Conditions of inheritance

Yukio Hayashi 26 Apr 2019

Q: Recently, my mother passed away. Her will stated that, in addition to part of the mother's deposit, the house she owned would be handed over to me, but the condition of the inheritance was that I would "be baptised and become a Christian". During her life, my mother was a devout Christian, but I am not interested in any religion. Are these bequest conditions legally binding?

A: In short, it is likely that such conditions of inheritance will be legally acceptable. In particular, if the will specifies how the inheritance will be treated in the case that you do not satisfy the conditions, it will be more likely that such conditions are legally binding. Therefore, you need to examine your mother's will in detail. In principle, "freedom of will" is recognised in Australia so that a testator can freely decide who and how his or her estate will be inherited. Generally, if the conditions of an inheritance are 1) clear, 2) achievable, and 3) not contrary to public policy, the condition of the inheritance is considered valid.

There is a case held in 2014 before the NSW Supreme Court in 2014, Carolyn Margaret Hicken v Robyn Patricia Carroll & Ors (No2), in which the court discussed the validity of a condition that an heir needs to be baptized by the Catholic Church within three months of the death of his father.

The heir of course claimed that the above conditions were invalid. In particular, he argued that the condition was "inconsistent with public policy" because "it is religious discrimination, which creates discord within the family and also infringes universal human rights and freedom concepts". In response, the court ruled that "the condition does not force the heir to change his or her religion, and they are not contrary to public policy". In other words, the heir had the choice of converting and receiving an inheritance or keeping his or her own religion. In addition, it was held that the condition was clear and achievable. One of the major factors that led to such a decision was that the will specified who would inherit if the heir failed to meet the condition.

In the current matter, it will be determined that the mother's inheritance conditions do not oblige her child to be converted. However, even if he or she is unable to fulfil the conditions, and thereby the estate is to be inherited by others, it does not mean that the child cannot inherit anything. According to the Family Provision regime stipulated in the Succession Act 2006 (NSW), regardless of the content of the will, children of the deceased can claim inheritance rights for a part of heritage. Further details about the inheritance claim on Family Provision will be explained in the later article.

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Why superannuation should be included in your estate planning

Whether it be an industry super fund or self-managed super fund, most Australians will have some form of superannuation. And not surprisingly, this will be one of the biggest assets people will have by the time they reach retirement age, apart from their real estate. Usually, superannuation sits outside the assets of the estate and therefore many of us fail to consider superannuation as part of our Estate Planning. However, all superannuation accounts allow a death benefit nomination (“DBN”), in which the account holder can name a beneficiary in case of death before the vesting date. DBN will be either binding or non-binding. The DBN directs the Trustee of the superannuation fund as to whom the death benefit should be paid out if the superannuation member dies. Non-binding death DBN is just that, non-binding. Most people fail to realise that the Trustees are not in any way bound by a non-binding DBN. A non-binding DBN is only a guide by a member to the Trustees as to how their death benefit should be distributed, but the Trustees are free to exercise their discretion to pay the member’s death benefit to any dependants. Unlike a non-binding DBN, a valid binding DBN (“BDBN”) is binding on the Trustees, and they must follow the direction of a valid BDBN and distribute the death benefit to the named beneficiary in accordance with the BDBN. Superannuation Industry (Supervision) Act 1993 (SIS Act) defines “dependant”, and any nominated beneficiary who falls outside the definition of dependant will invalidate the BDBN. SIS Act defines the dependant as the following: 1. A spouse of member 2. A child of member 3. A person in an interdependency relationship with member SIS Act further states that an interdependency relationship exists where: 1. they have a close personal relationship; and 2. they live together; and 3. one or both of them provides the other with financial support; and 4. one or both of them provides the other with domestic support and personal care. Therefore, if you nominate your siblings or your parents who are not living with you to be your beneficiary then this nomination is invalid. Having an invalid BDBN will mean that you will not have any say on how and to whom your superannuation death benefit will be paid out after your death, and this decision will be left at the full discretion of the Trustees. Considering that your superannuation will possibly be one of your largest assets, this is putting lot of faith in someone you don’t know to have full control over your asset. Ultimately, you are allowing a total stranger to determine how your assets should be distributed after you die. In a recent case, a 68-year-old VIC magistrate, Rodney Higgins, who was earning $324,000 a year was engaged to a 23-year-old court clerk, who suddenly died in a car accident in 2019. Ms Petrie had nominated her mother, who lived a very modest life, as her beneficiary. Ms Petrie’s death benefit amounted to $180,000. After Ms Petrie’s death, Rodney Higgins filed an application to receive Ms Petrie’s death benefit, stating that he was a “dependant” as a de-facto partner of Ms Petrie. Despite Ms Petrie having nominated her mother as her beneficiary, Ms Petrie’s mother did not fall within the definition of dependant under the SIS Act as Ms Petrie did not live with her mother. Ms Petrie’s mother’s pleas for help were ignored, and the Trustees ruled that Ms Petrie’s mother was not a valid beneficiary. The Trustees ultimately paid Ms Petrie’s death benefit to Rodney Higgins, who soon moved back to his former partner of 18 years and to their luxurious waterfront home. The best way to eliminate the risk of these kinds of situations from arising is by nominating your “Estate” or “Legal Personal Representative” as your beneficiary in your BDBN. This legally binds the Trustee to pay the death benefit from your superannuation to your estate, thereby legally including your superannuation to be part of the estate’s assets after you pass away. By allowing your superannuation to be part of your estate, you have the flexibility to distribute your superannuation to absolutely anyone you wish through your Will. However, if your superannuation is not included in your estate, then you are confined to distributing your death benefit to a dependant listed in accordance with the SIS Act. This is further complicated by possible uncertainty as to who will ultimately benefit from your death benefit after you pass away due to the discretionary power of the Trustees. Therefore, including your superannuation as part of your estate planning will reduce uncertainty and alleviate unnecessary stress to your loved ones after you pass away. Disclaimer: The contents of this publication are general in nature and do not constitute legal advice. The information may have been obtained from external sources and we do not guarantee the accuracy or currency of the information at the date of publication or in the future. Please obtain legal advice specific to your circumstances before taking any action on matters discussed in this publication.

