ‘payable on demand’? Treat yourself as if you are a bank, and your children are borrowers. You can then call in the loan if something goes wrong.

A loan agreement protects your interests by putting rules about the loan in writing. In future you can forgive the loan, either during your lifetime or in your Will.

Any tax issues?

There are none if the interest rate for the loan is ‘as advised by the Lender’.  Whilst the interest rate is zero there are no income tax issues.

What is the status of a loan agreement vis-a-vie a mortgage?

If you lend your child money and a bank is also providing them with a loan, the bank lodges a mortgage over the property.

Making a Loan Agreement payable “on demand” does not change the precedence of a mortgage over the property over your rights to repayment. However, repayable ‘on demand’ rather than specifying circumstances for repayment (e.g. house sale, separation, divorce) protects you as it extends the circumstances in which the loan is repayable.

Your loan agreement should give you a right to lodge a caveat over any real estate your child owns in Australia. If there is an existing mortgagee it will be difficult to lodge a second mortgage over the property.

Does the bank (with a mortgage over the home) need to be consulted about a Loan Agreement?

Second mortgages are complex, expensive and rare. An alternative is to lodge a caveat over the property with the loan agreement attached after the settlement.

If your child separates, a professionally prepared loan agreement should ensure that the loan is paid out prior to any payout to their ex-partner.

How to lodge a caveat or mortgage in NSW using a loan agreement

  1. All parties sign the Loan Agreement.
  2. Engage a subscriber to PEXA (such as a lawyer) to electronically register a caveat or mortgage against the title of the property with NSW Land Registry Services.
Conclusion

When making loans to children:

1. talk with all your children about the proposed loan;

2. to protect you and your children – lend (not gift) them money

3. don’t rely on verbal agreements –engage a solicitor to draft a loan agreement

Child Loan Agreement on back of an envelope?

Recording a ‘minute’ or IOU on a piece of paper is not sufficient evidence of the existence of a loan. Only a legally prepared loan agreement satisfies the ATO, Bankruptcy Courts and Federal Circuit and Family Court as to the existence of a loan.

Son refuses to repay father

In Berghan v Berghan [2017] QCA 236 a son refused to pay back money he borrowed from his aged father.

The son’s company suffered financial stress. The father lent his son money. The son then spent more using his father’s credit card.

The District Court held that there was no written loan agreement, the father failed to prove a legal binding agreement, and that the monies were a gift.

The Judge determined that:

  • The son’s promise to look after his father in old age was just a moral obligation.
  • In making the payments to the son, for the benefit of the company, the father was simply discharging his parental obligations. This is because the son’s daughter was an employee at the son’s company. The money was therefore of a charitable nature. The father was protecting the son’s company so his daughter would keep her job.
  • The father allowed the son to use the credit card when the son was injured and impecunious. These circumstances are charitable.

The Court of Appeal overturned the District Court decision, holding that the amounts were loans and that a child loan agreement was inferred.

In setting aside the decision, the Court determined that:

  • The lengthy period it took the father to demand the money did not count against his assertion that a breach of contract existed. Post-contractual conduct is not taken into account when interpreting the terms of a contract.
  • The father’s motivein transferring the money to the son was not relevant.

The Court said that it was an “inescapable conclusion” that the monies were paid with an understanding that they would be repaid. The transactions amounted to a loan contract.

This decision illustrates the perils of not signing a loan agreement.

Additional money to help child buy first home

If you want to help your child with the deposit on their home or they need more equity, you can do a loan agreement and lodge a caveat over the property after the mortgagee has registered the mortgage.

0 Comments

Capital Gains Tax Rollover Relief

Capital Gains Tax

Capital Gains Tax (“CGT”) is payable pursuant to the Income Tax Assessment Act 1997 (“ITAA”) on the disposal of assets purchased after 20 September 1985. CGT is payable on and is applied to the profit made from the sale, transfer or disposal of an asset to another person or entity. It applies to all assets but there are exceptions including:

  • the parties’ main residence (i.e. the former matrimonial home);
  • cars and motorcycles;
  • personal assets (such as a boat or household furnishings) purchased for under $10,000.00; and
  • collectables (such as artwork, jewellery, antiques or a wine collection) valued at less than $500.00.

An adjustment of property between parties to a marriage or a de facto relationship involving the sale, transfer or disposal of an asset may give rise to a CGT event.

The former Matrimonial Home

If the former matrimonial home has been the parties’ main residence, it is one of the exceptions under the ITAA and selling, transferring or disposing of it will not attract CGT. If however the property was not the main residence of the parties for a period, the situation may be different. If, for example, the property is rented out as an investment property before the parties live in it as their main residence. In such a situation, a sale, transfer or disposal may attract CGT but the assessment will be restricted to the period during which the property was rented out.

