Partner providing Q & A on the 2GB Chris Smith Afternoon Show discussing issues in relation to Wills & Estate Law 22/08/13

Thursday, 22 August 2013

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CS       Yes, courtesy of our sponsors, Turner Freeman Lawyers, our very important Legal Matters segment this afternoon.  We’re mixing a few topics.  Now, Paul Sant who comes in here regularly, is an expert when it comes to Wills and Estates.  So, if there’s something that you would like to have answered about Wills and Estates, issues you’re involved in or issues you can see come up in your family, 131873 is the telephone number.  Free advice on the radio, it’s an Ask an Expert segment with Paul Sant so you can go for your life but we’re also touching on some real estate law today and some very interesting real estate law indeed.  Paul, welcome to the programme once again.

PS       Thanks Chris.

CS       Thank you very much for coming in.  I want to get straight into some changes that may pertain to situations that some of our listeners find themselves in.  New changes to retirement village laws.  Now, as of October, 1 this year, there are new regulations which will commence affecting retirement villages.  Can you explain to our listeners what they are?

PS       Three major changes with the new regulations.  Firstly, they’re going to introduce a new pre-contract general enquiry document, which is a document particularly to the dwelling or the place that you are interested in, rather than a more general document about the whole village.  They’ve introduced changes to the disclosure documents.  Again, that has to be specific to the dwelling that you’re interested in.  But, more importantly, the biggest change is the introduction of a Standard Village Contract.

CS       Right, so there’s no standard between a nursing village?

PS       No, no.  And I can get contracts that are 20 pages, I’ve had contracts that are 120 pages.

CS       Yeah.

PS       It’s amazing the difference that you have when people are looking to move into a retirement village.

CS       Which causes a problem when you’ve got to take action about it and they call people like you to go to Court because you’re actually debating using contracts that can be different to the next case.

PS       Every contract is different.  Now, they will still be allowed to introduce special conditions.  We’re expecting…the view is that the smaller operators will probably stick to the standard contract.  The bigger operators may introduce additional clauses.  I’m just hoping that the causes aren’t as copious as they are at the moment.

CS       Yeah, make it easily understood.  I guess you’d have some advice for sons and daughters who are working with their parents to get them into a retirement home.  You’ve got to take these sort of documents to lawyers, don’t you?

PS       Definitely, you have to.  And people have to understand…usually, they’re not buying the unit.  It is a licence, it’s purely, usually, a 99 licence agreement where you’ve got the right to occupy until you pass away if you’re a couple, until the later of the two, the last of the two to pass away.

CS       Yeah, and in most circumstances, you are paying a particular bond for that lease?

PS       Correct.  And the operator is entitled to deduct from the bond a certain amount each year.  There as regulated as to the maximum, I think from memory the maximum is about 30% of the bond.  Of course you pay your outgoings as you would normally do.  Where there are other differences is when you then leave the village, whether you are entitled to get back any capital gained that the operator may make from on-selling your right of occupation.

CS       What is the law on that?

PS       There isn’t.  You can either get zero capital gain and I’ve seen some agreements that have provided for that or you can get up to 100% of the capital gain.  Often, they split 50/50.  So any capital gain is split between…50% to the operator, 50% to the occupant or the occupants’ estate or whatever, but there’s no set provision.

CS       Right…so if you were in a contract now related to a retirement village you are in, will that contract change as a result of these clauses?

PS       No.

CS       No, it’ll remain the same?

PS       Correct.

CS       So it won’t be retrospective.

PS       It’ll be future contracts.

CS       Right, ok.  131873.  20 to 2 is the time.  From Bossley Park, Jilda, you’ve got a question for Paul.  He’s listening.

C1       Oh hello Paul.

PS       Hi Jilda.

C1       I’ve got a question regarding Wills.

PS       Yes.

C1       My father died over 25 years ago and two months ago, I approached my mother and said I think we should read my father’s Will and my mother and brother absolutely fell apart and I have not seen my father’s Will after this time.  His solicitor has obviously thrown the Will out.  Where do I stand?

CS       That’s a difficult one.

PS       25 years…you’ve got a problem

C1       25 years!!!

PS       You’ve got a problem with limitations as to what you can and can’t do.  There is no…people talk about reading Wills and often I get people asking me, well, can we get all the family in so you can read the Will.  We see that in movies, it doesn’t happen in reality.  The Will is held by the solicitor or held by the executor.  The executor’s got obligations to the beneficiaries and that’s where it stops.  Now, there have been recent changes in probably the last two years where people who are not named in the Will can obtain copies of Wills.  So, you could always ask for a copy of the Will.  If you’re a beneficiary or if your named or you are related to the deceased, you’re entitled to get a copy.  Whether that goes back 25 years…you could always…if probate was applied for, you can always apply for a copy of that grant of probate which would have the Will attached from the Supreme Court Equity Division.

