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Money Matters

Money Matters

Collecting Debts
Enduring Power of Attorney
Guarantee Advice
Making a Will

Superannuation Splitting
Wills and Estate Planning

Collecting Debts

You may have the best business in the world but if your clients are not paying your bills, your business will not survive. The old saying goes, cash is best. However if you have to give credit, there are a few things that should be remembered to protect yourself.

Things to consider before extending credit
Effective debt recovery begins with effective documentation of the transaction. This entails more than merely getting a signature on a piece of paper. Think about the information you will need if you have to sue to recover the debt. Here are some things to consider:

  • is the debtor a natural person, a company or some other type of entity?

  • have you confirmed the identity of the debtor by requesting proof from an individual or have you considered conducting a company or business name search?

  • have you confirmed the personal and business addresses of each of the debtors?

  • have you recorded all this information accurately in the contract?

  • have you conducted a credit check on the debtor and, if applicable, its directors or proprietors or promoters?

  • have you identified fully and precisely the money, goods or services to be provided?

  • have you specified precisely when payment is due?

  • have you specified precisely what will happen if payment is not made by the due date?

  • if you want to charge interest, have you specified precisely the rate to be charged, the method of calculation and the date from which interest will run?

  • if you are selling goods, have you made clear precisely when title to the goods passes to the purchaser and have you included a "Romalpa" or "retention of title" clause? For those not familiar with a "Romalpa" clause, it is a term in a contract that states that the title or ownership to the goods do not pass till payment is received.

  • if there is to be a course of trading, have you obtained the debtor’s agreement and signature to a comprehensive and well-drafted "Terms of Trading"?

  • if the debtor is a company, or if you have some doubts about ability to pay, should you get personal guarantees from third parties? Do you have a well-drafted form of Guarantee?

You should have the debtor’s agreement to your terms before you perform your part of the transaction. It may not be enough to rely on your terms of trading on the reverse of your invoice.

You must enforce your terms, otherwise you are sending an implicit message to the debtor that you do not care. How you enforce your terms is a matter for your commercial judgment.

The best thing to do is immediately after the due date, an "account rendered" be sent, specifying a new due date. If the debt is still not paid, refer the matter to a lawyer for legal action.

The longer a debt is left unpaid, the harder it will be to recover. It must be made clear to the debtor that you will not let up until you have been paid.

Remember that, if you have to sue to recover your debt, the Court will require you to prove your case. Careful documentation of the transaction, and of your enforcement action, will play a very important part in that proof.

What happens if the debtor still refuses to pay.
A solicitor will usually send a letter of demand to the debtor. A simple letter of demand would cost between $60-$100.00. A letter of demand will usually threaten the issue of a summons to recover the debt if the debt is not repaid within a further 7 or 14 days.

In the event that the debt is not paid, you then have to discuss with your solicitor whether you should proceed with the next step which is to issue the summons.

Your solicitor will then have to explain to you which Court he will commence the action in.

Which Court
The West Australian court system is made up of many different courts, boards and tribunals, each with their own jurisdiction, which determines the types of cases they can hear.

Courts of Western Australia

Court

Authority

Jurisdiction

Location

Supreme Court

Constituted under the Supreme Court Act 1935. Is a superior court of record and the highest in the State.

Civil, criminal and appellate jurisdictions at highest level.

Civil :
Judge sitting alone (occasionally jury)

No limit on monetary jurisdiction.

There is one Supreme Court registry located in Perth.

The court sits primarily in Perth but judges conduct circuit court sittings at 11 regional centres in Western Australia. Provision exists to sit at Christmas and Cocos Islands.

District Court

Constituted under the District Court of Western Australia Act 1969. Is the intermediate court of record in the State. Civil, criminal and appellate jurisdictions.

Civil : Up to $250,000 for monetary and general damages; unlimited for personal injuries.

The principal registry is located at Perth.

The court sits primarily in Perth but circuits are conducted at 11 regional centres.

Civil matters may be filed at regional centres.

Magistrates’ Courts

Civil Jurisdiction :

Local Courts Act

Civil :

Local Courts Act Claims for recovery of debt up to $25,000. Presided over by a magistrate.

A Small Disputes Division exists with a limit of $3,000. This division also deals with residential tenancy disputes to a limit of $6,000. The Clerk of Local Court can sit on residential tenancy disputes with consent of the parties.

Major registries of the Local Court and Court of Petty Sessions are located in Perth.

5 other registries are located in the metropolitan area.

