A Will with no ben­e­fi­cia­ries? An expen­sive mistake

Con­sult­ing a lawyer might seem expen­sive to some. A defec­tive Will, how­ev­er, can prove even more costly.

Will mak­ing is a sig­nif­i­cant com­po­nent of lat­er life plan­ning, and in near­ly all sit­u­a­tions will require pro­fes­sion­al legal advice. On a basic lev­el, legal advice should ensure that the Will itself is a legal­ly sound doc­u­ment and will ulti­mate­ly con­tribute to safe­guard­ing the dis­tri­b­u­tion of the assets in accor­dance with the inten­tion of the tes­ta­tor. Poor­ly draft­ed Wills – such as those con­tain­ing ambigu­ous direc­tions or which fail to incor­po­rate fun­da­men­tal terms – can prove cost­ly, as the par­ties will often need to go to court seek­ing an order for clar­i­fi­ca­tion or rectification. 

The recent Vic­to­ri­an case of Re Hely; Appli­ca­tion by Arbuth­not & Donoghue [2018] VSC 614 pro­vides one such example:

In late 2014, Daryl Hely engaged lawyers to pre­pare his Will. This Will con­sist­ed of sev­en tes­ta­men­tary trusts and dealt with a num­ber of rel­e­vant issues, such as cap­i­tal gains tax and the dis­tri­b­u­tion of resid­uary funds. 

Less than a year lat­er and with­out the assis­tance of a lawyer, Mr Hely and his daugh­ter decid­ed to sim­pli­fy the 2014 Will. Mr Hely crossed out pro­vi­sions which he no longer thought nec­es­sary and his daugh­ter imple­ment­ed her own addi­tion­al changes. 

Mr Hely died on 10 Decem­ber 2017 and pro­bate was grant­ed on 25 May 2017. At time of death, Mr Hely’s Estate had a total gross val­ue of over $25 mil­lion. The re-draft­ed Will was his final Will and due to its alter­ations, proved defi­cient in sev­er­al respects. 

Unfor­tu­nate­ly for every­one involved, the execu­tors of the Estate had to make an appli­ca­tion pur­suant to Order 54 of the Supreme Court (Gen­er­al Civ­il Pro­ce­dure) Rules 2015, seek­ing clar­i­fi­ca­tion regard­ing the con­struc­tion of the final Will. In the alter­nate, the execu­tors made an appli­ca­tion for the rec­ti­fi­ca­tion of the Will pur­suant to sec­tion 31 of the Wills Act 1997.

Jus­tice McDon­ald of the Supreme Court of Vic­to­ria saw three main defi­cien­cies with the final Will. 

(1) Sev­en tes­ta­men­tary trusts and no beneficiaries

Sim­i­lar­ly to the 2014 draft­ing, the final Will sought to estab­lish sev­en tes­ta­men­tary trusts over Mr Hely’s Estate, which at time of death includ­ed title to 14 prop­er­ties, a size­able share­hold­ing and cash. While the trust prop­er­ty was metic­u­lous­ly detailed, the Will estab­lished no ben­e­fi­cia­ries. Mr Hely’s daugh­ter gave evi­dence to the effect that this was an over­sight on her behalf. The effect, how­ev­er, was that the trusts were defec­tive and would not serve the pur­pose of dis­trib­ut­ing the trust prop­er­ty to the intend­ed recip­i­ents. As a result, the Court had to rec­ti­fy the Will by re-insert­ing the ben­e­fi­cia­ries named in the orig­i­nal 2014 document. 

(2) Unequal dis­tri­b­u­tion of cap­i­tal gains tax liability

The Court con­sid­ered that the final Will did not ade­quate­ly reflect Mr Hely’s inten­tion for each of his chil­dren to be treat­ed equal­ly in respect to cap­i­tal gains tax lia­bil­i­ty. On this occa­sion, how­ev­er, the Court refrained from rec­ti­fy­ing the Will on the basis that insuf­fi­cient evi­dence had been sub­mit­ted regard­ing the extent of any poten­tial tax lia­bil­i­ty on the prop­er­ties gift­ed under the trusts. Ulti­mate­ly, it is like­ly that the par­ties will now incur addi­tion­al costs in rela­tion to this aspect.

(3) Gifts to the grand­chil­dren with con­flict­ing vest­ing dates

Clause 4.1 of the final Will pro­vid­ed that gifts bequeathed to the grand­chil­dren were to vest in each child upon attain­ing the age of eigh­teen years. Clause 5, how­ev­er, assert­ed that all gifts made under the Will would not vest in any ben­e­fi­cia­ry until that ben­e­fi­cia­ry reached the age of twen­ty-one years. The Court had to rec­on­cile these con­flict­ing pro­vi­sions by assess­ing the orig­i­nal inten­tion of the tes­ta­tor. On this basis, the final Will was rec­ti­fied so that ref­er­ences to twen­ty-one years was replaced with eigh­teen years. 

Legal pro­ceed­ings such as the mat­ter of Re Hely can be cost­ly, time con­sum­ing, have uncer­tain out­comes and can bring added stress dur­ing an already dif­fi­cult time. These sit­u­a­tions, how­ev­er, can be eas­i­ly avoid­ed by seek­ing pro­fes­sion­al legal advice when under­tak­ing lat­er life estate plan­ning. Fur­ther, hav­ing a lawyer draft your Will or the Will of a loved one can help pro­vide peace of mind that the last wish­es of the deceased will ulti­mate­ly be hon­oured before the eyes of the law.