C1       Who would I enquire with?

PS       You’ll have to see a solicitor or someone who does legal searches and they can search through the probate records.

C1       Oh ok.

CS       You’ll find it in the probate records but the normal procedure would be that the executor would have informed Jilda if there was anything coming to her from that estate.

PS       There’s an obligation upon the executor…

CS       An obligation, yeah.

PS       to administer the Will.

CS       Right, ok.  Jilda, thank you very much for your call.  Effie in Maroubra, go ahead.

C2       Oh, Mr Sant?

PS       Yes Effie.

C2       Thank you.  Look, I’m in my 80s and I want to know whether I can gift my home to one of my children while I’m alive.  I’ve got three children and I just want…this one looked after me and I just want to know whether that’s possible please?

PS       It is possible to gift the property to whoever you wish whilst you’re alive. However, if you are in receipt of social security, there are certain ramifications that come from that.  Social security says, well you’re only allowed to give, if I recall correctly, $10,000 over three years.  If you’ve gifted a property, you’ve gifted much more, you are deemed to have got the money, even though you’ve got nothing, therefore your pension will decrease, if not cease.  And that can happen for a period of 5 years.  So you have to be aware of the consequences, particularly to your pension, if you’re thinking along those lines.

C2       Do they have to pay stamp duty and taxes and those things that are involved?

PS       Definitely, you have to pay stamp duty.

CS       Once you change that name and it’s sold on?

PS       Yes, on the value of the property.

CS       On the value of the property.  Go back on what you’ve just said though.  $10,000 ceiling over three years?

PS       I think so.

CS       Right, ok.  Go on Effie.

C2       What type of solicitor to go to to make it legally binding so that they actually get the place?  Do you understand what I mean?

PS       Effie, you can give my firm a call.

CS       There’s one called Turner Freeman, Effie that sponsors this particular programme and this is what they specialise in.

PS       And we will look after you.

C2       Yeah, cause I don’t want them…when I die, I don’t want them to turn around and say, listen, this is not right, you’ve got the property and we’re not getting…I’m giving them something, of course, but not the property.

PS       The general rule is whilst you’re alive, it’s your Will, you can do what you like…you can proceed and give the property away, however, one further qualification and I’ve mentioned it before.  There’s this concept of Notion of the State.  If you happen to pass away within about three years of gifting that property, without getting actual value for it, the beneficiaries could claim a share in that property, bring it back into the estate.

C2       Thank you very much indeed, you’ve helped me a lot.

CS       Good on you Effie, thank you.

PS       No problem.

CS       There you go.  This is brought to you by Turner Freeman Lawyers, Paul Sant, our Wills and Estates expert, and we’ve been touching on retirement village law as well.  If you’ve got questions in reference to any of those areas 131873 is the telephone number.  It is a quarter to 2.

 

Alright, our Legal Matters segment this afternoon.  Brought to you by our sponsors, Turner Freeman Lawyers and Paul Sant talking Wills and Estates and retirement village law as well this afternoon.  Anita, you’ve got a question for Paul, go right ahead..

C3       Oh hi Paul, how are you?

PS       Hi Anita, good thank you.

C3       I was just wondering Paul, my uncle actually made a Will about four years ago.  At that time, his state of mind was fine.  Now he has dementia and he will be going into care within the next month.  But the problem is, everybody…any nursing assistant, shop keeper, anybody who comes near him, he’s always offering to make a new Will and so the family, we’re quite concerned if, when he’s in the nursing home, if a new Will will have any…well, you know, we’re concerned if he makes a new Will…obviously he has dementia, we’re just concerned how valid it will be.

PS       If he does make a new Will, it’s always open to be challenged on the basis of capacity and he…then the executor is required to prove that the person had capacity to make the Will at the time.  They’re not easy challenges, it’s a real problem.  But usually, if a Will is made, more often than not, they’re made…I mean, if it was made in front of the solicitor then there’s a presumption that the person had the capacity.  If the Will was…it was a home-made Will, and you know, two people off the street were witnesses, then you’ve got a better argument.

C3       Yeah, ok.

CS       Alright Anita, thank you very much for your question.  Let me ask a question similar to Anita’s.  If, for instance, her uncle passes on power of attorney to, say, her cousins or the uncles daughter and son and then the uncles decides, even though he’s suffering from dementia, he wants to change the Will as well, what needs to happen?  He has no say over that.

PS       No, he can.  You can make a power of attorney and appoint someone to handle your financial affairs.  The question of whether you have enough capacity to make a valid Will is a different question.  The person who, let’s say, as a solicitor, someone comes to see me…I determine, I’m entitled to determine whether I believe that person has capacity.  I mean, just because you’ve made a power of attorney or whatever, that’s irrelevant.