Investment Property

CGT will be assessable on the profit from the sale of an investment property or another non-exempt asset as part of a family law property settlement. It is important that a property settlement considers the payment of CGT on the sale of an asset. If the property is in the parties’ joint names (or an entity controlled by both parties), then both parties will be assessed to pay CGT on their share of the profit. If the property is in the name of only one party (or an entity controlled by one party), then that party will be assessed to pay the CGT. Discounts may apply to reduce the ‘profit’ on which the CGT is assessed.

CGT rollover relief

Where a CGT-liable asset is transferred between the parties (rather than sold) then normally CGT would apply to the transfer. If, however, the transfer of the asset is a consequence of the breakdown of a relationship, then sec 126 of the ITAA allows for “rollover relief” on the transfer. CGT can be disregarded until the party receiving the asset sells, transfers or otherwise disposes of it.

For example, CGT is not payable at the time when an investment property is transferred to a party following the breakdown of a relationship. The party receiving it will be liable to pay the tax on any gain made on a subsequent sale or transfer of the asset.  The CGT is calculated as though that party had owned it since their former partner acquired it, including using their former partner’s cost base for the asset.

Rollover relief only applies if:

  • If the asset is transferred between parties to a marriage or a de facto relationship or from a company or a trust to one of the parties; and
  • The transfer is made in accordance with a court order, an arbitration award, or a financial agreement under the Family Law Act.

Will CGT be included in the property pool?

The leading authority on CGT is the case of Rosati and Rosati, where the Full Court of the Family Court outlined the following principles:

  1. Whether the incidence of CGT should be taken into account in valuing a particular asset varies according to the circumstances of the case, including the method of valuation applied to the particular asset, the likelihood or otherwise of that asset being realised in the foreseeable future, the circumstances of its acquisition and the evidence of the parties as to their intentions in relation to that asset.
  2. If the Court orders the sale of an asset, or is satisfied that a sale of it is inevitable, or would probably occur in the near future, or if the asset is one which was acquired solely as an investment and with a view to its ultimate sale for profit, then, generally, allowance should be made for any capital gains tax payable upon such a sale in determining the value of that asset for the purpose of the proceedings.
  3. If none of the circumstances referred to in (2) applies to a particular asset, but the Court is satisfied that there is a significant risk that the asset will have to be sold in the short to midterm, then the Court, whilst not making allowance for the capital gains tax payable on such a sale in determining the value of the asset, may take that risk into account as a relevant s 75(2) factor, the weight to be attributed to that factor varying according to the degree of the risk and the length of the period within which the sale may occur.
  4. There may be special circumstances in a particular case which, despite the absence of any certainty or even likelihood of a sale of an asset in the foreseeable future, make it appropriate to take the incidence of capital gains tax into account in valuing that asset. In such a case, it may be appropriate to take the capital gains tax into account at its full rate, or at some discounted rate, having regard to the degree of risk of a sale occurring and/or the length of time which is likely to elapse before that occurs.”

Whether CGT will be taken into account in calculating the net asset pool will depend upon the circumstances of that individual case.

0 Comments

Priority Notices in NSW

A priority notice is a form of land dealing which, once registered on title:

  • acts as a notice to the public that someone intends to lodge a dealing on a title (e.g., a transfer, lease or mortgage); and
  • temporarily (i.e. for the period of the priority notice) prevents the registration of other dealings to preserve the priority-on-title of the dealing covered by the priority notice. Subsequent dealings are noted as ‘unregistered dealings’ until the priority notice is withdrawn or lapses.

So if for example you intend to lodge a transfer, you can register a priority notice to hold the transferee’s place on title until settlement.

Lodgement, duration and cost

Priority notices can only be lodged online via PEXA.

A priority notice’s initial priority period of 60 days from the date of registration can be extended once for 30 days. However, it can be withdrawn before the end of the 60 days (or a 30 day extension).

Priority notices cost $40.31 to register, $16.70 to extend, and $16.70 to withdraw. Lodgement and withdrawal of a caveat costs $147.70 to register.

Pros and cons

Pros

  • they are cheaper to register than caveats
  • they are quick and easy to lodge
  • registration of a priority notice does not require a caveatable interest–the only requirement is that you are a party to a land dealing
  • a single priority notice can remain on title for 60 to 90 days, and
  • sequential priority notices can be lodged without limit in relation to the same land dealing (when a previous priority notice lapses).

Cons:

  • unlike a caveat, a priority notice is time limited and lapses, and
  • priority notices do not prevent registration of all subsequent dealings (e.g. a caveat is not subject to a priority notice and there can be competing priority notices).

Priority notices vs caveats

One disadvantage of priority notices is automatic lapsing. After a priority notice is registered, subsequent dealings lodged for registration are noted on title as ‘unregistered dealings’ until the priority notice dealing is registered or the priority notice lapses or is withdrawn.

