Wills and estate administration

In this, the second of a series of bulletins, we will deal with some of the issues and the terminology which was flagged in the first bulletin (October 2023).

The will

As explained in Bulletin No 1, the will is the document which controls the destination after death of the assets owned by an individual, and which also appoints, usually other individuals (but occasionally a company) to positions of responsibility.

We foreshadowed that we would consider how even a simple will (the type that people are sometimes inclined to make for themselves – a home-made will) can be deficient and can be improved.

There is no doubt that home-made wills can be valid.  However, validity does not just mean proper compliance with formalities, such as the will being in writing, properly signed by the maker of the will and properly signed by 2 witnesses.  It also means that the will is effective.  It is generally in the area of effectiveness that home-made wills can have shortcomings.

The fundamental reason for these shortcomings is that a person who self-makes a will often fails to ask, and cater for the answers to, the “what if” questions.

Common “what if” questions are:

• If only a single executor is appointed, who will administer if that single executor dies or becomes incapable?
• Sometimes, successive executors are appointed.  The intention is that if the primary executor cannot act, a back-up executor or executors take over.  The circumstances in which the primary executor falls out of the picture and the back-up executor or executors come into the picture, must be expressed with adequate precision, so how will that be done?
• The same applies to gifts by the will.  If there is a primary beneficiary, but an intended substitute beneficiary or beneficiaries, how will the words which link the two alternatives be expressed with adequate precision?  This is particularly so if the disqualifying circumstance for the primary beneficiary is something other than (or more than) failing to outlive the will-maker.
• How are specific gifts to be expressed?  A gift of “my house” seems straight forward enough, but what if the house owned at death has been sold and another replaces it?  What if, when the house which is referred to in the will, is sold, the will-maker goes into a retirement village or care institute?  The “ownership arrangements” associated with a retirement village or a care institute are often such that the replacement interest in the retirement village or care institute does not legally qualify as a “house”.
• What if the specifically gifted item has entirely disappeared?  If the will-maker was asked this question whilst still alive, he or she might say that the recipient is to get nothing, or the recipient is to get another asset.  However, that second outcome will not apply if there are no words in the will answering this “what if” question.
• As a generalisation, home-made wills do best if they are simple, they do not try to cover substitute arrangements, and there are no material changes in relation to people or assets between when the will is made, and death.  That does not happen very often.

Can you change your will?

You can change your will (in the sense of taking something out with or without a replacement) as long as you still have the requisite testamentary capacity and you do it the right way.

The right way is to either make a completely new will, or a codicil.

A codicil is an addendum to the will – a separate piece of paper signed and witnessed in the same formal manner as the will was.  The will and codicil then together constitute a multi-document will.

However, codicils can be dangerous.  They operate by a form of verbal “keyhole surgery” upon the contents of the will.  There is scope for the language of the 2 documents to be misaligned or otherwise lack harmony.  Codicils should only be used for peripheral (not major structural) changes to the will.  Experienced lawyers often will only use them in urgent or exceptional circumstances.

The wrong way to change your will is to get the original document and write over it.  That will almost certainly convert what might be a straightforward document into a contentious one, which may need court intervention to determine and declare the true meaning.

Enduring power of attorney

As explained in bulletin No 1, the enduring power of attorney (EPOA) is a document whereby you appoint trusted people to make decisions on your behalf in certain circumstances.

We foreshadowed that we would consider various issues in relation to an enduring power of attorney, which we do so now.

Who is involved in bringing a valid EPOA into existence and legal effect?

Three people are involved.

The first is the person making the EPOA.  The maker cannot make a valid enduring power unless at the time, he or she is possessed of the requisite capacity to do so.  The capacity is defined in the legislation.  Fundamentally, that person:

• must be capable of making the enduring power freely and voluntarily; and
• must understand the nature and effect of the enduring power.

The second person involved is the witness.  The witness must be eligible.  This means that he or she must be a Justice of the Peace, Commissioner for Declarations, notary public or lawyer.  Furthermore, the witness does not simply witness the signature of the maker.  The witness also completes a certificate to the effect that the maker signed the enduring power in the witness’ presence and at that time, it appeared to the witness that the maker had the capacity necessary to make the enduring power.  Therefore, the witness is required to form a judgement about capacity and can be called upon to explain the basis on which that opinion was formed.

The third necessary party is the attorney (or if there is more than 1 attorney, then this third party is a “multiple person”).  Each attorney must be eligible.  That means that each person has capacity and:

• is at least 18 years old;
• is not (or has not been within the previous 3 years) a paid carer for the maker;
• is not a health provider for the maker;
• is not a service provider for a residential service where the maker is a resident, and
• in relation to financial matters, is not bankrupt or is not taking advantage of the laws of bankruptcy as a debtor under Australian law or similar law of a foreign jurisdiction.