CS       Ok, 131873, Mark, go right ahead.

C4       Yeah, my question for you is, I was there when my Mum made her Will and…she’s still alive and everything but she’s decided to leave the house to me and all I have to do is compensate my brother with $100,000/$120,000 in cash as a mortgage from against the house.

PS       Yep.

C4       To pay for it.  What…there’s nothing there to stop him to contest the Will and, you know, if he wants a better deal…it’s not all cut and dry like that is it?

PS       You can’t stop someone from contesting a Will…making a family provision claim.

C4       Yeah.

PS       You know, it doesn’t matter what you do.  If…my advice is, in these type of scenarios, is probably to provide so that it is not worthwhile making a claim.  And it may be, on your facts or on the values and stuff that when you look at it and someone comes and asks the question, you say well hold on, is it worthwhile making that claim?

C4       Yeah, well originally it was a lot less than that.  It was probably, if anything, maybe half the amount and I said, well that was terribly unfair.  I said, you know, you should at least increase it somewhat so then, you know, something a bit more comfortable, something I can actually afford to pay off if something does happen to my mother.

PS       But remember, he’s entitlement to make a claim is dependent upon establishing a number of factors.  And one of those questions, of course, relies upon his financial capacity or his financial circumstances.

C4       Well, his financial capacity is a lot better than mine.

CS       You may have answered your own question Mark, thank you.  131873 Sandra is a Financial Planner…Gifting Sandra.

C5       Yes, I just thought you’d like to know and perhaps with Paul’s information as well, I specialise in Centrelink and Aged Care and the gifting rules are very precise, in that, a couple or a single person combined can only gift $10,000 a year for three years in a row and then for the next two years, they can’t gift at all so, therefore, we can only gift a total of $30,000 in a five year period but it’s got to be done year by year.

CS       Aha that’s interesting.  Can you repeat that for our listeners, Sandra.

C5       Ok, so you can only gift $10,000 a year whether you’re a couple or a single person…so, that’s $10,000 between you if you’re a couple, per year three times (three years in a row), then you have to stop for two years, then you can start again.  So it’s a five year cycle.

PS       So it’s $30,000 every five years.

C5       Correct.

CS       Ok, Sandra, answer this question.

C5       Yes.

CS       We’ll get Joe up on line 6, he’s got a question on that exact point.  Go ahead Joe.

C6       Hi Chris, Sandra might not come in to play in this matter because they don’t receive pensions, they’ve never received a pension, they’re self-funded retirees but my question to the solicitor is, along the gifting lines, instead of you gifting me the property, you sell it to me with no money, we pay the stamp duty and the debt retires on your death, can the other siblings come after it within that three year period?

PS       Hold on, how do I sell it to you with no money?

C6       Well, you’re my father, you sell me the property, I pay the stamp duty on it and I owe you $1 million and on your death, that debt retires.

PS       I think it will depend upon whether that transaction falls within the Notion or period.

C6       Within that three years?

PS       Correct.

C6       Ok.

PS       Because I think that proposal is still the same as, you know, basically gifting it now.

C6       What about if we own the property together?  We’re 50% shareholders in it and I buy your 50%?

PS       I still don’t see the difference.  Let’s say you own the property as joint tenants which would mean that when one dies, it automatically goes to the survivor, that might…but again, that half share that you get by way of survivorship, again can fall within Notion of State if it’s within the period.

CS       Sandra, can you add anything to that?

C5       Well, just in relation to once they gift…if it’s gifted or you gift something away for less than it’s valued, it’s considered a gift anyway but if then that then put the parent into a Centrelink situation, you would have to wait five years from the date of that transaction because anything that’s gifted, and you wait five years, is like it never existed in the first place.

PS       So it affects you for five years.

C5       That’s all.

CS       How’s that Joe.

C6       That’s in a Centrelink situation Chris.

CS       Yeah.

C6       There’ll never be a Centrelink situation.

CS       Ok, alright.  No, Sandra’s not including the Centrelink situation.

C5       Yeah, but I’m saying that Mum may be, if five years down the track, once the value of the house is gone.

C6       Not in this case, no.

CS       Ok, alright thank you Joe, thank you Sandra.  I’ve got to say thank you to you too Paul, a very popular man today.  So many questions because there are so many grey areas so to speak and it’s always a great topic.  Thank you very much for coming in this afternoon.

PS       Thanks for having me.

CS       Alright our Legal Matters segment with Paul Sant, expert in Wills and Estates and we touched on retirement village law changes as well, which begin from October 2013.  Some kind of sensible standard contract which is something that’s probably been long overdue in legal circles.