Worrall Moss Martin News

Issue 22,  August 2020
"Won't my kids look after me after I have lost my marbles?"
The only certainty in life is death.   Some of us (65%, according to a recent study) actually plan for it.

But what happens if our mind slips away before our body does?  

Who takes care of us if we are alive, but unable to take care of ourselves?

Enduring Powers of Attorney:   An Enduring Power of Attorney allows a person (the “Donor”) to appoint one or more “Attorneys” to act on their behalf in making decisions about their financial affairs and property.  

Instruments Appointing an Enduring Guardian:   An Instrument Appointing an Enduring Guardian operates in a similar way to an Enduring Power of Attorney.   Under this document, the Donor appoints an Enduring Guardian (or Guardians) to make decisions about health and lifestyle matters, including where the Donor will live, and what medical care they will receive.  

Who Can Appoint an Attorney or Enduring Guardian?   In Tasmania, anyone over the age of 18 years, so long as they have mental capacity, can appoint a trusted person (or persons) to act on their behalf.  

If you lose capacity but have not appointed an Enduring Guardian, decisions about medical treatment may be made on your behalf by a ‘person responsible’, someone whom your doctor believes has a sufficient personal connection with you who can consent or refuse treatment on your behalf.

Importantly, if a person has already lost mental capacity, there are no laws that automatically enable - or require - someone to act in the place of an Attorney (no, not even their children).   If a person loses capacity without having appointed an Attorney, it can be costly and difficult for another person to obtain the authority to take on that role.

Enter, the Guardianship and Administration Board

The Guardianship and Administration Board (“the Board”) has the power to appoint a person or organisation to make decisions for an individual when they have lost capacity.   The Board can make:
  • Administration Orders, appointing an Administrator (with similar powers to an Attorney), to make financial decisions on a person's behalf; and
  • Guardianship Orders, appointing a Guardian (much like an Enduring Guardian) to make limited decisions about the accommodation, medical care, and work arrangements of a person.
Relying on the Board to make an appointment after a loss of mental capacity is risky.   The Board will not always appoint someone that person would have preferred or chosen themselves.

The Board may appoint a professional organisation, such as the Public Guardian or the Public Trustee.   Those organisations have the advantage of experience in the relevant roles, and administrative systems in place to best discharge their obligations, but are unlikely to consult with an individual’s family or friends, in the same way as a person whom you may personally choose, while acting as their Administrator or a Guardian.

The Board can also make emergency decisions on behalf of a person that has lost their capacity, and conducts reviews of Enduring Powers of Attorney and Instruments Appointing an Enduring Guardian to ensure that persons appointed are acting in the best interests of their respective Donors.

The Case of DBS:   The recent case of DBS (Review of Enduring Power of Attorney and Guardianship) [2020] TASGAB 16 is a good example of why each person should properly plan for their mental incapacity as part of a considered and comprehensive estate plan.

Facts:   DBS (“the Donor”) was, at the time, 71 years old and a resident of an aged care facility run by the Royal Hobart Hospital.  

Although the Donor put in place an Enduring Power of Attorney on 29 September 2015, she subsequently showed signs of having lost capacity, and becoming a danger to herself after.   AT, the Donor’s primary Attorney, had tried to act in that capacity but felt she could not effectively carry out that role as:
  • the Donor had told AT that the Enduring Power of Attorney had been “cancelled”;
  • the Donor was secretive and paranoid about her finances when asked by AT; and
  • because AT lived far away from the Donor, she was having difficulty acting in the circumstances.
The Donor was also exhibiting unusual behaviour, including:
  • maxing out her credit card without any memory of doing so;
  • refusing to discuss her financial matters, and when she did discuss them, insisting that someone else had been accessing her accounts;
  • withdrawing a total of $28,000.00 from her savings, which she said that she used to pay for “taxis”;
  • refusing to pay for her accommodation at the aged care facility, telling the staff that Anglicare was going to settle the account;
  • not communicating with, or responding to several requests from, her real estate agent; and
  • continuing to enjoy alcoholic beverages more frequently, and at a greater volume, than was medically recommended.
The Board considered two medical reports about the Donor’s condition, which observed that the Donor:
  • was suffering from a form of dementia, that was made worse by her regular alcohol consumption.   The dementia was likely to have a slow progression, and the Donor’s condition would fluctuate; 
  • had impaired orientation, impulse control and decision-making capability; and
  • was very vulnerable to influence.  
Decision:   Based on the Donor’s behaviour, and the medical reports provided, the Board was satisfied that that the Donor had lost capacity, and was in need of someone to make financial decisions for her.   Given the circumstances, including AT’s difficulties in dealing with the Donor, the Board revoked the Power of Attorney and appointed the Public Trustee to act as an Administrator.