22 registries are located in regional centres within Western Australia. There are registries at both Christmas and Cocos Islands

Boards & Tribunals of Western Australia

Tribunal etc

Authority

Jurisdiction

Location

Small Claims Tribunal Small Claims Tribunals Act 1974. Referee sitting alone. Consumer/trader disputes under $6,000. The registry is located in Perth. The tribunal sits primarily in Perth, but referees sit in country centres on an as-needed basis.

For the purposes of this newsletter, I shall concentrate on proceedings in the Local Court.

Local Court
The Local Court deals with civil cases involving claims for debt, damages and residential tenancy matters. It has two divisions – small and general disputes.

General

  • most claims for debts or damages up to $25,000

Small Disputes

  • claims for debts and liquidation sums of money up to $3,000

  • residential tenancy matters involving amounts up to $6,000

  • Legal representation in this division is not permitted unless certain conditions are met

You should seek legal advice if you are in doubt about whether or not to commence action or if things get out of hand.

Parties are encouraged to try and reach an agreement or settlement before taking action. This can save them time and expense.

Sometimes , it may not be commercially viable to issue a summons against a debtor. This is especially the case where the debt is for a small amount. A small amount may be anything below $1,000.00-$3000.00. As I always tell my clients, "principles cost money". To sue someone on principle when the amount claimed is a small amount is not always commercially viable as the cost may outweigh the benefits to be obtained.

The other problem is when the person you are suing has no known assets. Then, you may be throwing good money after bad.

It is best to discuss any potential claims with your solicitor before proceeding.

Issuing the summons
To commence action, the plaintiff (that is the creditor) must issue a summons to the defendant (that is the debtor). The summons must include full names and addresses of the parties plus full details of the claim. The summons is then lodged (with the appropriate court fees) either in person or by mail at a Local Court.

Serving the summons
It is the responsibility of the plaintiff to serve a copy of the summons upon the defendant. An additional fee may be paid at the time of lodging the summons for the court to appoint someone to serve the summons. Alternatively, the summons may be served by the plaintiff or a process server. It is the plaintiff’s responsibility to ensure the defendant’s address for service of the summons is correct.

After the summons is served – the defendant
Upon receiving the summons, the defendant should respond, within the period specified (usually 10 days), by either:

  1. Admitting to the debt – Judgment will then be entered for the plaintiff for the amount claimed. Payment can only be made direct to the plaintiff. If you cannot pay the debt in full you must negotiate time to pay with the plaintiff.

  2. Disputing the debt – Consider the following alternatives

  • approach the plaintiff with a view to resolving the claim

  • seek legal advice

  • file a defence at the court of issue (a fee will be payable)

  1. Admit part of the debt & defend balance – As per "disputing the debt" however you must ensure you carefully read and follow the instructions on the back of the summons form as there are additional steps you must take.

  2. Not responding to the summons – As a result, judgment may be entered in favour of the plaintiff for the full amount of the claim including costs for the issue of the summons.

Admitting or confessing to a debt in full – the plaintiff
If the defendant admits to the full debt, the plaintiff will receive a Notice of Confession of Debt from the court with details of any offer to pay in full or by installments. The plaintiff does not have to accept any offer to pay by installments and defendants are encouraged to contact the plaintiff prior to lodging the confession.

Disputing a debt in full or in part – the plaintiff
The plaintiff will be advised by the court if the debt is disputed either wholly or in part. The plaintiff may then accept the part admitted by the defendant and judgment will be entered for that amount or alternatively, the plaintiff may request the matter be listed for a pre-trial conference.

The pre-trial conference
The pre-trial conference is conducted by the Clerk of the Local Court. It is a chance for the parties to clarify issues in an attempt to settle the matter. If the matter is not settled and the action is ready, the next step is to proceed to trial. I would say that 60% of Local Court cases settle at the pre-trial conference stage. If the matter is not settled then, the clerk will arrange for the matter to be heard before a magistrate in a trial.

The trial
The trial is conducted in a courtroom by a magistrate. The plaintiff and defendant are required to attend. The plaintiff may be allowed to proceed with the case if the defendant has been advised and fails to attend.

Usually, the plaintiff’s case is presented first, however different procedures may be observed at the hearing of small debts actions. The defendant is able to ask questions or cross examine each witness. When the plaintiff’s case is completed, the defendant’s case is presented. The plaintiff is able to ask questions or cross-examine each witness. Both parties then have the opportunity to summarise. The magistrate will determine the matter and make a decision. An order for costs (court fees) may then be sought by the successful party from the unsuccessful party. If the successful party was represented by a solicitor they may seek additional costs based on a costings scale.