If the relevant dealing cannot be registered within the priority notice period, an unregistered dealing noted on title can be registered immediately on the lapse of the priority notice before a second priority notice can be lodged.

Consequently, if there is a caveatable interest, it may be preferable to lodge a caveat than a priority notice, especially if the registration date of the dealing is uncertain. A caveat remains on title indefinitely, preventing virtually all dealing with the title until it is either withdrawn (e.g., when the caveator receives payment) or is lapsed by the owner or an interested person. As lapsing can be complex (involving court proceedings if the caveator defends their caveatable interest), a caveat gives stronger protection than a priority notice for the priority of a proposed dealing.

Priority notices and caveats have distinct purposes:

  1. the priority notice preserves the priority of a dealing to be lodged for registration later;
  2. the caveat acts as a form of security and a warning to third parties that the caveator claims an equitable or legal interest in the land.

Where there is a caveatable interest, either can be used to protect the priority of an impending dealing. However, where a caveatable interest exists, registering a caveat is a safer bet.

Conclusion

Although priority notices can be used as a quick and cheap tool to preserve a future dealing’s priority on title, it is important to consider whether:

  • the dealing will be registered within the priority notice period, and
  • whether, in the circumstances, a caveat should be lodged instead.
0 Comments

What is a Reseal of Probate?

The effect of a Grant of Probate or a Letter of Administration.

When a person dies the executors named in the person’s Will must apply to the Supreme Court of NSW for a grant of probate for the Will made by the deceased to be recognised. A Grant of Probate allows the executors to withdraw the assets from different entities. Until it is issued, none of the assets of the deceased can be distributed to the beneficiaries named in their Will.

If the deceased did not have a will, a letter of administration is granted to an administrator.

What is a Reseal of Probate?

A reseal of probate is the expression used when you need to apply to another state’s Supreme Court, so that a Will that has already obtained a grant of probate in one state, can be recognised in another state. Once a reseal of probate has been granted, the executor can also deal with the assets under the Will that are not located in the state where the original grant of probate was issued.

Obtaining a Reseal of Probate in NSW

The executor or administrator of deceased estate in another jurisdiction obtains the grant of probate or administration in the state or country where the deceased passed away.

However, a grant of probate is state-based and probate laws can differ between states and countries. A deceased’s assets, such as shares or investment properties, may be in various locations. Assets not located in NSW cannot be dealt with under a NSW grant of probate

Rather than requiring a fresh application for a grant of probate in NSW, you can apply to the Supreme Court of NSW asking that it recognise the original grant by resealing the original grant with the seal of the Supreme Court of NSW.

Not all foreign grants can be re-sealed. The Supreme Court of NSW will only recognise grants made in one of ‘Her Majesty’s Dominions’ (being certain Commonwealth countries and other Australian States and Territories. Probate granted in Western Australia , Northern Territory, South Australia, Queensland, Victoria , Australian Capital Territory or Tasmania can be resealed with the seal of the Supreme Court of NSW.

Why do I need to obtain a Reseal?

The Grant of Probate is proof that the named executor or administrator is authorised to deal with the estate’s assets. The asset holder (such as a bank, nursing home, share registry or NSW Land Registry Services) may require the grant before releasing the asset. If the Grant has been obtained outside NSW, the asset holder may require the Supreme Court to approve the Grant.

What is the effect of a Reseal of Probate or Reseal of Administration?

A re-sealed grant of probate or grant of administration made in another state or country has the same effect and operation in NSW. A resealed foreign grant must be accepted as if it had been made by the Supreme Court of NSW. The executor can then gain access to and distribute to beneficiaries the deceased’s assets located in NSW.

Can I avoid having to obtain a reseal in NSW?

Depending on the type, size and value of the asset(s) located in NSW, you may be able to avoid having to obtain a reseal in NSW by signing a declaration and/or indemnity as required by the asset holder. Each asset holder will have their own requirements. You should provide them with proof of the original grant and death certificate and ask them what their requirements are to release the assets. Shares may be released or transferred without the need for the grant to be resealed in NSW if it has been obtained in Australia and a section 1071B statement (which may be downloaded from the share registry) is completed.

How can I obtain a reseal in NSW?

An application for Reseal of probate must be made using the Court form accompanied by the information required by the legislation and rules of court. The process involves filing Court documents and advertising requirements.

0 Comments

Home ownership and your Will

Real estate is one of the most valuable assets people own during their lifetime. Property owners may not realise that whether or not real estate passes to the beneficiaries named in their Will depends on the type of ownership.

Sole Ownership, Joint Tenants or Tenants In Common?

There are different ways to be the legal owner of a property asset. Each form of ownership has a different implication when it comes to deceased estates, so it is important to understand which applies to you.