The Board also made a Guardianship Order, appointing a staff member of the Aged Care Facility as a Guardian with the limited power to determine where the Donor would live.

Ultimately, not only had the Donor lost her ability to make decisions for herself, but she also lost the opportunity to decide who should make decisions for her, with the appointment of the Public Trustee in place of AT, the Donor’s original choice of Attorney.   Whilst the Donor’s loss of capacity was, to some extent, unavoidable, some of the difficulties experienced by AT in caring for the Donor may have been mitigated by a thorough and comprehensive estate plan that considered a loss of capacity.

How Can We Help?   Worrall Moss Martin Lawyers has specialist skills and experience in estate planning, and Guardianship and Administration Board matters, and can help you with any enquiries.

Importantly, we can help you to prepare a thorough and comprehensive estate plan in order to, to the greatest possible extent, provide for a smooth succession of decision-making power when a person’s mental capacity is beginning to decline.

Please contact our Estate Planning lawyers (Peter Worrall, Kimberley Martin, Casey Goodman or Ashleigh Furminger) if you, or your client, need expert advice and guidance about preparing a comprehensive estate plan, including an Enduring Power of Attorney and an Instrument Appointing an Enduring Guardian.

Alternatively, please contact Thomas Slatyer, Kimberley Martin and Robert Meredith for expert advice and guidance about the merits of making an application to the Guardianship and Administration Board.
Giving Everything and Nothing - Willable versus Non-Willable Assets
For every complex problem there is an answer that is clear, simple, and wrong.
– H. L. Mencken, 1917

As estate planning lawyers, we are most often asked to prepare “just a simple Will”, for clients to gift all of what they “own” to their intended beneficiaries.

But the nature of “ownership” of property is complex, and not everything that a person believes that they “own” is a Willable asset.   A person can only gift under the terms of their Will, property that they own in the full sense of individual (and exclusive) beneficial ownership.

Understanding the difference between “Willable assets” and “non-Willable assets” is essential.   What a person owns, and how they own it, determines what types of estate planning arrangements need to be put into place to adequately deal with the succession of property.

What are Willable Assets?   Willable assets are, by definition, the assets that a person is able to gift by their Will.   These assets are “Willable” because they are not affected by any law, or legal arrangement, that holds them outside the person’s estate.

Willable assets are assets that are owned personally by the Willmaker, provided that they do not hold those assets on behalf of someone else.   Common examples are real estate (held as a sole registered proprietor or as a tenant in common), non-joint bank accounts, personal chattel items and furniture, company shares, units in a unit trust, as well as loans and other debts owed by others to the Willmaker.   Willable assets may also include the proceeds of insurance policies and superannuation death benefits, provided that those proceeds are paid to the Willmaker’s estate (and not directly to a third party).

Gifting Willable assets is, therefore reasonably uncontroversial.   All that is required is for the Willmaker to make a valid Will dealing with the disposition of their estate after their death.   Specific gifts may be made of Willable assets, and any and all other Willable assets fall into the “residuary estate” and are divided between the residuary beneficiaries.

