Koolik & Associates Lawyers

5 Discovery Drive North Lakes QLD 4509

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Confidently seek our professional advice on three broad areas – Family & De Facto Law, Wills & Estates Law and Conveyancing Law.

Koolik & Associates Lawyers is a law firm located in the heart of North Lakes, just north of Brisbane. Our professional staff are all locally based and are more than happy to assist with any legal enquiries you may have relating to your particular circumstances.

Our areas of expertise relate to three broad areas of law which, in our experience, often overlap and intertwine:

  1. Family and de facto law;
  2. Wills and Estates; and
  3. Conveyancing.

Our solicitors and support staff understand every individual legal enquiry is not only important to you but also is often emotional and sometimes daunting. For this reason, our team places communication as one of its highest priorities to ensure you are kept informed with professional advice on all aspects of your matter and that we endeavour to promptly respond to any enquiries you may have.

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Loss of Capacity SMSF what do i do

Published on ClearLaw legal bulletin

Author: Maddocks Lawyers

 

A loss of capacity of a person can occur when a person is unable to understand the nature of a document or is unable to communicate a decision. As the population ages, issues can arise which can impact a person’s ability to make decisions – including a member’s ability to make decisions relating to their SMSF. Trustees have only 6 months from a person’s loss of capacity to take steps to ensure the fund remains compliant so it is important to have a contingency plan in place.

Alexandra Hodsman, Maddocks Lawyers

An aging population

The federal government has predicted that by 2022 there will be four million people in Australia aged between 65 and 84 years. The most recent ATO statistics show that at 30 June 2017, there were just over 1.1 million SMSF members, of whom 83% were 45 or older. The average member age was 58 years old.

In the coming years there will be a significant number of SMSF trustees entering an age where the deterioration of mental capacity is a probable risk. Planning for the eventuality of loss of capacity is just as important as estate planning.

Rules governing trustees and members of a sole-member SMSF

Section 17A(2) of the Superannuation Industry (Supervision) Act 1993 (SIS Act) states that for a sole-member SMSF to be compliant, the member must be one of only 2 trustees. Alternatively, the member can be the sole director of the corporate trustee, or one of two directors of the corporate trustee.

However, the SIS Act also contemplates a scenario where a person who has lost capacity can remain as a member despite needing to be removed as trustee. Section 17A(3) says that a SMSF will still be valid if a member loses capacity if:

  • the legal personal representative (LPR) of a member of the fund is a trustee/director of the corporate trustee; and
  • the LPR has an enduring power of attorney in respect of the member of the fund.

Accordingly, a SMSF will still be compliant where there is one sole incapacitated member with an LPR acting as trustee/director of the corporate trustee in place of that member.

For example:

Jane is the sole member of a SMSF and is one of two trustees. The other trustee is her husband John. She has recently been diagnosed with Alzheimer’s disease and has an enduring power of attorney in place appointing her daughter Emma as her LPR. In every case the deed should be reviewed relating to how trustees are removed and appointed, however the trustee with capacity should effect the replacement of Jane as trustee by appointing Emma in her place. Jane remains as a sole member and the SMSF remains valid.

Enduring power of attorney

An enduring power of attorney is a legal document by which a person appoints another person who can act – as legal personal representative – for the incapacitated member during the period of incapacity. It allows the attorney to make certain decisions on the person’s behalf. These decisions can be for either financial or personal matters, or both.

There are some points to note about the power of attorney:

  • it must be in force before the member loses capacity;
  • it must be current; and
  • it must accord with relevant state or territory legislation.

What if there is more than one attorney appointed?

Where an enduring power of attorney is executed in favour of multiple attorneys, one or more of those attorneys can be appointed as trustee/corporate director in place of the member – noting that the maximum number of SMSF trustees/corporate directors contemplated by the SIS Act is 4.

It is important to note whether multiple attorneys have been appointed to act ‘jointly’ or ‘severally’ under an enduring power of attorney, as this will affect the decision-making process by which they appoint one or more attorneys to act as trustee/corporate director. If one out of four attorneys has the power to act severally, then one attorney has the power to make decisions on behalf of the incapacitated member without consulting the other attorneys – and could conceivably accept an appointment to act as the only trustee/corporate director in place of the incapacitated member. However, if each attorney is appointed ‘jointly’ then all decisions must be made as a group – that group would need to make a decision about who is to be appointed as trustee/corporate director.

Once appointed, either as an individual trustee or director of a corporate trustee, those persons will be bound by legal and fiduciary obligations by virtue of their new position.

Steps to effect the change

Whether or not you can remove and appoint an individual or a corporate trustee will depend on the terms of the trust deed governing the SMSF. In the case of replacing directors of a corporate trustee, the constitution of the company will set out the process for removal and appointment.

Usually a SMSF trust deed will require any appointment or removal of trustees to be in writing.

You should also check the terms of the enduring power of attorney to ensure that it is valid and contemplates an attorney making financial decisions (whether jointly or severally) on behalf of the incapacitated member.

Lost capacity court applications what to do

The New South Wales Succession Act (“the Succession Act”) and associated regulations allows for an application to be made to the Court for protection of a person who has lost testamentary capacity. An order can only be made if the person who has lost capacity is alive at the time the order is made by the Court.

