Court rewrites Will to save tax

Court rewrites Will to save tax


Question: Our client is threatened by divorce. His dying dad is leaving everything to him. His dad has Alzheimer’s disease. Can we use a Power of Attorney to rewrite the Will or can we get the Court to alter the Will as per the Matsis Case? This stops the wife getting her hands on her father-in-laws wealth as well.

Answer: POA’s are limited to decisions about property and financial matters e.g. opening a bank account or selling property. You cannot use a POA to amend or create a Will.

However, in Australia the Supreme Court can make or alter a Will. This is where the Will-maker, while still living, lacks testamentary capacity. Like your client’s dad.

In Re Matsis the court was happy to insert a Testamentary Trust into the existing Will for both asset protection and to avoid de facto death duties. In contrast, the court in Hausfeld v Hausfeld refused to ‘authorise an alteration to the Will to defeat creditors.'

In Hausfeld’s case, the son was pursued by creditors. Dad was dying. The son urgently asked the court, to alter dad’s Will so his wife, instead, got the assets. Thus keeping dad’s estate out of the clutches of the son’s creditors. If of sound mind, dad would have gleefully altered his Will – the court admitted as much. However, the court stated that ‘people should pay their debts’ and thus, refused to amend dad’s Will. I cannot reconcile the two cases. Matsis allows you to amend the Will to avoid tax and protect assets; Hausfeld does not.

Dad’s assets shouldn’t be lost to creditors of another person (his son). By the court refusing to amend the Will, it allowed a third party to pay the debts of another person. This is moral turpitude.

Later cases restrict Hausfelds case to its actual facts. Thankfully, we are seeing the courts – Re Matsis and Gau v Gav – placing greater emphasis on the Will-maker’s “likely” wishes.

Hausfeld is now bad law. Your client has a good chance of success.

At Legal Consolidated (and my old Brett Davies Lawyers), our Wills contain Protective Trusts. This ensures that bankrupt beneficiaries get nothing from your Will. Therefore, the trustee-in-bankruptcy can’t get their hands on the assets. When the beneficiary comes out of bankruptcy they then get the gifts from the Will. This ensures the Will-maker’s true intentions are met.

For further information contact me, your accountant or adviser.

CASES:
Re Matsis [2012] QSC 349
Hausfeld v Hausfeld [2012] NSWSC 989
Gau v Gav [2014] QCA 308

 

1 Comment

  1. Kevin McCoy says:

    Very correct Brett, and well argued.

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