What are Non-Willable Assets?   Conversely, non-Willable assets are the assets that a person is unable to gift by their Will.   They are “non-Willable” because, as a result of the operation of law or another documented legal arrangement, they do not fall into the Willmaker’s estate.

The following are examples of assets that are commonly non-Willable, or are non-Willable unless further steps are taken to ensure that they form part of a Willmaker’s estate:
  • Joint Tenancy Property:   Joint tenancy assets pass automatically to the surviving joint tenant on the death of a joint tenant.   This means that joint tenancy property (including joint bank accounts) will not fall into a Willmaker’s estate.   Of course, once all but one joint tenant dies, that sole surviving joint tenant will own the asset completely.   At this time, the asset becomes Willable.

    If a person wishes for someone other than their joint tenant/s to receive their interest in property, it is very important to obtain advice about what can be done to ‘sever’ the joint tenancy so that the asset becomes Willable.

  • Superannuation Death Benefits:   Superannuation assets (including the balance of any member accounts as well as insurances held through superannuation funds) cannot be gifted in a Will unless the superannuation fund pays some or all of those assets into the Willmaker’s estate.

    Ensuring whether (or not) superannuation proceeds form part of a person’s Willable estate is a vital part of a comprehensive estate plan, and involves sometimes complex taxation considerations and planning.   This cannot be done by a Will alone, and it is important to seek advice about how to ensure that superannuation death benefits are dealt with on death in the intended manner.

  • Life Insurance Proceeds:   In certain circumstances, the proceeds of a policy insuring the Willmaker’s life will not fall into their estate.   This may be the case where a third party (for example, a spouse or an employer) purchased the policy, or where the Willmaker has nominated a third party beneficiary on a policy they themselves purchased.
  • Assets Owned by Others:   If a Willmaker gifts an asset during their life, then it will no longer form part of their estate (even if they purport to gift it in their Will).   Similarly, an asset that a Willmaker has use of but that is owned by another person cannot be gifted in the Willmaker’s Will.
  • Trust Property:   If a Willmaker is a trustee of a discretionary trust (often called a family trust), then any assets that are the property of that trust are “owned” by the Willmaker not in their personal capacity, but in their capacity as trustee.   This means that even though those assets may be registered or recorded in the Willmaker’s name, they remain the property of the trust after the Willmaker’s death.

    Where trusts have been established to hold property and other assets, it is critical that the persons in control of those trusts obtain proper advice about trust succession planning.   Although a Will is ineffective for this purpose, there are other mechanisms that can be put in place to ensure that the control of the trusts (and trust assets) is passed as intended, without the need for lengthy and expensive post-death court applications.

  • Company Assets:   Similarly, as with trust property, the assets owned by a company continue to be owned by that company after the death of the persons (directors, secretaries and shareholders) who control the company.  

    In the absence of proper succession planning, the Corporations Act 2001 (Cth) provides for who can assume control of a company after the controllers have died.   The legislative rules may not reflect the intentions and wishes or the persons who established a company. For this reason, appropriate company succession documents and arrangements should be put in place as part of a complete estate plan.
Proper estate planning must always involve a review of all of a person’s assets, and their related entities (trusts, companies and superannuation arrangements), to ascertain and advise on what is and is not Willable.   It is a complex exercise, and can very often involve advising on, and preparing, many complementary documents in addition to “just a simple Will”.  

How Can We Help?   Worrall Moss Martin Lawyers has specialist skills and experience in estate planning and succession law, and can help you to with any enquiries about Willable and non-Willable assets and can provide advice about how to deal with them.    Please contact our Estate Planning lawyers (Peter Worrall, Kimberley Martin, Casey Goodman or Ashleigh Furminger) if you, or your client, need expert advice and guidance about preparing a comprehensive estate plan.
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This newsletter contains material for general educational purposes and is not designed to be advice to any particular person about their own affairs as it does not take into account the circumstances of the reader as an individual.  It is recommended that appropriate professional advice be obtained by each reader so that reliance can be taken upon that advice.

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