Under the Succession Act an application can be made to the Court for an order authorising:

  1. A Will to be made or altered, in specific terms approved by the Court, on behalf of a person who lacks testamentary capacity; or
  2. A Will or part of a Will be revoked on behalf of the person who lacks testamentary capacity.

The Court Application

In order to make the application a person must first apply to the Court for leave to make the application.

The application for leave must include the following information:

  1. A statement about the nature of the application and the reasons why the application is being made;
  2. Evidence of the lack of testamentary capacity of the person for whom the order is sought;
  3. Estimates of the size and character of the Estate of the person for whom the order is sought;
  4. A draft of the proposed Will or revocation that the applicant wants to be approved by the Court;
  5. Evidence of the person’s wishes including any previous Wills made by them;
  6. Evidence of the likelihood of the person acquiring or regaining testamentary capacity;
  7. Evidence of any person who would be entitled to benefit if the person died without a Will (i.e. died intestate).
  8. Evidence of any person who might reasonably be expected to be included in the Will; and
  9. Evidence of any charitable gift that the person might reasonably be expected to make in their Will.

It is apparent from the above list of requirements that a large amount of evidence is required to be put before the Court before they will even consider granting leave to make an application for an order.

This is why you need to seek expert legal advice from a Wills and Estates lawyer if you wish to apply to the Court for an order.  As the proceedings are heard in the Supreme Court this requires a lawyer with knowledge and proficiency in this jurisdiction who is aware of the procedural and legislative requirements to obtain a successful order.

The Court hearing of the application for leave

Once the application for leave has been made the Court will hear the application, grant leave to make the application and make the orders sought if it is satisfied on the following matters:

  1. There is reason to believe that the person is, or is reasonably likely to be, incapable of making a Will; and
  2. It is appropriate for the order to be made; and
  3. The proposed Will, alteration or revocation is one that would have been likely to have been made by the person if they had testamentary capacity; and
  4. Adequate steps have been taken to allow all persons with a legitimate interest in the application to be represented in the proceedings.

Our expert Wills and Estates lawyers have the experience you need to apply to the Court for protection of a person who has lost testamentary capacity.

At Heckenberg Lawyers we don’t take our clients’ confidence for granted: we work hard to earn it by providing an efficient, cost-effective service which puts your interests first and doesn’t cut corners. We take pride in achieving repeat custom and winning clients by word of mouth recommendation.

If you need advice about a Will or an Estate matter please call 02 9221 2779 or email info@hecken.com.au to arrange an initial consultation with principal lawyer Graeme Heckenberg at our centrally located Sydney offices.

See our Will Dispute Lawyer & Contesting Wills page for more information on the Wills & Estates services we provide or contact us for advice specific to your situation.

 

What do i do if im left out of a will

The following case study is from a Sydney Law Firm specialising in Will Disputes.   The main points of this case are:-

  • When one parent remarries and leaves the estate to the new spouse.
  • Power of Attorney sells home and buys a new home in his name only.
  • Children could not claim on their mothers’ house as she was no longer on the title.
  • 12-month window for Will Dispute nearly exhausted in negotiations
  • Notional Estate

Our firm successfully represented two sisters who were left out of their mother’s Will.  Their mother contracted a terminal illness and died in her 50s.  Each adult daughter had a young family.  The mother had remarried and had made a mutual Will with her second husband in terms that she left everything to her husband, and that on his death he would leave everything to the two daughters. The husband made a Will leaving everything to his wife, and then to her daughters.

In addition, the wife granted the husband a Power of Attorney over her financial affairs.

Once the wife became ill and was no longer able to be cared for at home she had be removed to a nursing home.  While she was living in the nursing home and without her knowledge her husband, using the Power of Attorney, sold their home and with the proceeds of sale purchased a new home in his name only.  He did not inform his wife of his actions.

The daughters only learned of these events after the death of their mother, when her estate revealed that she did not own her home.

During the next 11 months the husband continued to promise the two daughters that he would come to an accommodation and provide for them, however, nothing eventuated and the daughters sought our expert advice.  It was important that they did so as their right to bring a claim on their mother’s estate would have lapsed after 12 months, and they would have been robbed of their inheritance if they continued to let the negotiations with the second husband prolong for a further month.

Heckenberg Lawyers was able to file an application on the eve of our clients’ rights expiring and to preserve their rights of inheritance on their mother’s estate.

We were then able to conduct a Court case where we were able to reveal the transactions by which the mother’s real estate and bank accounts had been taken by the second husband for his own benefit and the purchase of his new home.

This involved the concept of ‘notional estate’, whereby evidence is presented to the Court that although the property no longer forms part of the deceased person’s estate (in this case, as it had been taken prior to her death) it can under certain circumstances be identified and brought back into the estate for accounting purposes, which we were successfully able to do in this case.

We are pleased that we were able to achieve a successful result for both our clients and they were able to secure their inheritance, something which their mother had always intended them to receive but they were in very real danger of losing completely.

Heckenberg Lawyers are recognised as leaders in the law of contested estate litigation, disputed Wills and Probate law.  Deceased estate disputes and cases where people have been left of out of the Will are often factually complicated and involve precise legal principles. We have been specialising in these areas of the law for over 20 years, and provide cost-effective and expert legal advice.

See our Will Dispute Lawyer & Contesting Wills page for more information on the Wills & Estates services we provide or contact us for advice specific to your situation.