Judgment
The decision of the magistrate is known as the judgment. The successful party is known as the judgment creditor, and the unsuccessful party is known as the judgment debtor.

If the judgment debtor does not make an acceptable proposal to pay the debt and costs to the judgment creditor, the judgment creditor may enforce the judgment by a number of methods. The most common methods are a judgment summons or warrant of execution.

Judgment summons
The judgment creditor may apply for a judgment summons to be issued. This requires the judgment debtor to come before a court and be examined as to their means to pay the debt either in full or by periodic installments. After considering the evidence, the court may order the repayment of the debt at a reasonable rate.

Warrant of execution
The judgment creditor may apply for the issue of a warrant of execution. This empowers the bailiff to seize and sell the judgment debtor’s goods and/or land. The proceeds of sale are applied to the judgment debt and costs.

Appeals
Appeals against decisions of the Local Court are made to the District Court.

This is just a small snippet of information on debt collection. It is advisable that you are aware of your rights as a creditor as soon as possible. However, it is also important to be aware of the practical side of court actions.

Tan and Tan take instructions on debt collection and would be glad to listen to your problems and try and find a solution to them.

"To cut a long story short"

I once acted for a lady who loaned quite substantial amounts of money to a close and personal friend. As usual in such personal matters, no records or agreements were signed. The defendant denied the moneys were loaned and created a big smoke screen to try and hide the real issues as to when and how the loans were made. The case turned on the credibility of the parties. It was fortunate that although my client did not keep proper records and evidence of the loans, the Magistrate believed the reason why the moneys were loaned and the fact that the moneys were loaned. The case was laborious because of all the issues raised by the defendant’s in an attempt to avoid liability for the debt.

We won the case and got judgement against the defendant and quite a substantial amount of cost. However, the problem was that the defendant had sold her house in between the lengthy Court proceedings which had to be adjourned on several occasions.

My client had to bankrupt the defendant on a matter of principle as the judgment was not able to be executed due to the fact that the defendant was impecunious.

Moral of the story:
Proper documentation would have enabled the debt to be more easily pursued in Court. If proper documentation was entered into prior to the transactions, it would have reduced the possibility of the defendant to try to create any delaying or diversionary tactics. Any loans to friends or for that matter any body should be evidenced in writing by a solicitor.

On the Light Side…
God strolls to the gates of heaven to talk to St. Peter. He says "Peter, you look tired, why don’t you take a vacation, kick it in the Caribbean for a week or two, and I’ll watch the gates." So, St. Peter goes on vacation.

An engineer comes to the gates, God takes a look at him, and says, "You’re in the wrong place." So he turns around, feeling quite rejected, and goes down the escalator to the gates of hell. There the devil greets him with open arms. After about a week, the engineer decides hell is just too hot and uncomfortable, so he talks to the devil and arranges to have water piped in, air conditioning installed, and swimming pools built. So after a month of construction, hell is getting to be a nice tropical place to be.

God calls the devil and asks, "So, how are things down there, pretty hot, huh?"
And the devil replies," No, actually it’s pretty nice. We have an engineer down here who helped us pipe in some water and air condition the place."
God says, "No, wait, that’s a mistake, the engineer was supposed to be up here."
The devil says, "Too bad, we’re keeping him."
God is angry: "I want that engineer, I’m going to sue."
The devil smiles his most confident smile and says, "Yeah? Where are YOU going to get a lawyer??? They come straight to me. Hahahahahahahahaah……."

Enduring Power of Attorney

What is an EPA?

An EPA is a legal document allowing you to appoint another person to make financial and property decisions on your behalf.

A person who makes an appointment under an EPA is called the DONOR. A donor can authorise another person or persons to be their ATTORNEY to act for them if they become mentally ill or lose their decision-making ability.

An EPA is different from a normal Power of Attorney, which only remains valid so long as the donor is still capable of making decisions. Under an Enduring Power of Attorney, an Attorney can act even after the donor loses their legal capacity.

What does an EPA authorise my Attorney to do?

An EPA does not authorise your Attorney to do everything on your behalf. It will only authorise them to make decisions about your FINANCIAL and PROPERTY affairs. It is important to remember that an EPA does not cover non-financial decisions – for example decisions regarding your health care or medical treatment.

If you are unsure about the types of decisions that an Attorney can make under an EPA, you should seek legal advice.

Why Should I Make an EPA?

An EPA is necessary to protect your assets and ensure that they are managed by someone you know and trust in the event that you suffer a mental disability.