Peter Brock and the three Wills

Most Australians who are car enthusiasts will know Peter Geoffrey Brock (“Peter”), also known as the King of the Mountain, was one of Australia’s most successful motor racing drivers. His life was cut short on 8 September 2006 when his car skidded off the road during a competition rally in Western Australia. Peter drafted three Wills during his life. His first Will was properly drafted by his solicitor and executed in 1984 (“the 1984 Will”). His second Will was an informal Will, which Peter prepared himself using a Will Kit in 2003 (“the 2003 Will”). The final Will was also prepared by using a Will Kit in 2006 (“the 2006 Will”). Two months after drafting the 2006 Will, Peter died from his accident. Peter was married twice during his life but did not have any children from any of these two marriages. Later, from late 1976 to March 2005, he was in a de-facto relationship with Beverley Brock (“Beverley”) and they had two children together. However, Beverley also had one child of her own from her former relationship. The de-facto relationship with Beverley ended when Peter moved out of their home in March 2005. When Peter died in 2006, he was living with and was engaged to Julie Anne Bamford (“Julie”). Although Peter had been living with Julie from 2005, he had been in an intimate relationship with Julie Anne Bamford for about 15 years at that time. The 1984 Will, prepared by his solicitor, was validly executed. The 1984 Will left a small gift to his parents and his children, including Beverly’s child, and the rest of his estate went to Beverley, giving Beverley the right to reside at their family home and after Beverley’s death the residue was to go to his two children. The 2003 Will was drafted from a Will Kit and in front of Beverley and Peter’s secretary, Sandra Williams (“Sandra”). Peter filled out the Will kit writing out his own details, revoking the earlier will, appointing the executor and providing funeral directions. However, he left blank the parts of the Will Kit which gave direction on how his assets were to be distributed. Peter told Beverley that he trusted her completely and said that she can complete the rest of the Will Kit. Peter then signed the half-completed Will Kit as the testator and Sandra signed the Will Kit as a witness to the Will, but Beverley did not sign the Will as the second witness or fill out the rest of the Will Kit. The 2006 Will was another Will Kit which was filled out by Danees Christine Denman (“Danees”), a personal secretary of Peter, under Peter’s direction. However, this Will Kit was never signed by Peter. When Peter passed away in 2007, the matter of Estate of Peter Geoffrey Brock went before the Supreme Court of Victoria to determine which Will, if any, was the last Will of Peter. In Victoria, and similarly in NSW, in order to have a valid Will there are a number of formal requirements which must be satisfied: 1. The Will must be in writing; 2. The Will must be signed by the testator; 3. The testator must have intended to execute the Will; 4. The signature must be witnessed by at least two witnesses; and 5. At least two witnesses must then attest and sign the Will in the presence of the testator. Out the three Wills, the Court stated that the 1984 Will was the only Will which satisfied these formal requirements. However, under the Wills Act 1997 (VIC) and the Succession Act 2006 (NSW), the Court has the discretionary power to dispense with the requirements for formal execution of Will, if the Court is satisfied that a document purports to state the testamentary intention of the deceased person. However, the Court did caution that “[n]otwithstanding the remedial nature of the section, care must nevertheless be taken to ensure that the statutory formalities enshrined in the Act are not unduly relegated in importance.” After reviewing all the evidence that was before the Court, the Court concluded that the 2003 Will, although failing to meet the formal requirements of the Will as it was not executed properly, was a document purported to state the testamentary intention of Peter. The Court therefore accepted it as being the last Will of Peter. This meant that the 2003 Will validly revoked the 1984 Will, although it was silent on how his assets were to be distributed. Peter knew he had to update his Will as his life circumstances changed and he clearly attempted to do so. However, without proper legal guidance, Peter’s efforts in updating his Will did the complete opposite of what he was trying to achieve. The 2003 Will failed to give direction on how his assets were to be distributed and he effectively died without a proper Will. This led to an 8 year long costly legal battle among his surviving family because they could not agree on how his assets were to be distributed. There is a lesson we can learn from this case: 1. Always seek proper legal advice when drafting or updating your Will to ensure they meet the legal requirements to be a valid Will; and 2. When your life circumstances change, your Will should always be updated to reflect this in your Will. [Disclaimer] The contents posted are general legal information, not legal advice, and the author and publisher have no legal responsibility for the contents. Each post is based on the law that was in force at the time of writing. Please consult a lawyer directly for accurate legal advice.

