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General Estate Protections

This paper will be a survey of some, but by no means all, of the issues in Elder Law which, due to our rapidly increasing lifespans, is becoming more relevant as a distinct field of law. There are two key areas I wish to address: planning for the future, and freedom of decision-making. The former involves estate planning, accommodation arrangements, and dealing with blended families. The latter involves the issue of undue influence and the appointment of third parties to care for one’s affairs. This paper does not seek to give legal advice, or even make any recommendations. I simply wish to raise important issues for thought and discussion.

Estate Planning

The first, and most important step in estate planning is the preparation of a valid will. This allows the will-maker, known as the testator, to make their own decisions as to the distribution of their assets upon death. In the absence of a valid will, legislation determines the distribution of assets, based upon relationship with the deceased, and not their wishes. The making of a will ensures control.

One of the first things to consider, when drawing a will, is that the an essential requirement of any will or power of attorney, is that the maker of the instrument must have the requisite legal capacity. In terms of a will, this means the mental capacity to understand the extent of one’s estate, the claims of others upon that estate, and the ability to make a decision as to whether those claims will be met or disregarded. This does not require a testator to leave a gift to any person who may believe they have a claim on the estate. It simply requires the testator to be able to reach a decision as to the gifts which are made to friends and family. There is no obligation on a testator to leave a gift to a family member, especially an estranged family member. That being the case, in circumstances of estrangement, a common practice is to include a clause in a will, explaining a decision to leave and estranged family member no gift.

The law presumes that every person, who has not been diagnosed with any condition which would have the effect of diminishing their mental capacity, to be able to make a will. The onus, then, is on any person who subsequently seeks to attack the will to establish that they did not have the necessary capacity at the time the will was executed. The corollary of this rule is that the law also presumes that any person who has been diagnosed with a condition which would tend to deprive them of the necessary legal mental capacity, such as dementia, schizophrenia or Alzheimer’s disease, lacks the mental capacity to make a will. In such circumstances, it is the responsibility of the person seeking to prove a will made during that time to establish the testator temporarily had the necessary mental capacity.

As a general rule, with aged persons, the law of best practice is to obtain a report from the testator’s medical practitioner, answering a series of questions relating to the patient’s capacity to understand the requisite issues associated with the making of a will. For this reason, a testator ought not to take offence when a series of questions are put to them, in order to determine capacity. In addition to the medical evidence, the Queensland Law Society has a checklist for the determination of capacity. The medical report and the checklist are, ultimately, for the benefit of the testator and the estate, to obviate the potential risk of a dispute when it comes to proving the will. Disputes relating to the validity of wills can be very costly, and substantially deplete the pool of funds being left to family and friends.

Another important issue which arises in the context of elder law is that of accommodation arrangements. These have been particularly complicated by recent changes to Federal legislation. As you are no doubt aware, most retirement villages require a substantial payment in advance in order to secure the right to reside. In addition to the upfront payment, most retirement villages will also charge a regular maintenance fee, as well as providing care facilities, for which there will also be additional charges. The upfront payment was formerly referred to as an accommodation bond, but, since 1 July 2014, has now been referred to as a refundable accommodation deposit.

The repayment of the refundable accommodation deposit has now been affected by Federal legislation, which provides that, irrespective of the source of the money, the balance of the deposit is to be returned to the estate of the tenant, upon their death. The effect of this change in the law can be illustrated by an example: assume an ageing widow has three children and very limited funds. She does not own her own home, and requires accommodation in a retirement village. Her daughter pays a deposit of $200,000 to a retirement village, because the widow’s two sons are unable to contribute. Upon the death of the widow, the deposit is returned to the estate of the widow, whose will is a simple instrument which evenly divides her entire estate between the three children. The daughter, expecting the return of the $200,000, receives simply one third of the balance of the deposit. The brothers may be morally obligated to return their share to the sister, but will not be legally obliged to do so. Sadly, moral obligation rarely prevails over avarice.

This situation can be further complicated by the fact that the weekly contributions and care expenses may also be offset against the balance of the deposit. Therefore, even if arrangements are made to ensure the return of the deposit, there is nothing preventing the tenant in the retirement village from dissipating the vast bulk of the deposit prior to their death.