If you own any property, you should consider making an EPA. A loss of legal capacity can be gradual or sudden, occurring as a result of an accident, injury or through illness or trauma later on in life.

It may not be possible to predict or prevent the onset of mental disability, but by appointing an Attorney under an EPA, you will be safeguarding your interests by putting your financial affairs in the hands of someone you trust.

Who should I appoint as my Attorney?

You can appoint anybody to be your Attorney, including your spouse, partner, children, relatives, friends, lawyer or financial adviser. You can also appoint more than one Attorney, for example where you want your children to act together (or separately) as your Attorneys.

The most important consideration you must make before appointing an Attorney is whether you can trust that person to make decisions about your financial affairs. Ideally, it should be someone who you know will manage your affairs and make decisions in your best interests.

I often tell my clients to consider the following:

If you appoint one of your children to be the attorney, is that child going to put you in the cheapest nursing home or the most expensive. Bear in mind that when you pass away eventually, that child may stand to inherit a more valuable asset if he or she placed you in an "el cheapo" nursing home.

What happens if I don’t make an EPA?

If you lose your ability to make decisions and have not appointed an Attorney under an EPA, the State Administrative Tribunal may appoint an Administrator on your behalf to manage your affairs.

Take note that a state appointed Administrator may not necessarily be someone who you trust to manage your financial matters. It is very important that you consider the need for an EPA to be in place to prevent this possibility from arising.

In most cases, an EPA will be preferable because it gives you the power to appoint someone to be your Attorney. At the end of the day, the time and cost involved in making an EPA will be a small price to pay for your peace of mind.

How do I make an EPA?

For an EPA to be valid, it must comply with the requirements set out in the Guardianship and Administration Act of 1990.

In addition, a person making an EPA must be of sound mind when the EPA is made. If there is any doubt as to the mental state of the donor, a medical opinion should be sought to confirm their legal capacity.

There are standard EPA forms that are available for download on the State Government’s website. As a donor, you can complete an EPA yourself or you can arrange for a lawyer or Trustee Company to prepare the documents for you.

You can also specify in your EPA exactly how you want your Attorneys to carry out their responsibilities. All Attorneys will have obligations under the Guardianship and Administration act and it is open for you to provide special conditions that apply whenever they make decisions for you.

If you are unsure about the legal effect of an EPA or what rights and obligations an Attorney has, you should seek legal advice.

When does my Attorney’s appointment come into effect?

An Attorney appointment can come into effect either immediately after the EPA has been signed, or only once the donor has been declared legally incapable of making decisions.

In your EPA, you must specify whether you want the Attorney to assume power immediately, or whether the appointment will only be valid after the State Administrative Tribunal makes an official declaration that you do not have legal capacity to make your own decisions.

If you appoint an Attorney to act immediately, it is important to remember that your Attorney must act in accordance with your directions whilst you are still legally capable.

An EPA can be revoked at any time, provided that you are still of sound mind at the time you revoke it.

As we get older, we may need to consider arrangements that can protect our assets if we are unable to do so ourselves.

As the population gets older, it is imperative that EPAs be considered as early as possible before it is too late.

Are you sure you want to sign that guarantee?

What is a Guarantee? What happens if you sign on that dotted line on behalf of your family or friends?

A guarantee is a contract whereby one person agrees with another to pay some debt or perform some act or duty owed by a third person. This third person remains however primarily liable for such payment or performance and the person giving the guarantee will only become liable on the default of the third party.

The parties to a guarantee contract are:

  • The Creditor: The person receiving the benefit of the guarantee is called the creditor. This is usually the bank, finance company, supplier or lender.

  • The Principal Debtor: The person who is borrowing the money or obtaining the benefit of the contract.

  • The Surety or Guarantor: The person who provides the guarantee is called the surety or the guarantor.

In order for a contract of guarantee to be enforceable, it must be in writing and signed by all the parties. For eg. If you are providing a loan to a friend "A", it is not sufficient for "B" the person who is going to guarantee the loan to say that he will guarantee the loan. It must be in writing.

What are your liabilities when you sign a contract of guarantee?
The extent and nature of the liabilities of a surety or guarantor will depend on the words of the contract of guarantee. Some guarantees are limited for a fixed amount. Some guarantees are for an unlimited amount. Whatever is alleged as being guaranteed, the court will interpret the contract of guarantee strictly and a surety will not be liable beyond the precise terms of his or her commitment.

An example : A surety’s guarantee to find a replacement tenant for a shop at a specified rental and for a term of three years was satisfied by the surety finding a person who was willing to become a tenant on the prescribed terms. The surety is not held to guarantee the solvency of the replacement tenant or the conduct or performance of the replacement tenant.

