Bowen Buchbinder Vilensky

Archive for August, 2018

Lacking mental capacity to make a Will – you may get Court!
Wednesday, August 29th, 2018

By Alana Stallard, Solicitor at Bowen Buchbinder Vilensky Lawyers

29 August 2018

Arguably one of the most controversial and challenging of the formal legal requirements of a valid Will is whether or not the person making the Will has sufficient testamentary capacity at such time that they make their Will.  A Will is not valid unless the person making it has testamentary capacity. That is, they must:

(a) understand the nature of the act and its effects;

(b) understand the extent of the property of which he or she is disposing; and

(c) be able to comprehend and appreciate the claims on his or her Estate to which he or she ought to give effect.

However, what happens if a person has no Will and no longer has the required testamentary capacity?

One option of course is that no steps are taken. In this case, when that person dies his or her Estate will be distributed in accordance with a prescribed formula set out in the Administration Act (“an Intestacy”). But, what if dividing this person’s Estate or an Intestacy does not adequately provide for certain family members or non-family persons or organisations?  Further, what if the person already has a Will in place but their personal and/or financial circumstances have significantly changed since the time when the earlier Will was made and it is now no longer relevant or appropriate?

This issue arises more and more frequently as our population ages, people’s financial circumstances become more complex, and the family unit continues to disappear.

In this situation, consideration can be given to whether an application should be made to the Court for what is called a Statutory Will.  This is a Will which is made by the Court for the person concerned.   This option first became available in Western Australia in 2008.

Upon such an application being made by any person, the Court, pursuant to section 40(1) of the Wills Act 1970 (WA) has the power to make, alter, or revoke a Will of a person who lacks testamentary capacity provided that the person concerned:

(a) lacks testamentary capacity;

(b) is alive; and

(c) is over 18 years of age.

The power for the Court to make a Statutory Will enables the Court to ensure that there is a valid Will in place which:

  1.  Gives effect to the previously stated or more obvious wishes of a person lacking testamentary capacity;
  2.  Avoids a full or partial intestacy;
  3.  Avoids a future dispute as to the adequacy of provision or interpretation of an existing testamentary document;
  4.  May allow for appropriate structuring to be put in place, such as testamentary trusts, which can have significant benefits for beneficiaries of the Estate; and
  5.  Deals with changes in circumstances that may have occurred since a last Will was made by the Will maker.

However, in the last 10 years there is only one reported case in Western Australia which has addressed this matter.  In that instance the Court declined to make the Will as sought. The lack of applications to the Court for a Statutory Will may reflect a lack of familiarity with such applications, or that the cost and complexity of these Applications can be prohibitive in many instances. Nevertheless, Statutory Wills can be a useful estate planning tool that should, at the very least, be considered in the appropriate circumstances.

Please contact Alana Stallard at astallard@bbvlegal.com.au if you wish to discuss this matter or your estate planning objectives further.

 

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State Taxes on Property Transactions – for Loved Up Couples and Those That Are Not So Loved Up
Tuesday, August 14th, 2018

By Rhonda Griffiths, Senior Associate at Bowen Buchbinder Vilensky Lawyers

14 August 2018

 

State tax on real estate transfers used to be called stamp duty- as the documents would be stamped.

Since 2008 state land transfer tax is called Duty under the Duties Act (WA).

What happens where an interest in property is transferred during a marriage or de-facto relationship by one of the parties to the marriage to the other party?

However, duty concessions can support happy families.  When, sadly, the relationship has ended and the couple is splitting up, duty relief may also be available.

PART 1 When the couple are settled and happy in their relationship

Duty that would otherwise be charged on land transactions where a couple has established a home together, is exempted by Section 97 of the Duties Act 2008 (WA).

For couples who are living together in a home that belongs to one of them, there is a saving if, after two years during which they live together in the home, the owner of the home wants to transfer half their interest to the other person, in that normal transfer duty is waived.

This law applies to all couples in de facto relationships.

The definition of a de facto relationship is Section 9 of the Duties Act that states that a de facto partner of 2 years means “a person who is living in a de facto relationship with the person and has lived on that basis with the person for at least 2 years”.

