There is no such thing as a ‘water-tight’ Will – By Jesse Rankine
Wills and Estates lawyers are frequently requested to prepare a ‘water-tight’ Will – a Will that cannot be contested. In Victoria, this is simply not possible. Part IV of the Administration and Probate Act 1958 provides any ‘eligible person’ with the right to seek Court orders for additional provision to be made for them from an estate. This is called a ‘Part IV’ claim.
The right to make a Part IV claim exists regardless of whether you provide the eligible person $1 or $1,000 or even 95% of your estate. If they are considered eligible then they have the right to attempt to contest your Will through the Courts. Whether or not they take up that right, is their decision. And if they do, whether or not they are successful will depend on the evidence before the Court. Regardless of the outcome of the case, a Part IV claim will take substantial funds, emotional energy, and time to defend.
So, what are the options for people wishing to leave their estate without the possibility of facing a Part IV claim?
One method to protect your estate plan is to establish a trust to hold assets outside of your estate. The trust can be established in a way that it benefits you during your lifetime and after your lifetime it must be paid in accordance with the provisions in the trust deed.
The establishment of a trust is relatively simple, particularly where the trust is designed to hold cash or liquid assets.
A word or warning to those wishing to transfer real estate into a trust, such transactions attract stamp duty payable to the State Revenue Office (SRO). Additionally, exemptions such as the Principal Place of Residence (PPR) exemption for Capital Gains Tax and Land Tax may also be affected. These taxation consequences should be canvassed with an accountant prior to transferring real estate into a trust.
2. Binding Death Benefit Nominations
There is no such thing as a water tight Will. However there are methods of dealing with Superannuation Death Benefits that cannot be contested. For more information regarding this, please refer to our article of 10 July 2019 – Superannuation Death Benefits: https://www.wightons.com.au/superannuation-death-benefits
3. Joint tenancies
Another effective method is to establish joint tenancies with the person to whom you wish to leave your estate. Joint property automatically transfers to the surviving joint tenant upon death. This is known as ‘survivorship’ and happens regardless of the terms of any Will. Survivorship cannot be contested in a Part IV claim in Victoria.
The SRO allows the transfer of your PPR to yourself and your spouse as joint tenants as a non-dutiable transaction. All other transfers of real estate will be subject to stamp duty on spousal transfers. Likewise, stamp duty will be payable on all transfers to other beneficiaries such as children or friends.
Finally, you may wish to consider making an early gift of money or real estate during your lifetime. However, you must always consider your own financial situation first. Gifts should only be considered where there are sufficient assets to support your own needs moving forward.
If you are in receipt of a government pension, you will need to consider the Centrelink rules which deem that you receive market value for all gifts exceeding $10,000. A gift of a PPR property valued at $500,000 is likely to extinguish any pension you receive.
All options that thwart Part IV claims come with their own benefits and costs. Careful consideration should be given to the above options where a Will is contentious or is likely to face a Part IV claim.
If you would like further information about making your own Will or estate plan please telephone 5221 8777 and make an appointment to see one of our Wills and Estates lawyers.