Sometimes there may be two or more persons who enter into a contract of guarantee. The liabilities of the sureties or guarantors are in most cases joint and several. This mean that when there is a default by the principal debtor, the creditor is free to take action either against one or both of the sureties.

An example : B, C & D guarantee to pay Z a sum of $100,000 in case X cannot pay Z. X defaults. Z sues B only because B has assets sufficient to meet the debt.

B cannot say that it is unfair and demand that Z sue all the guarantors as they should be jointly liable.

However after B has paid the sum of $100,000 to Z, B has the right to claim contributions from C & D in what ever proportions they have agreed upon.

What are your rights as a guarantor?
After the guaranteed debt has become due but before the surety or guarantor has been asked to pay for it, the surety or guarantor may require the creditor to call upon the principal debtor to pay off the debt.

At any time after the debt is due, the surety or guarantor may apply to the creditor and pay him off. Upon being provided with proper indemnity for costs, he may sue the principal debtor in the creditor’s name or in his own name if he has obtained an assignment of the guaranteed debt.

As soon as the surety or guarantor has paid to the creditor what is due to the creditor under the contract of guarantee, he is entitled to "step into the shoes" of the creditor and avail himself to all the rights possessed by the creditor in respect of the debt, default or miscarriages to which the guarantee relates.

Thus upon payment, the surety or guarantor has a right to the benefit of all the securities which the creditor has received from the principal debtor.

For example: Where the guaranteed debt is secured by a mortgage executed by the principal debtor, the surety or guarantor is, on payment of the debt in full, entitled to a transfer of the mortgage.

The surety or guarantor has also rights, either express or implied against the principal debtor or his estate for indemnification. The right includes the ability to recoup the amount which the surety or guarantor has actually paid for the principal debtor together with interest. Should the surety or guarantor suffer damage beyond the principal and interest which he is compelled to pay under the contract of guarantee, he is also entitled to recover that damage as well.

Discharge of the Guarantee
Payment made by the principal debtor of the guaranteed debt will normally discharge the surety or guarantor.

Before signing a contract of guarantee
It is of utmost importance that you understand the legal consequences of acting as a guarantor. Before signing on the dotted line, it is advisable to consult a lawyer so that he can explain to you your rights and liabilities.

Common instances of the need to provide guarantee

(a) An incorporated proprietary limited company seeking a business overdraft facility or loan. The Bank providing the overdraft facility or loan will call upon the directors of the company to stand as sureties or guarantors.

(b) An incorporated proprietary limited company leasing office premises. The landlord will require the directors to stand as guarantors for the due performance of the terms of the lease.

(c) When a family member wishes to buy a property and has insufficient income. A person with an alternative source of income and who has assets may be requested to stand as a guarantor.

What to Do
Very often, you may receive a request to stand as a guarantor. The 1st thing to ask yourself is whether you really should do it. The answer depends on assessing the risk involved and the person you are going to guarantee. If in doubt, the best course is to decline to be a guarantor. In the event that you cannot decline, then the next best thing is to try to limit the guarantee. Whatever it is, you should seek legal advice. Tan and Tan Lawyers will be pleased to advise you if the need arises.

To Cut A Long Story Short
We were asked by the son of a client to witness a guarantee to the bank for a loan for the son to purchase a property. The banks usually require a solicitor to provide independent legal advice before they will allow the loan to be drawn. The son had failed to fully inform his father that as part of the guarantee, the bank also wanted the father to include the father’s property as security. Upon being fully informed as to the contents of the guarantee, the father of course declined to stand as guarantor

Moral of the story: Make sure you know what you are signing. Those fine print between the lines are fine print which need to be carefully considered.

On the lighter side

Moses, Jesus and an old man are playing a round of golf at the local course. On the third hole, a difficult par 3 which has a river guarding the front of the green, they hit their tee shots. Moses’ ball runs into the river but the waters part and it rolls onto the green a foot from the cup. Jesus’ ball heads towards the river as well, but skims across the surface of the water and stops three inches from the hole. The old man tees off and his ball hits a turtle in the river, bounces up and is caught by a passing bird, which drops the ball in the hole. "Nice shot, Dad," says Jesus

Things to Consider When Making a Will

I have previously written in one of my newsletters about the many reasons why a will should always be prepared so that your wishes after your death in regards to your wealth distribution can be expressed.

As indicated previously, the absence of a will means that the distribution of your estate is governed by the Administration Act.

