Consider the remarriage Risk when doing a Will

When one spouse dies often the surviving spouse remarries. This will mean any inheritance received by the surviving spouse could be at risk of not ending up in the children’s hands.

Example

Homer and Marge are happily married and have 3 kids, they prepare their wills so that if one dies the survivor gets everything, if they both die the kids share everything equally. Sounds good so far.

Homer dies.

Marge inherits Homer’s assets which were 50% of the main residence, 50% of the investment property and 425 pens stolen from his employer over the years.

So far all is well.

A year after Homer’s death Marge gets on tinder and eventually marries a guy called Barney.

Marge’s will is now revoked by the marriage, marge dies and under the intestacy laws of NSW the assets of Marge get shared by Barney and the kids.

Even if Marge didn’t marry Barney, he might still be able to take a share because he is a de facto spouse. If the will was in place still, he could make a family provision claim. There is also the possibility that Marge will knowingly prepare a new will and leave Barney something – or everything.

So, when making a will consider that your spouse could enter a new relationship after your death and plan for it. Assume it will happen.

For a Discussion go to: https://www.propertychat.com.au/community/threads/legal-tip-197-consider-the-remarriage-risk-when-doing-a-will.38888/

Can Children be Executors under a will?

Children are considered legally ‘disabled’ until they reach 18. They can be appointed as executors under a will, but if the testator dies while the child is under 18 the child cannot act as executor.

So what happens?

Usually their legal guardian will be executor in their place, or the courts can appoint someone else.

Under NSW law this would be s 70 of the Probate and Administration Act 1898

http://www8.austlii.edu.au/cgi-bin/viewdoc/au/legis/nsw/consol_act/paaa1898259/s70.html

Example

Bart has divorced the mother of his sole child – Junior.

Bart makes a will while Junior is 11 and appoints Junior as the executor of his estate with no backup. Bart has no plans on dying but carks it in a skateboard accident when Junior is 16.

Junior’s guardian at this point is her mother. The mother applies for probate as guardian of the executor and this is granted by the courts.

Bart roles over in his grave when his ex-wife, whom he still hates, takes control of his estate.

Don’t listen to the Armchair experts on Family Law

On various internet forums where family law issues are discussed, it is interesting to see how the non-law trained persons become the instant experts in Family Law. They will know more than lawyers instantly, often citing the experience of friends or friend’s friends or media reports.

The non-expert opinions that I have heard recently are:

  • Binding Financial Agreements (BFA) are a waste of time and money because the courts just overturn them. This is not true.
  • Women get more than men in property settlements – “they come with a handbag and leave with a property” is one quote that I have heard. There is no legal basis for this.
  • The courts favour women over men.
  • A short relationship can see you (if you’re a man) lose 50% of your assets.
  • You can just transfer your property to your sister to avoid your spouse ‘taking’ it.
  • Trusts provide asset protection on divorce or relationship breakdowns.
  • You should charge your girlfriend $1 per week rent so that she cannot make a claim on your property (seen a guy who actually issued receipts to his girlfriend – not sure if she actually paid him).
  • You can only sign BFA before getting married. You can actually enter into a BFA before, during or after a relationship.
  • You are not de-facto if you maintain a separate residence – knew a guy who lived with a girl but kept his own house unrented. He told me this was to prove he lived separately from her.
  • There is a do it yourself BFA option – I have heard of persons who have written out their own agreements. These are probably worded poorly, but they will also not comply with the Family Law Act if they are not explained by a lawyer.

It seems to me that the area of family law brings out more armchair experts than any other area of law and I am not sure what, but it could be because it is an emotional area of law.

My suggestion is if you want to know about family law issues disregard absolutely everything anyone says unless they are a practicing lawyer with a family law focus.

Transactions to Defeat Family Law Claims

Section 106B of the Family Law Act allows a court to set aside certain transactions designed to defeat an existing or proposed order relating to a party to a marriage or defacto relationship.

This can include transactions that are:

  • Gifts
  • Sales
  • Bankruptcy related
  • Rights attaching to an interest in a company or trust
  • changing Appointor positions in trusts
  • Varying powers under a trust

Example

Bart is about to divorce his wife and resigns as appointor of the family trust and appoints his friend Millhouse. Bart also causes the trust to be varied so that neither Bart nor his wife are beneficiaries of the trust. The trustee is also controlled by Millhouse.

Bart then gifts money to the trustee of the trust. Bart borrows this money back and lets the trustee take a mortgage over his house as security for the loan. Bart sells another property he owns for $1 to the trustee of the trust.

This series of transactions involving Bart could be attacked in several ways. Including:

  1. Court reversing the amendments to the trust
  2. The gift could be clawed back
  3. The loan set aside
  4. The mortgage set aside
  5. The transfer of the property could be set aside.
  6. The court may not do any of the above, but to simply take the value of the assets into account when working out the division of property between the spouses.

Keep in mind that just because a transaction can potentially be attached does not mean that you should not do this.

Legal advice should be sought if seeking asset protection.

Written by Terry Waugh, lawyer at Structuring Lawyers, www.structuringlawyers.com.au