Each of the attorneys must sign the acceptance section of the enduring power, but only after the maker and his/her witness have signed.

• The order in which these participants “put pen to paper” is:
• The maker and witness go first – they do their signing at the same time and in each other’s presence in section 4;
• The witness alone completes and signs the witness certificate;
• The attorney or attorneys sign the acceptance section 5 after that;
• Reversal of this order probably makes the document ineffective.  For example, if the attorneys sign their acceptance before the maker and the witness have signed, the attorneys are purporting to accept something which has not by then been legally created.

What sort of matters can your attorneys deal with?

By the way the maker completes the enduring power, the attorneys can be given power to make decisions in respect of financial matters.  Financial matters are matters relating to finance or property.  Common examples are doing the following for the maker of the enduring power (this list is not exhaustive):

• paying bills;
• recovering money;
• carrying on a trade or business;
• performing contracts;
• discharging a mortgage;
• maintaining insurance;
• making and changing investments;
• conducting legal transactions.

In the same way, the maker can give the attorneys the power to make decisions in respect of what are known as “personal matters” (which is a combined category of day-to-day lifestyle issues and health issues).  The 2 cannot be separated – power over day-to-day lifestyle issues cannot be given without power over health issues.  These personal matters include, in relation to the maker of the enduring power (this list is not exhaustive):

• where that person lives;
• with whom that person lives;
• provision of services to that person;
• whether the person works, where and for whom;
• what education or training the person has;
• whether the person applies for a licence or permit;
• day-to-day issues such as diet and dress;
• consent for a forensic examination;
• healthcare;
• legal matters not relating to financial or property matters;
• determining who can have access visits to or other contact with that person.

Personal matters do not include (this list is not exhaustive):

• making or revoking a will;
• making or revoking an enduring power;
• voting;
• consenting to adoption;
• marriage;
• entering into or terminating a civil partnership;
• entering into a surrogacy;
• entering a plea on a criminal charge;
• removal of tissue;
• sterilisation;
• pregnancy termination;
• participating in special medical research or experimental healthcare.

In the one document, the maker can give the same attorneys the power to make decisions in respect of both financial matters and personal matters.

By a variant of that document, the maker can divide those decisions among or between different attorneys.

Because of proposed changes to laws in Queensland relating to trusts, a maker who is a trustee should give serious consideration to a clear appointment of an attorney for all financial matters.

When and in what circumstances does the attorneys’ authority commence?

In the case of financial matters, the commencement date can be specified in the enduring power.  There are 3 options which appear in the document:

• The first reads “When I do not have capacity to make decisions for financial matters“.  At first blush, that option has a certain appeal.  However, by selecting that option, you make incapacity to make decisions for financial matters, a precondition to attorneys exercising power.  That restricts the flexibility.
• The second reads “Immediately“.  It is most favoured because it means that the financial power is operative without having to prove that any precondition has been satisfied.
• The third reads “At this time, or in this circumstance, or on this occasion“.  Very rarely is this option chosen, because being able to precisely specify the time, circumstance or occasion has a significant element of guesswork.

In the case of personal matters, the commencement date coincides with the maker of the document losing capacity.  There is no power to choose another commencement date.

Who should you appoint?

Since an enduring power will often operate when, through loss of mental capacity, you can no longer oversee what your attorneys are doing, you must appoint a trusted person or trusted persons (and preferably when you are appointing more than one, your multiple attorneys should be broadly compatible and habitually contactable).

What happens if you do not make an enduring power and lose your capacity?

It would be necessary for some concerned person to bring an application to the Queensland Civil & Administrative Tribunal (QCAT) for the appointment of an administrator (for financial matters) or a guardian (for personal matters) or both.  Who would be appointed in those circumstances is largely a product of the evidence put before QCAT.

Can you change your enduring power of attorney?

There is no equivalent to a codicil to an enduring power of attorney.  The only way to effectively change it is to make a new one.  That should be accompanied by written revocation of the replaced enduring power.  That written notice should be given to the attorneys appointed by the replaced enduring power.

More to come

In subsequent bulletins, we will consider issues such as:

• What is an advance health directive?
• How do you provide for dealing with your superannuation after death?
• What is involved in estate administration?
• Since there is no will and therefore no one nominated as executor, the right to apply for letters of administration on intestacy is determined by a pre-set formula which basically provides that the nearest next-of-kin (with a spouse elevated to the highest position) has the highest right.

 

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