Now, I wish to discuss possible problems that may arise even if you have prepared a will.

The law allows a person who has been a dependant of someone who has died to challenge the contents of a will if that person does not receive a fair share of the deceased’s property under the will. This can happen for example where a person has a wayward or estranged child and decides not to leave anything in their will to that child. There are certain things the said child can do to challenge such a will.

The Estranged or Wayward Person Applies to The Supreme Court
Under the Inheritance Act (the "Act"), a potential interested party if they believe that they have been shortchanged in the distribution of the estate, can launch an action in the Supreme Court. It is then up to the Court to decide whether the Court whishes to interfere with the wishes of the deceased person as written in their will. The Court will interfere if it thinks the will does not properly look after the needs of a person the deceased had a duty to provide for.

Who May Apply?
The Act states that the following interested parties may apply under the Act.

  • the widow or widower;

  • a person whose marriage to the deceased has been dissolved or annulled and who at the date of the death of the deceased was receiving or entitled to receive maintenance from the deceased, whether pursuant to an order of any court, or to an agreement or otherwise;

  • a child of the deceased living at the date of the death of the deceased, or then en ventre sa mere ("a child not yet born but in the womb") ;

  • a grandchild of the deceased who at the time of death of the deceased was being wholly or partly maintained by the deceased or whose parent the child of the deceased had predeceased the deceased living at the date of the death of the deceased, or then en ventre sa mere ("a child not yet born but in the womb") ;

  • a parent of the deceased, whether the relationship is determined through lawful wedlock or adoption, or otherwise, where the relationship was admitted by the deceased being of full age or established in the lifetime of the deceased;

  • a de facto widow or widower of the deceased who at the time of the death of the deceased was being wholly or partly maintained by the deceased, who was ordinarily a member of the household of the deceased, and for whom the deceased, in the opinion of the Court, had some special moral responsibility to make provision.

How is The Application Made
You should see a lawyer for advice as the law in this area is quite complicated.

Before submitting an application in, the lawyer will need to make sure that you will be able to prove:

  • your relationship to the deceased;

  • why you believe you are entitled to apply for a share or a larger share of the property;

  • why you believe the deceased person did not provide well enough for you pursuant to the Will or the law.

Time Limits for Such an Application
There are strict time limits that need to be complied with to ensure that you are able to put in an application under the Act. You must apply within six months of the grant of probate of the will or, if the deceased did not leave a will, within six months of the grant of Letters of Administration.

In very rare circumstances, you may be able to apply for an extension of the 6 month time period. However, it is always a risk to delay any application under the Act. You should see your lawyer as soon as you believe you have a possible claim.

What Happens at the Hearing
Such court action can usually take months, if not years, before the matter is heard by a Judge. There is usually no oral hearing but an argument by your lawyers based on sworn documents prepared before the hearing. The parties are not usually asked to go to court to give evidence, but it can happen sometimes if the matters are unusually complex and the Judge believes that a fair hearing can only take place after listening to oral evidence of the parties. You must be prepared to accept the consequence of such a court action as very often, the already tenuous fabric of the family will be totally torn to shreds as a consequence of such an application.

How the Court Decides Whether to Change the Contents of the Will
After hearing the arguments on both sides the Court will consider the following possible matters in deciding whether to change the distribution of the deceased’s estate contrary to the will of the deceased.

  • how any change to the Will could affect other people in the Will;

  • the relationship to the deceased of other dependants;

  • the needs of other dependants and those of the applicant; and

  • the sort of property involved and its value;

  • the ages of the surviving dependants;

  • the way the applicant acted towards the deceased and their relationship in general.

No lawyer can guarantee to you how such an application will pan out. Each case is unique and the outcome often hangs on the judge who hears the case.

Therefore, when making a will, you should always consider who may launch any such challenge. It may be prudent to leave a token sum or give very good reasons in your will why no benefit is being given to the wayward relative.

Lastly, always inform your lawyers if you are leaving any body out of your will so that they can at least draft your will to minimise any challenges under the Act.

On the Light Side…
A woman awakes during the night, and her husband isn’t in bed with her. She goes downstairs to look for him. She finds him sitting at the kitchen table with a cup of coffee in front of him. He appears to be in deep thought, just staring at the wall. She watches as he wipes a tear from his eye and takes a sip of his coffee.

"What’s the matter, dear?" she asks. "Why are you down here at this time of night?"

The husband looks up from his coffee, "Do you remember 20 years ago when we were dating, and you were only 16?" he asks solemnly.

"Yes, I do," she replies.

"Do you remember when your father caught us in the back seat of my car making love?"