Sole ownership means the property is exclusively owned by a single person and no other person has any interest in the property asset. If the deceased person was the sole owner of the property, the asset usually forms part of the estate for distribution in accordance with the Will (if there is one).

There are two ways of holding joint property. Where two or more people own property, they can hold it jointly as joint tenants or as tenants-in-common. The mode of ownership is significant and dictates what happens to the property on the death of one of the joint owners.

joint tenancy is the more common form of ownership and can be thought of as similar to a joint bank account. Ownership as tenants in common can be with two or more people and in equal or unequal shares.

Property Ownership as Joint Tenants

Joint tenancy comes with the ‘right of survivorship’. Owning a property as joint tenants means that when one joint owner dies, their interest in the home passes to the surviving joint owner, irrespective of what is in the deceased person’s Will. The deceased person’s share is not included in the deceased estate for distribution to beneficiaries.

The property will usually transfer to the surviving joint tenant without having to go through the courts. A copy of the death certificate is generally required as proof of the death.

Property Ownership as Tenants in Common

If the deceased person owned a property with someone (e.g. a spouse, partner, or someone else) as ‘tenants in common’, each owner (or ‘tenant’) owns a portion of the property asset. The ownership need not be in equal shares – it can be split any way the tenants in common agreed on when they purchased the property.

What happens to deceased estate when a tenant in common dies?

If a property is owned as tenants-in-common, there is no right of survivorship. If one of the joint owners dies their share of the property does not automatically go to the surviving owner. The deceased owner’s share of the property becomes an asset of their deceased estate for distribution in accordance with their Will (or if the person has no Will, as per the laws of intestacy).

What if joint owners’ circumstances change?

Owning property as joint tenants may be preferable for many people. However, difficulties can arise if circumstances change. For example, in the event of a relationship breakdown, a joint tenant may no longer want their share of the property to pass automatically to their estranged spouse or partner on their death.

 Can ownership be changed from joint tenants to tenants-in-common?

It is possible to apply to NSWLRS to have the ownership changed from joint tenants to tenants-in-common without the consent of the other property owner(s). Once registered at NSWLRS, a new certificate of title will be issued showing the registered owners as tenants in common (expressed in parts such as “1/2”).

There is a risk in that a person may believe their property will pass according to their Will, but in reality it may not. If you are in doubt about the mode of holding for any jointly owned property you have, and want to confirm what implications this has on your Will, seek advice by calling Anthony Steel on 0451 118 644.

0 Comments

Superannuation and estate administration

Superannuation is becoming an increasingly significant asset. For many Australians, their super is one of their largest cash assets. Part of the administration of an estate may require superannuation to be dealt with.

How do I give superannuation away when I die?

Your Will is a legal document that deals with and distributes assets that you own. Superannuation does not normally form part of your estate and you can’t include it in your Will. It usually goes directly to the person that you nominate to receive the benefit from your superannuation.

Superannuation can not be left to someone in your will. If you don’t understand how you can distribute this money to your beneficiaries and erroneously include it in your Will it can cause problems.

Why can’t I leave Superannuation in my Will?

Unfortunately, when making a Will, the Will-maker can mistakenly believe that super is owned by them and will be distributed along with the rest of their estate. However, your superannuation isn’t considered as one of your assets and cannot be included in your estate.

Due to the way in which Superannuation schemes are set up the money in your Superannuation Account is not owned by you personally. It is owned and managed by the trustee of your Superannuation Fund person who holds it on Trust on your behalf. Only the trustee can distribute the money in your account. They can distribute your superannuation to your beneficiaries, but not as part of your Will.

The Trustee cannot simply do as they like with this money; there is legislation in place to protect your super.

How can I bequeath my superannuation?

Superannuation does not automatically form part of your Estate. You should ensure that you contact your Super Fund with information about your beneficiary or Estate.

What is a death benefit nomination?

A death benefit nomination is a non-binding nomination made by you. In it you express your wishes to the trustee of your superannuation fund about who you would like to receive your death benefit on your death.

What is a binding death benefit nomination?

A binding death benefit nomination is a binding nomination made by you directing the trustee of your superannuation fund who to pay your death benefit to on your death. Traditionally, binding death benefit nomination lapse after three years, so you need to update it before it expires. However, some funds now allow for non-lapsing binding nominations which need not be renewed.

A binding death benefit nomination specifies that the trustee must distribute superannuation in your account to the beneficiaries you nominate.

How do I ensure that my super is distributed according to my wishes?

You can ensure that your Superannuation is distributed according to your wishes by notifying your Superannuation Fund with your Binding Nomination and by inserting a Superannuation Will Clause in your Will.

In your Will you can stipulate who is to receive the benefits of your superannuation account. You nominate through your superannuation fund your legal representative as the beneficiary of your superannuation, who can then distribute it according to your Will.

