Wills & Estates Law Update - informal wills & risks of poor drafting

In this bulletin we focus on lessons that can be learnt from recent estate litigation cases.

Another informal testamentary document fails

The following case demonstrates the potential problems and risks involved when people document their own testamentary intentions without professional guidance or review.

We recently acted for a trustee company that was named as executor in an informal testamentary document. The document was handwritten by the deceased, was in the form of a Will, was dated 27 August 1985 and had been signed by the deceased. The document made provision for witnesses to sign and print their address but no witness signed the document.

The deceased died between 11 October and 7 November 2002, aged 83 years. He was a bachelor. His parents predeceased him. He was one of a family of three children. His brother predeceased him. His sister survived him. He did not leave a formal Will. Under intestacy law his sister would receive the whole of estate. Under the informal testamentary document his sister would receive the major share of his estate but the local Catholic Church and the local Salvation Army branch were named as residuary beneficiaries. There was also an issue concerning the proper interpretation of the document.

The trustee company complied with its legal obligation to disclose the informal testamentary document to the Court and sought a declaration that the document be admitted to probate under section 18A of the Probate Act. The deceased's sister opposed the document being admitted to probate.

The document had been kept by the deceased since 27 August 1985. It was found with other general papers of the deceased in a drawer under his bed. The evidence showed the deceased was a loner and it seemed unlikely that he acknowledged to any person that he had made a testamentary instrument.

Non-compliance with the witnessing requirements for a Will proved fatal. Judge Windeyer held that the document provided for witnesses to sign and as none had done so, the legal tests could not be met. The document was not admitted to probate. Therefore, the sister of the deceased received the whole of his estate under intestacy law but only after significant legal costs and delay for the estate.

Brave attempt to continue proceedings for deceased claimant fails

Bartier Perry were recently involved in defending several claims by and on behalf of a widow against the estate of her deceased husband. The litigation surrounding this estate clearly demonstrates that a good understanding of practice and procedure is essential to protect an estate from claims.

The initial and main claim by the widow was a family provision claim for further provision from her husband's estate. However, the widow claimant died after she commenced her legal proceedings but before the hearing of her claim. The law was clear - the widow's FPA claim came to an end on her death (McEvoy v Public Trustee (1989) 16 NSWLR 92).

Surprisingly the widow's niece applied to be substituted as the applicant for the widow in the FPA proceedings. The niece was the executor of the widow's estate. The niece argued that the FPA proceedings should be continued because the widow had substantial debts when she died. The Court found it did not have jurisdiction to determine the application because the widow applicant had died. The niece lodged an appeal.

The niece also made claims against the estate based on constructive trusts ("the trust proceedings"). The niece claimed (as executor of the estate of the deceased widow)
that -

• the widow was the business partner of the deceased, and
• the money that the widow had received from the deceased was less than the wages that the widow should have earned for her efforts.

The trust proceedings were based on the documents produced to the Court in the FPA proceedings.

In order to protect the estate, we obtained instructions to make a number of applications to the Court. We successfully obtained a Court order that the niece pay an amount of $60,000 as security for the costs of the estate.

Prolonged negotiations followed the security for costs order. The niece changed her solicitors. Bartier Perry successfully obtained orders for the dismissal of both the appeal and the trust proceedings. The estate may now be distributed to the beneficiary nominated by the deceased in his Will.

Sometimes you get what you pay for

A recent judgment of the Supreme Court which involved 4 sets of proceedings in connection with a deceased estate illustrates the difficulties which can arise for all parties involved with a deceased estate, including the solicitor/executor who was the willdrafter when the particular circumstances of the testator are not adequately addressed.

The deceased left a widow of 4 years and two sons in their 30's who did not have established employment. The main assets of the deceased were a residence in his sole name which had been acquired and improved with substantial financial assistance from his widow and an interest in a partnership which owned a fishing boat and licences.

By his Will, the deceased left the residence, as to 70% to his widow and as to 30% to his two sons. He also left the fishing boat and licences to his sons. The total value of the estate was about $810,000.

The initial difficulties arose when the widow asserted an equitable interest in the residence based on her substantial contribution to its acquisition and improvement. If she was successful in this claim it would substantially reduce the interests of the sons in the estate. The next difficulty arose when it was realised that the gift of the assets owned by the partnership would not be effective and the deceased's interest in the fishing partnership fell into the residuary estate and, as there was no residuary clause in the Will, that interest went on intestacy to the widow.

The sons brought Family Provision Act (FPA)proceedings. Proceedings were then brought by the widow asserting her equitable claim in respect of the residence and, in the alternative, for additional provision from the estate to allow her to acquire a residence.

After a complex 4 day hearing, the total costs of the parties exceeded $300,000.

The interests in the estate were ultimately determined on the basis of the FPA applications. The Court was confronted by the difficulty as to how to carve up the estate, particularly having regard to the legal costs to be borne by the estate. The Court found that there were factors warranting the making of all claims, as well as a claim by the former wife of the deceased. In the end however, although the widow received more than 70% of the estate, the size of the estate was insufficient to permit her to acquire the residence she sought. Relatively modest amounts of $50,000 were payable to each son. There was simply nothing left for the former wife. It can be assumed that none of the applicants would have been satisfied with the outcome.

The sting in the tail for the solicitor willdrafter was that he forgot or otherwise omitted to include a charging provision in the Will, so that although his firm had conducted the defence of the proceedings on behalf of the estate and he had assessed the costs in excess of $130,000, he would not be entitled to profit costs out of the estate. The issue as to what, if any, costs will be recoverable by the solicitor willdrafter from the estate, or whether he will be liable for the costs of any of the parties, is yet to be determined.

The case clearly shows how important it is to ensure that full details of the assets and liabilities of the testator, including the nature of those interests, are known to the willdrafter and that the willdrafter ensures as far as possible that all potential contingencies are covered by the terms of the Will.