Spouse passing away whilst separated – Inheritance and family provision

Q: I separated from my husband of 25 years. Between my husband and me, we have a son, now an adult, who is currently working. My husband and I thought it would be a temporary separation and did not divide our assets. The apartment I currently live in and an apartment that is an investment property in Tokyo is under my husband’s name. My husband passed away last week. He did not leave a will. When my ex-husband passed away, he was living with his girlfriend who has a child. In this case, what happens to the distribution of marital assets and the right to inheritance? A: If the deceased and his girlfriend are legally recognised as de facto Partners, the girlfriend has the right to inherit the deceased's estate. According to the laws of NSW, if they have been living like a couple for more than two years, the relationship will be legally recognised as a de facto relationship. A person who claims the question of ‘have they lived together like a couple’ that has the duty to prove it. For example, each person has a dwelling, and if they only spend 2,3 days together, they cannot be considered to be a marriage relationship. In this case, assuming the girlfriend was in a marital relationship with the deceased, even if the cohabitation period was short, she has a right to inherit half of the deceased’s estate as mentioned under the Succession Act. The remaining inheritance will go to you. And subsequently in this case, your son does not have any inheritance rights. You may feel that it is unfair that the girlfriend has a right to half the deceased’s estate when she has only lived with the deceased for a period of 3 years compared to your 25 years of marriage. If you disapprove of this result, you can claim a right under the Family Provision. Family Provision refers to the right of succession of the deceased’s dependent family, not only the spouse but individuals that had a marriage-like relationship and those who have no kinship with the deceased (Dependent). This right cannot be revoked by a will. Therefore, your son can also claim this right. Additionally, if the step-child is dependent on the deceased, this right can be asserted. If the parties do not agree on the asset distribution, the court will ultimately decide to whom and to what extent the Family Provision will be granted by taking into account all relevant circumstances. Subsequently, you do not have the right to distribute marital assets as the procedure of distribution was not completed before the deceased’s passing. Japanese laws apply to the inheritance of apartments that are in the name of the deceased in Japan. From what I understand, as Japan is family-oriented, no inheritance rights are available to those who are not family members and those who are not recognised. Therefore, under Japanese law, with regards to property in Japan, you and your son have 50% inheritance rights.

Remarriage of father and inheritance

Q: I have a father that will be turning 60 years old this year. My mother passed away 10 years ago. My father recently became close with a woman living in our neighbourhood and yesterday he asked me, “I am thinking of remarrying to this woman, what do you think?” With regards to my father remarrying, how would this affect my inheritance? A: As inheritance laws vary in each state, this column will focus on NSW inheritance laws. Generally, when you marry or remarry, the will that your father previously had is invalid. In other words, if your father remarries, and a new will is not drafted and he passes away, inheritance of any estate will be determined under inheritance laws. In this case, the person he remarries is entitled to more than half of the estate. However, even if the father refuses to marry this woman, if the two had been in an ‘internal relationship’ for a period of more than two years or the relationship was registered with the Relationship Register, even though they are not married, she has a right to inherit as a spouse. If the father, for example, states in the will “I leave 100% of my estate to my daughter”, the internal relationship is accepted as stated above and the woman reserves a right to claim some of the inheritance under the Family Provision (similar to Japanese inheritance law). In other words, depending on the will, the deceased may not be able to freely distribute the inheritance. Furthermore, if the father marries the woman or a close relationship is established, you cannot avoid the consequences of the inheritance. If your father and the woman have a child, your inheritance success rate will be even lower. If the woman has a child that has no blood relation with the father, lives with your father and is dependent on the family, then the child can also claim inheritance under the Family Provision. Additionally, when your father passes away, anyone that has a “close personal relationship” with him has a claim under the Family Provision. However, it is ultimately up to the court to decide whether or not the claim is to be granted and to what extent. Another important note is that after your father has married the woman, and for example ends up with a condition such as dementia, loses his ability to judge or ends up in an accident (unless a power of attorney has been prepared), any medical decisions made by the remarried partner will take precedence over the children. In order to avoid any disputes, why not advise your father to create a power of attorney?