For this strategy to work, your Will must include a superannuation clause and you must keep the binding nomination and the beneficiaries in your Will up to date.

A simpler option is to make a binding death benefit nomination with your superannuation fund and the money will be distributed to the named beneficiaries on your death.

There are only certain types of people who you can nominate under a binding death benefit nomination. These include a spouse, a de facto, children (in some circumstances including step children), dependents, inter-dependents, and your estate.

How do I make a Binding Nomination with my super fund?

You nominate someone using a death benefit nomination form or a binding death benefit nomination form.

What happens if I don’t make a Binding Nomination?

If you don’t make a binding nomination or it has expired at the time of your death, the trustee of the super fund has the ultimate discretion about who will receive that benefit. They can either pay the money directly to your estate or decide which of your beneficiaries should receive it.

Mid Mountains Legal are experienced in working with Wills and Estates and can ensure your peace of mind with comprehensive legal advice and guidance.

Contact Mid Mountains Legal on 02 47593742 or 0451118644 for a free phone consultation about your Will and distributing your Superannuation.

0 Comments

Inheritances and family law

Will the Court give me back what I put in?

An inheritance is not a protected asset in family law property settlements. Depending when an inheritance is received, the family law courts exercise wide discretion about how it is treated.

Will an inheritance be included in the property pool?

The treatment of inheritances can result in bitter disputes between parties in family law property settlements. An ex-partner who received an inheritance may believe they should retain all of it whilst the other ex-partner may argue that it should from part of their shared pool of property to increase their overall entitlement.

The family law court’s treatment of an inheritance can be confusing. One inheritance can be excluded entirely from the property pool whilst another can be treated as a separate pool distinct from the other property. Whatever approach the courts choose to adopt, they will not ignore an inheritance.

An inheritance will only be considered where it has already been received or where evidence shows that party is likely to receive an inheritance in the very near future e.g. if a parent has lost the capacity to change their Will. The mere expectation of a future inheritance will not affect the division of assets of the relationship. The family law courts will not be interested in a possible inheritance an ex-partner might one day receive without evidence that the entitlement is more than purely speculative.

What will the family law courts consider?

A key issue in property settlement negotiations is how an inheritance received during a relationship is to be treated.

How an inheritance is dealt with in a property settlement depends on the circumstances of the particular case. Following are some of the factors taken into account in determining whether the inheritance forms part of the asset pool, or is ‘protected’ from distribution in the settlement.

  • the timing of the inheritance i.e. before cohabitation commenced, during the de facto relationship/marriage, or after separation
  • the intentions of the deceased;
  • how the money was used; and
  • the size of the inheritance compared to the value of the property pool.

The family courts will consider what weight, if any, should be given to the inheritance and assess it along with the parties’ other contributions.

If an inheritance is received shortly before or after the commencement of the relationship, it will be considered an initial contribution by that party and it’s value will included within the asset pool. The value of the inheritance as one of the contributions made by that party will be taken into account when determining that party’s entitlements on separation. The magnitude of the impact of the inheritance on adjustments to a party’s entitlements depends on it’s size and the amount of the party’s other contributions to the asset pool.

If an inheritance is received during the relationship, how it is treated depends on how it was applied and the intentions of the deceased. If the inheritance is spent on improving the family home, paying for the day to day expenses of the family and generally used for the benefit of both parties, it is likely to be treated as a financial contribution by the party who received it.

If an inheritance is received after separation, it will generally not be viewed as a contribution to the asset pool and may be ‘protected’ from distribution between the parties.

If the deceased had specific intentions for the inheritance, this may influence how it is treated. For example, if they specified that it was for the benefit of the family as a whole, it is more likely to be treated as part of the asset pool. If, however, the deceased specified that the bequest was to a party for a particular use who then kept the inheritance separate from the asset pool, it is likely to be treated as separate from the asset pool.

If the ex-partner of the beneficiary assisted with caring for the deceased (e.g. if a deceased parent lived with the couple) the inheritance is more likely to be treated as belonging to the family as a whole.

Where a large inheritance is received late in a relationship and the test of the asset pool is small and if a division of the balance of the asset pool would result in an unjust settlement considering the parties’ contributions, the inheritance may be treated as part of the asset pool. That is, if the party who has made the greater contribution is not the one who receives the inheritance, it may be included to give that party a just settlement.

Resolution of a property settlement

It is always preferable if possible for parties to family law property negotiations to settle the matter amicably. This can be achieved through direct negotiations, through lawyers, or by undergoing family dispute resolution. If a dispute cannot be resolved amicably, either party can file an application for property orders in the family law courts. An application must be filed within 12 months of a divorce becoming final or for de facto relationships, within two years of the date of final separation.

Call us for free advice on the status of an inheritance in a family law context.

0 Comments

What is Probate & how do I apply for it in NSW?

What is a grant of probate?