"Yes, I remember," says the wife, lowering herself into a chair beside him.

The husband continues, "Do you remember when he shoved the shotgun in my face and said, ‘Either you marry my daughter, or I’ll send you to jail for 20 years?’"

"I remember that, too," she replies softly.

He wipes another tear from his cheek and says, "I would have gotten out today."

Superannuation Splitting when you have split with your Spouse

Whether you are an employee or an employer, one of the main concerns about life nowadays is superannuation. We are constantly being reminded by financial advisors that baby boomers need to look after themselves when they retire. The news gets even bleaker when you consider how a marriage break up affects your superannuation.

With the new Family Law Legislation Amendment (Superannuation) Act 2001 introduced in December 2002, superannuation can now be split when marriages break down thus affecting the final split of marital assets. This newsletter will hopefully provide a better insight into superannuation splitting.

A new section called, Part VIIIB has been introduced into the Family Law Act 1975. The new section sets out the rules for making superannuation splitting agreements and orders.

A person’s superannuation can be divided in any proportion between the husband and spouse in the event of separation. Superannuation splitting takes place through an agreement or court order.

The old super laws prevented superannuation splitting because super was treated as a financial resource rather than property capable of immediate distribution. Superannuation funds as financial resource can be taken into account when the final order is made for distribution of matrimonial assets. However the new provisions allows superannuation to be treated as property in the event of separation, thereby paving the way for superannuation splitting.

For Example:

Mr and Mrs Bloggs are recently separated. Mr Bloggs is the sole income earner of the family. Their total asset pool is $100,000. There is also a Super fund in Mr Bloggs’s name that has built up over the years to $50,000. Under the old superannuation laws, in the event of a court order for a 50%/50% split (or $75,000 each) the court may order that Mr Bloggs retain $25,000 of the property assets and keep the superannuation valued at $50,000. The court may order that Mrs Bloggs retain $75,000 and receive none of the superannuation resource.

Why? Because existing laws could not split Mr Blogg’s super but could take it into account. However as a person is prevented from accessing their super before a minimum age, the notional value of Mr Bloggs super fund may not be as attractive to him as being given a cash sum immediately at settlement.

As a result of the change in super laws, an order could be made in the family Court for Mr and Mrs Bloggs to each retain $50,000 of the assets and $25,000 of the super. Both parties still cannot use their the super fund until 65 but at least in the meantime they will have equal assets to use.

Do the new laws apply to you?
You are able to have a super split if:

  • you were ever married and divorced; or
  • Currently married but separating; and
  • Still finalising property arrangements either through a court order or binding financial agreement.

The current laws are retrospective which means that it affects previous divorces as well as current separations. However the laws only apply to divorces that have yet to finalise property agreements.

That means if you have a court order or financial agreement dividing property before 28 December 2002 then these superannuation splitting laws won’t apply to you. If after this date you are still finalising property arrangements or have an informal arrangement then superannuation splitting laws will apply to you.

The new defacto relationship laws in Western Australia have changed the way joint assets are shared in a defacto relationship split (the subject of a previous newsletter). However superannuation splitting laws DO NOT apply to de facto relationships.

The reason for this is that under the Australian Constitution, the Commonwealth does not have the power to legislate for de facto couples, only to married couples. Although the Commonwealth has asked the States to legislate on this issue, it has yet to be done.

What does Superannuation Splitting Laws Affect?
Generally the laws cover most superannuation entitlements. There are some "superannuation-like" products that are not subject to this law.

Further superannuation interests that have a withdrawal benefit of less than $5,000 is not able to be the subject of a split for the simple reason that it would just not be cost effective.

Conclusion
The new laws allows a more flexible way for couples to deal with the splitting of their matrimonial assets and resources. Some spouses may prefer to keep their super after a break up as the super fund is more valuable to them if it is retained till retirement age. Some spouses may feel that the value of a super fund is limited and would prefer to split their cash and super assets immediately. The new rules allow more options in dealing with getting the parties to agree on an already difficult issue of property settlement.

On the Light Side…
These are from a book called Disorder in the Court, and are things people actually said in court, word for word, taken down and now published by court reporters who had the torment of staying calm while these exchanges were actually taking place. Some of these are excellent stuff! Don’t miss the last one!!!

Q: Are you sexually active?
A: No, I just lie there.

Q: What gear were you in at the moment of the impact?
A: Gucci sweats and Reeboks.

Q: This myasthenia gravis, does it affect your memory at all?
A: Yes.

Q: And in what ways does it affect your memory?
A: I forget.