Finally, some consideration ought to be given to the problems raised by blended families. This involves couples’ second or third marriages, in circumstances in which they have children from previous marriages, and possibly even children of their own marriage. Naturally, arrangements need to be made to ensure that the interests of both the spouses and the children from previous marriages are properly taken into account, as well as those of any children from the present marriage. A common problem arises where a spouse holds property as joint tenants, rather than tenants in common. The distinction is that, where two people hold property as joint tenants, they do not hold any distinct share in the property, they are co-owners of the entire asset. The rule of survivorship provides that, upon the death of one, the asset is automatically owned in its entirety by the other owner. This is in contrast with tenancy in common, which provides that a distinct, identifiable portion of the property can be owned by one party, and is able to be disposed of by way of sale, trust or gift in a will.

Owning property as joint tenants creates a risk that, upon the death of one spouse, the entire property will vest in the surviving spouse, who may then choose to leave the benefit to their own children, rather than taking into consideration the children of the deceased spouse. Therefore, a common means of avoiding these problems is the creation of tenancy in common. Then clauses can be inserted in the spouses’ wills which either establish trusts for the benefit of children, or a life estate in the deceased’s share of the property to the spouse, with the balance going to the children upon the death of the surviving spouse.

Personal Freedom

One of the disturbing developments in Australian law in recent years has been an increasing willingness of the courts to find the existence of undue influence. “Undue influence” describes a relationship between two people, whereby one person is so trusted and has such an influence over the other that the free will of the other is said to be overborne. The courts will interfere when one person uses their influence to obtain an advantage. Traditionally, the Australian and English courts have taken the view that undue influence is generally limited to acknowledged special relationships, such as priest and penitent, doctor and patient, solicitor and client as well as close family relationships. However, in recent years the courts have started to expand the scope of their involvement.

A recent case, in 2013, of the Queensland Civil and Administrative Tribunal reflects this fact. In that case, a 71-year-old widow became involved in an online romance with an American resident, who described himself as a retired criminal lawyer. The criminal description seemed to be correct, but not the lawyer, as the American paramour was a gambling addict, with substantial gambling debts, and he may also have been married.

Over the course of two years, the widow forwarded in excess of $200,000 to the gentleman in America. She sought to send more, with the expectation that it would be returned, and that they would be married. To prevent any more money being sent, her son made an application to the tribunal for the appointment of an administrator to look after her affairs.

In the course of evidence, two psychiatrists gave evidence that there was no indication of any mental disease or cognitive impairment. They also found that there was no evidence of delusion or fantasies, beyond simply being mistaken as to the truth of what she had been told by her online connection.

Despite this, the tribunal found that the widow’s mind and will were so affected by the relationship that she could not distinguish reality from fantasy, and therefore she ought to be subject to an administration order. Effectively, the tribunal found that love was a mental disorder, and she was so badly afflicted that she was deemed to be incapable of looking after her own affairs.

While this case is one in which the outcome was definitely to the benefit of the widow, the effect of the decision is somewhat disturbing. Essentially, the tribunal found that, while they could not find any clear evidence of a mental impairment, the decisions made by the widow were contrary to the decisions that could be said to be sensible or reasonable, and therefore the widow was subject to her affairs being controlled by another. One has to wonder whether a besotted 23-year-old who spends his hard-earned money on a gold digger would be subject to the same restrictions.

In contrast, there are mechanisms available to allow any person to make the choice, in advance, of who will look after their affairs, in the event of becoming mentally incapacitated. The most effective means of doing so is creating an Enduring Power of Attorney, which authorises a nominated person to make legal, financial and/or medical decisions, on behalf of someone who is no longer able to do make the decisions for themselves.

There are very strict controls over people acting under a power of attorney. They must only act in the best interests of the principal, and they must only act within the scope of any restrictions which may be imposed. They must also maintain records of their activities, including keeping detailed accounts. Any breach of the requirements imposed by the law could result in personal liability being imposed on the attorney.

The advantage of the Enduring Power of Attorney is that, like a will, it allows the maker of the document to maintain a degree of control. Even after they are no longer able to look after themselves, they have made the decision in advance to appoint a person they know and trust to make their decisions for them.

So, this has been a very brief outline of some of the tools the law uses for avoiding abuse in the financial sense, rather than the physical sense. The law is reasonably well developed in the field of avoiding physical abuse, through both the criminal law, as well as recent changes to the Commonwealth Aged Care Act, which imposes an obligation on aged care facilities to report any suspicion of physical abuse. However, abuse of relationships is something which does not show in any obvious sense, and therefore the best means of avoiding such abuse is to prepare in advance.