An estate’s executor/s must collect the deceased’s assets, pay their debts, then distribute the assets to the beneficiaries. A grant of probate is a legal document that authorises an executor/s to follow the provisions of the will in managing a deceased estate.

Once the executor gives the grant of probate to those holding the estate’s assets (including banks or retirement villages holding bonds) or to whom the estate owes a debt they must transfer the assets to the executor (or to beneficiaries named in the will).

The Supreme Court of New South Wales (the Court) determines uncontested applications for grants of probate (known as grants in common form).

The Court can only grant probate if the deceased’s assets are located in New South Wales. If they are in more than one state or country the executor/s may have to apply for a grant in each state or country. However, assets held in other Australian states and in certain countries may only require a reseal of the NSW grant. This article is restricted to grants of probate in NSW

Must I obtain a grant of probate?

Not every deceased estate has to obtain probate. The type, size and value of the assets may be such (e.g. smaller amounts ) that an asset holders may release assets without the need to obtain probate.

Is there a difference between joint tenants and tenants-in-common?

When the deceased’s assets were jointly owned (i.e. where the co-owners [called tenants] did not own distinct shares of the property), the property automatically passes to the remaining joint tenant/s. For example, if all the deceased’s assets were held as a joint tenant with a surviving beneficiary/s probate would not be required.

Probate is required if the deceased owned real estate solely in their name or as a tenant in common (i.e. as a distinct share) with a surviving beneficiary. The certificate of title (or title deed) shows if the ownership of real estate was as joint tenants or tenants in common. New South Wales Land Registry Services (NSWLRS) can provide this information.

What are the asset holder’s requirements to release assets?

Asset holders differ in their requirements for releasing assets. If there is no real estate, the executor (especially if they are the sole beneficiary) should ask the asset holders (e.g. banks, superannuation funds, insurers) if they will transfer the assets without a grant of probate. They may be willing to do so if the executor gives them a certified copy of the death certificate, the will, a declaration signed by the beneficiary/s of their entitlement, and/or an indemnity in case there is subsequently a claim on the estate.

Superannuation is not considered part of the estate. Depending on the terms of the policy, neither are the proceeds of life insurance. However, a trustee may require probate before they will determine who is entitled to superannuation or insurance proceeds.

What is the timeframe for lodging an application?

If an executor files an application for probate after 6 months from the date of death of the deceased, the court requires an explanation for the delay by way of an explanation in the affidavit of executor or an Affidavit of Delay (using UCPR Form 40).

Who can apply?

Executors

The Will-maker (testator) should nominate an executor/s in the will. If an executor is not nominated in the will it is not possible to apply for probate. In that case a beneficiary named in the will can apply for letters of administration with the will annexed.

The testator may nominate an executor as their first choice (the instituted executor/s) and an alternate executor (the substitute executor/s) if the instituted executor predeceases them or is unable or unwilling to act. A substitute executor can only apply for probate if the conditions specified in the will for substituted appointment exist.

If the testator has nominated more than one instituted/substitute executor all of the named executors should apply unless one or more has died (the death certificate must be attached) or have filed a court form indicating that they do not want to apply (renouncing probate). The affidavit in support must explain why other executors are not applying.

If the instituted executor predeceased the testator, the substitute executor refers in the affidavit of executor to the case number of the probate application for the deceased executor or attaches a copy of the death certificate.

If the executor’s name in the will differs from their name in the application for probate this must be explained (e.g. by annexing a copy of their marriage certificate to the affidavit of executor).

If the testator has not specifically named an executor (eg. appointing someone holding an office at the time of their death), the affidavit of executor must include evidence supporting the applicant’s entitlement to apply.

Marriage or divorce after execution of Will

A testator marrying or remarrying after making a will may revoke the will. If the testator married after the will was made, you should seek legal advice as to whether the will has been revoked. A will which says it was made “in contemplation of marriage” would not normally be revoked by a subsequent marriage.

Divorce also normally revokes the former spouse’s entitlement under the will and their rights to be the executor.

Renouncing or resigning as executor

If an executor appointed under a will is unwilling to take on the role they can renounce probate. If there are several instituted executors, the remaining instituted executors can apply. Otherwise, the substitute executor/s may apply if the will says that the substitution is triggered by the instituted executor’s renunciation of probate or their unwillingness to act.

An executor’s renunciation of probate is included in the notice of intention to apply for probate (published on the Online Registry).

Executors cannot renounce probate once a grant has been made. An executor can be removed after a grant has been made only by a Court order revoking the grant of probate.

An executor may delegate their executorial duties only to the NSW Trustee and Guardian or a trustee company.

Where an executor/s is unwilling or unable to apply but is not prepared/is unable to formally renounce probate, a notice must be served on the executor/s requiring them to apply for probate. If they do not comply with the notice:-

  1. the other executor/s may apply without that executor; or
  2. there is no other executor/s, a beneficiary may apply for letters of administration with the will annexed.