In the formal language of the Act:

Duty is not chargeable on a transfer or an agreement for the transfer of property that would otherwise ordinarily be subject to stamp duty where the person who is transferring the property is married to the one they are transferring the property to or are de facto partners of two years and the dutiable property (Section 97 (b) ) is a lot on which a residence is erected which, when the liability for duty on the transaction arises, was used solely or dominantly as the ordinary place of residence of the persons referred to in paragraph (a) (the married couple or de facto couple).

The waiver of duty otherwise normally payable, is only available if the person transferring the property is the sole owner of the property and where the result of the transaction will be that the dutiable property is owned by the parties as joint tenants or tenants in common in equal shares.

Instead of the usual duty the nominal amount only is paid, presently $20.  There will still be lodgement fees payable at Landgate and other expenses such are production fees if there is a mortgage.

So if the home is owned by George and Mary, (ie George’s ex partner) the stamp duty exemption doesn’t apply if Mary’s interest is going to Shane, George’s new partner, because George doesn’t own it outright, only half.

But if George is the sole owner of the property (perhaps after Mary has transferred it to him after their relationship breakdown, see below) then he can transfer half the property to Shane without there being the usual rate of stamp duty payable.

Section 133 sets out what evidence can be produced to establish that a couple is married or living in a de facto relationship.  It provides that a statutory declaration can relied upon to prove the relationship.

PART 2: When all is not good in paradise: a marriage like relationship ends

When a couple separates and they want to transfer property they own together between them, provided they obtain court orders or enter into a formal agreement arising from their relationship breakdown, under the relevant family law legislation, Section 129 of the Duties Act provides an exemption from duty that would otherwise be payable.

If George and Mary owned their home jointly, either of them can buy the other out and not have to pay stamp duty on the transaction.

To be entitled to the exemption the agreement reached about transferring the property needs to be part of the couples’ matrimonial settlement.  In a settlement all the assets and liabilities a couple has needs to be taken into account and considered.

Section 113 provides that duty is not chargeable on a dutiable transaction to the extent that it is affected by a matrimonial instrument mentioned in Section 129 (b) or (c) or a de facto relationship instrument mentioned in Section 130 (a).

Section 129 provides that a reference to a matrimonial instrument is to any of the following instruments to the extent that it does with matrimonial property:

(a)  A maintenance agreement registered under the Family Law Act……

(b)  A financial agreement made under the Family Law Act..

(c)  A splitting agreement;

(d) An order of the Court under the Family Law.

Section 130 relates to de facto relationship instruments and refers to the Family Court Act Section 205T or an order of the Court made under that Act or the law of the Commonwealth or another State that substantially corresponds with Family Court Act Part 5A.

Section 131 provides that transactions effected by or in accordance with matrimonial instrument or de facto relationship instruments are subject to nominal duty if the parties are separated or divorced from one another and the property is to be transferred to (Section 131 No. 1 (d) )

(i)         either or both of parties to the marriage;  or

(ii)        a child or children of either of the parties to the marriage; or

(iii)       a trustee of such a child or children; or

(v)        the trustee of a superannuation fund.

The similar provision applies for de factos except that a superannuation fund is not referred to, there being no provision in Western Australia for superannuation splitting in favour of de factos.

What Does This Mean For Me?

A couple still in their relationship can take advantage of exemptions to transfer their home from one owner’s name into their joint names.  They can obtain that relief with the assistance of a settlement agent or lawyer to prepare the land transfer and assist with preparation of the statutory declaration required to be produced to the State Revenue Office.

A couple separating and wanting to take advantage of the stamp duty concessions will require legal assistance to obtain the court orders or formal agreement required to be produced to the State Revenue office to obtain an exemption on a transfer of property between them.

The individuals in a separating couple should be separately advised about their entitlements.  Advice obtained that enables access to duty relief may be cost effective in that the costs of preparation of the court documents and or agreement can be partly at least defrayed by the duty savings obtained on the property transfer.

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