How people who have lost capacity can make and update their Will

While many people would assume that once a person loses testamentary capacity, their ability to update their Will ceases, but this is not the case. Each state in Australia allows for statutory Wills to be approved by the relevant Supreme Court for signing on their behalf.

The process involves an application and a Court hearing. The Court will consider whether the proposed Will is what would have been intended by the person lacking capacity. So, importantly, it is not what the people proposing the Will want but, rather, there needs to be a clear indication that the terms of the Will would have been accepted by the person lacking capacity.

What is testamentary capacity?

In order for a person to be able to have a statutory Will made on their behalf, they must lack testamentary capacity. For a person to have testamentary capacity, according to the case of Banks v Goodfellow (1870), they must satisfy ALL of these conditions:

1. Understand the nature of the Will and its effect;

2. Have some idea of the extent of the property of which they are disposing under the Will;

3. Be aware of the persons for whom the testator would usually be expected to provide (even if they choose not to); and

4. Be free from any delusion of the mind that would cause them reason not to benefit those people.

This may mean a person can satisfy conditions 1, 3 and 4, but not appreciate the size of their estate and therefore be unable to make a Will (i.e. not have testamentary capacity).

The test itself is a legal test although, generally, medical advice as to the impact of any impairment is relevant. There is often a grey area in which a person may or may not have testamentary capacity.  In those cases, if it is possible to take instructions, there is an obligation on the lawyer to prepare the Will. Another option is to go to Court to ask for a statutory Will to be approved.

Case study – the Court approved a statutory Will on behalf of a dementia sufferer

A recent case was Re Gillam [2016] VSC 5 which was an application in the context of a family law property settlement. Mrs Gillam was 92 years of age and the application was brought by one of her sons from her first marriage, Ian.

In 2011 there appeared to be significant tension between Mrs Gillam and Noel, her second husband, surrounding their financial affairs. Mrs Gillam was the sole owner of their matrimonial home and other property. As a result of the tension, Mrs Gillam chose to transfer half of the matrimonial home to Noel.

She also wrote a Will that year in which Noel would receive a life interest in the remaining half share of the home after various gifts to children, step-children, grandchildren and step-grandchildren. The residue of the estate was to be divided between her two sons, Ian and Peter.

From the following year, it was clear that dementia had set in and Mrs Gillam moved out of the matrimonial home and began residing with one of her sons, Peter. Noel visited her weekly.

Noel then applied to the Federal Circuit Court seeking a family law property settlement. He ultimately received the remaining half share of the matrimonial property and retained various funds, loans owing from family members and share portfolios.

The following year, Ian, as his mother’s attorney, applied for a statutory Will in a form that was very similar to Mrs Gillam’s previous Will with the main change being that Noel was removed as beneficiary. Noel objected.

The Court considered whether Mrs Gillam would have wanted to update her Will following the family law property settlement and that he had in fact received far more in the property settlements than she had ever left him in her previous Wills. The decision was to approve the statutory Will in the terms proposed.

Case study – the Court approved a statutory Will on behalf of a child who had never had capacity

This matter concerned an application on behalf of a 13 year old boy who had severe physical disabilities as a result of birth trauma (the child was referred to the in case as “N”).  N received $3.2m in damages against the hospital and had ABC Limited acting as his administrator.  The damages had been used to purchase a house in which N, his mother and siblings resided and a portion was retained for producing income for N.

The child was about to undergo life threatening surgery and an application was made for a statutory Will to be made on his behalf the day before the surgery.

The father of N had had little to do with him since he was born and the entire responsibility for caring for N had fallen to N’s mother. She proposed a Will that gave half of N’s estate to herself and the other half to be divided between N’s siblings. After the Court indicated they would be unlikely to grant a Will in those terms, it was changed to include a share of the residual estate to the father but the whole of the house to the mother.

Ultimately, the Court accepted that an appropriate portion of the residuary estate to be given to the father was 15% with the mother receiving 42.5% and the siblings sharing 42.5%.

This case highlighted how the Court would consider a situation in which a person never had capacity.  While most statutory Will applications discuss what the intentions of the person might have been or were when they had capacity, there are also many applications that require the Court to truly consider how a Will should be prepared in a situation when there was never capacity. This requires an application of an objective person test and consideration of the surrounding circumstances.

Ask your financial adviser for help with estate planning

Statutory Wills, while a final resort, should always be considered when looking at estate planning options. If a person has lost capacity, it is entirely appropriate to look at whether a statutory Will can be made.

While the examples above looked at extreme cases of contest, often, statutory Will applications are accepted by all parties and can in fact allow for inclusion of strategies such as discretionary testamentary trusts.

If you are close to someone who has lost capacity, it might be prudent to talk with your financial adviser and an estate planning specialist so you can help ensure their final wishes are carried out.

by Anna Hacker, BA (Hons), Accredited Specialist – Wills & Estates, National Manager – Estate Planning AUT Legal Services (part of the Australian Unity Group)

Disclaimer: This article is not legal advice and should not be relied on as such. Any advice in this document is general advice only and does not take into account the objectives, financial situation or needs of any particular person. You should obtain financial advice relevant to your circumstances before making investment decisions. Where a particular financial product is mentioned you should consider the Product Disclosure Statement before making any decisions in relation to the product. Whilst every care has been taken in the preparation of this information, Australian Unity Personal Financial Services Ltd does not guarantee the accuracy or completeness of the information. Australian Unity Personal Financial Services Ltd does not guarantee any particular outcome or future performance. Australian Unity Personal Financial Services Ltd is a registered tax (financial) adviser. Any views expressed are those of the author and do not represent the views of Australian Unity Personal Financial Services Ltd. If you intend to rely on any tax advice in this document you should seek advice from a tax professional. Australian Unity Personal Financial Services Ltd ABN 26 098 725 145, AFSL & Australian Credit Licence No. 234459, 114 Albert Road, South Melbourne, VIC 3205. This document produced in November 2017. © Copyright 2017