If an executor is unable to apply or renounce for medical reasons or is overseas or cannot be located, evidence must be provided with the grant of probate reserving their right to later apply.

The Will

The original Will

The original will (and any codicils) must be filed with the probate application and will be retained by the Court. A will or codicil must be in writing and signed by the testator and two witnesses and be verified that the will is not a carbon or photocopy.

If you cannot find the original will but have found a copy, or if the will is unsigned or has not been properly witnessed, it may still be possible to apply for probate.

Unsigned/undated Will

If the will is undated, you must provide evidence as to when it was executed. If there is another will, this will establish which is the latest will. You should provide an affidavit by an attesting witness or from people with information as to when the will was made or the possible range of dates when it was made.

An affidavit of an attesting witness will be required if there is any doubt as to the proper execution and witnessing of the will. If the will has any hand-written amendments not initialled by the testator and the witnesses, an affidavit of attesting witness as to whether the amendments were made before the will was executed will be required. Affidavit evidence may also be required if it appears that other documents were attached to the will which have subsequently been removed, or if the will has been torn or defaced since it was executed.

Codicils

A codicil is a document that amends a previously executed will. If the testator has made a codicil/s, the application will be for probate of the will and the codicil/s.

Applying for Probate on a copy of a Will

If the original will cannot be found but there is a copy which is believed to be the last will of the deceased then the executor named in the copy may be able to apply for probate on the copy of the will. The actual copy of the will must be filed with the probate application.

Searches must be done to locate the original Will

The affidavit of executor must explain where the copy was found and set out all the searches made for the original will or any later will. These must include:-

  1. searches through the deceased’s personal papers and effects;

If the copy shows that the original will was prepared by a solicitor then enquiries should be made with the firm of solicitors to check that they do not have the original will, and as to their usual practice when wills were prepared for their clients (ie whether they normally held originals in safe custody or gave the client the original).

If the will was last held by a solicitor then an affidavit by the solicitor or someone in that solicitor’s firm should be provided as to the searches they have undertaken for the original will.

If the evidence suggests that the original will was last in the possession of the deceased there is a presumption that the deceased revoked the will by destroying the original. To rebut this presumption, the application must be supported by evidence indicating that the deceased did not intend to revoke the will. This can include:

  1. conversations with the deceased regarding their will, and
  2. evidence of no substantial change of circumstances since the will was made that may have led to an expectation that the deceased may have changed their will.

List those entitled under intestacy

The affidavit of executor must say who would be entitled if there was no will (called “intestacy”).

A limited grant

A grant of probate on a copy of a will is a limited grant. Although the original will is unlikely to be found, the grant is limited until the original will is found and an application for a grant of probate of the original will is made.

Applying for Probate of an informal Will

A will must be signed by the testator and witnessed by two witnesses who both saw the testator sign. Nevertheless the Court may grant probate for a will that does not meet these requirements if it is satisfied that the deceased intended the document to be their will.

Caveats and contested proceedings

A person with an interest in a deceased estate can file a form called a caveat preventing the Court from issuing a grant. There is a filing fee and a caveat remains in force for 6 months. It must be served on known applicants or potential applicants for a grant of probate or administration of the estate.

Reasons for filing a caveat include where:-

  1. someone wants to challenge the validity of an informal will; or
  2. a will that appears to be valid but it is claimed that the will is a forgery; or
  3. there is doubt as to the testator’s testamentary capacity, or
  4. it is claimed that the will was executed under undue pressure; or
  5. there is more than one possible will naming different executors.

An executor who wants to proceed with an application for a grant of probate can apply to the Court for removal of a caveat if they believe that the caveator has no standing or that there is no real dispute as to a will’s validity.

If there is doubt as to a will’s validity, contested proceedings can be commenced for probate to be granted in solemn form. Such proceedings are commenced by statement of claim and determined by a judge.

https://www.supremecourt.justice.nsw.gov.au/Pages/sco2_probate/sco2_filing_instructions/applying_for_probate.aspx
0 Comments

Challenging a Will in NSW

When can a Will be challenged?

A Will can be challenged by anyone with an interest or relationship with the Will-maker (known as the ‘testator’).

Reasons for challenging a will include:

  • Will not legally binding;
  • belief that a Will has been tampered with;
  • belief of existence of a more recent Will;
  • belief that Will does not make proper provision for claimant;
  • belief that the testator lacked capacity;
  • belief that the testator was tricked or unduly influenced into making the Will.

Undue influence is the use of persuasion, duress, pressure, force, coercion or fraudulent practices to the extent that the free Will of the testator is destroyed.

Preventing Challenges to Wills

If the testator tells loved ones what each is to receive in their Will they know what to expect which helps to prevent challenges.

Courts rarely interfere with the testator’s wishes if the language in a Will is clear and precise. Gifts in a Will being well-defined, expressing clear reasons for giving gifts, and having evidence showing that the Will was not tampered with reduces the chances of a successful challenge.

What is meant by Contesting or Challenging a Will?

A contest to a Will is a formal, legal objection or challenge to the validity of a Will, raised by an interested party, on the basis that:

  • The Will does not accurately reflect the testator’s true intentions; or
  • The will is grossly unfair, excluding the deceased’s dependents or someone who should have been provided for; or
  • the Will is a forgery.

In general, a belief fact that a Will is unfair will not be sufficient grounds to challenge its validity. Contests to Wills may claim that the testator was not acting freely when they made their Will because they:

  • were acting under undue influence; or
  • were the victim of fraud; or
  • lacked the necessary capacity (known as ‘testamentary capacity’); or
  • lacked the mental faculties necessary to write a valid Will.

Is There a Time Limit on Contesting a Will?

If the testator passed away after 1 March 2009, you have 12 months from the date of death to raise a Will dispute claim.

If the testator passed away before 1 March 2009, you had 18 months from the date of death to raise a claim. All is not lost however, as in certain situations you may still be able to make a claim. If you did not know the person had died, or you received threats then the court can set aside the time limit. It’s very important to act quickly, as delay may jeopardise your claim.

If the date of death is uncertain, the court will determine a reasonable date.

When can a Will be Contested?

You cannot challenge a will simply because you do not like its contents, or because you are aggrieved. A legal challenge to a will has to proceed on a ground recognised by law.

A testator’s the right to distribute their estate as they see fit is subject to legislation for the protection of those for whom the deceased had a ‘moral responsibility’ to provide. A Will can be challenged when a loved-one feels that the testator failed to meet this responsibility.

Can I Challenge a Will After Probate Has Been Granted?

While it’s easier to challenge a will before probate is granted, it is possible to raise a challenge after the grant of probate. In this case, you would have to explain to the court why the challenge was not made earlier and satisfy them as to the validity of the grounds for your challenge.

Can I Challenge the Validity of a Will?

Under the Succession Act 2006 (NSW), the two general classes of person have ‘standing’ (the necessary legal entitlement) to challenge a Will are:

  • A Person/s named in the Will (the beneficiary/beneficiaries); and
  • Anyone who would stand to inherit if the Will was invalid. That is, persons who have been ‘disinherited’ or excluded from inheriting.

People entitled to contest a Will because they believe they have not been sufficiently provided for are:

  • Spouses
  • Former Spouses
  • De Facto’ partners – De facto partners are partners who were living with the deceased when they passed away, in a manner similar to that of husband and wife (including same-sex relationships).
  • Children, including adult children, those under 18 and adopted children. Step children may contest the will if they were dependent on the testator.
  • Grandchildren, provided they were at least partially dependent on the deceased;
  • Members of the deceased’s household who were wholly or partly dependent on the deceased. This includes those in ‘close personal relationships’ with the deceased;
  • Parents. If dependant on the deceased, a parent may be able to contest a will.

A claimant on a Will must satisfy the Court that adequate provisions were not made for their maintenance, education or advancement in life.

Can I Challenge Part of a Will?

A Will can be challenged in whole or in part. An entire Will can be challenged, or only the part to which the claimant takes exception.

What Will the Court Look at When a Will is Challenged?

The criteria the Court uses to assess claimants on a Will include:

  • Is the Will ‘grossly unfair’?
  • Should a claimant left out of a Will been provided for?
  • Are the testator’s intentions clear?
  • Did the testator have the mental capacity to understand what he/she was doing?
  • Was a claimant partially or fully dependant on the deceased excluded from a Will?

Will I Have to Go to Court to Contest a Will?

Where possible, Will disputes are resolved through a settlement agreement or mediation. This prevents the matter going to Court which reduces legal costs, brings earlier resolution and preserves family relationships.

Sometimes, however, going to Court cannot be avoided.

How Much Does it Cost to Contest a Will?

The total cost of a contested Will claim depends on how long it takes to resolve a claim: either by negotiation or mediation before or after the dispute reaches Court; or after a long drawn out application to the Supreme Court. Each case is different.

What Will I Get If My Challenge Is Successful?

If you successfully contest the validity of a Will, the court will ‘set aside’ the Will. This has the legal effect of making it as though the will has never existed. None of the provisions will be applied and the estate will be distributed according to the second-to-last will, if one exists. If no other will exists or can be found, the laws of ‘intestate succession’ apply (Intestacy is the state of having died without a will). Those laws mandate how an estate is to be divided. Provision is made for certain relatives and dependants, regardless of the wishes of the deceased.

0 Comments
Close Menu