Q: You forget. Can you give us an example of something that you’ve forgotten?

Q: What was the first thing your husband said to you when he woke up that morning?
A: He said, "Where am I, Cathy?"

Q: And why did that upset you?
A: My name is Susan.

Q: Now doctor, isn’t it true that when a person dies in his sleep, he doesn’t know about it until the next morning?

Q: The youngest son, the twenty-year-old, how old is he?

Q: Were you present when your picture was taken?

Q: She had three children, right?
A: Yes.

Q: How many were boys?
A: None.

Q: Were there any girls?

Q: Doctor, how many autopsies have you performed on dead people?
A: All my autopsies are performed on dead people.

Q: Doctor, before you performed the autopsy, did you check for a pulse?
A: No.

Q: Did you check for blood pressure?
A: No.

Q: Did you check for breathing?
A: No.

Q: So, then it is possible that the patient was alive when you began the autopsy?
A: No.

Q: How can you be so sure, Doctor?
A: Because his brain was sitting on my desk in a jar.

Q: But could the patient have still been alive, nevertheless?
A: Yes, it is possible that he could have been alive and practising law somewhere!

Wills and Estate Planning

When do I need to consider a will? What is the effect of leaving this world without one?

General Information On Wills

Why Do you need a Will?

  1. Make the most difficult time for loved ones easier.
  2. Name who takes care of your children.
  3. Prevent bitter family battles. This is especially important if there has been a second marriage.
  4. Simplify the legal process.
  5. Name who gets your assets. If you do not name your beneficiaries, the law has a fixed formula for distribution of your assets.
  6. Prevent confusion.
  7. Protect the family home or business.
  8. Minimize legal costs.
  9. Eliminate cost for an administrator bond.
  10. Give consideration to your personal choices.

MATTERS OF CONCERN

  1. Do not leave it till later. DO IT NOW. Obtain peace of mind by preparing your will as soon as possible.
  2. If you die without a Will, all your money and possessions (your Estate) will be distributed according to strict legal rules and regulations. These rules are called the Laws of Intestacy. In many cases the Intestacy Laws distribute an Estate in a way the deceased would not have wanted, sometimes with disastrous results.
  3. In the event of the death of a married person the Intestacy rules divide the Estate into shares with a share going to the surviving husband or wife (the spouse). The amount a spouse can inherit is restricted to an amount set by the government. The popular belief that a spouse automatically inherits everything is simply not true.
  4. If there are no surviving members of your family then the whole Estate would go to the Crown (Government). You can imagine the possible nightmare you could leave if you die without a Will. Many people who don’t have close family would want their Estate to go to close friends or a charity rather than the Government or unknown relations.
  5. Who to select as a trustee of your will? The trustee should be one you trust to put your wishes to effect. The trustee should also be well versed in financial matters.
  6. Anyone whose circumstances have changed — perhaps through marriage, the birth of children, divorce, remarriage, or the death of a close relative, for example — should make a new Will.
  7. If you get married, any Will you made when single/divorced is revoked (cancelled). There are some exceptions to this, but it is always advisable to make a new Will after marriage.

FOR US TO PREPARE YOUR WILL, THE FOLLOWING QUESTIONS ARE MOST IMPORTANT:

  1. WHO WILL BE MY TRUSTEE?
  2. WHO WILL LOOK AFTER MY YOUNG CHILDREN?
  3. WHO DO I LEAVE MY PROPERTIES TO?

Why Should I Make A Will?
A will is essential if you are concerned about who will receive your assets and belongings after you die. It is especially important to make a will if you have a family or other dependants.

Even if you are married with dependants you will still need a will. If a husband and wife are killed together, for instance in a motor accident, the older person is presumed to have died first. If you were the younger person, you might have inherited assets from your spouse – even though you were dead – but if you had not made a will your assets would be distributed under a rigid formula regardless of what you might wish. This rigid formula is set by the Laws of Western Australia and called the Administration Act 1903.

What happens if I don’t make a will?
The legal procedures are more complicated and time consuming and may cause expense, worry and even hardship to your family.

The law provides a formula which sets out who is entitled to the property of a deceased person who does not leave a will. The formula may force you to distribute your assets in a way you would not have wanted. The biggest problem is that if there is no will, then the family has to agree on appointing a representative to handle the deceased’s estate.

Sometimes the family members cannot agree and family members then start squabbling leading to family break ups. The other problem is that you need all family members to consent to the appointment of the representative. The consents may have to be obtained from family members who are scattered to the 4 corners of the world.

It is not true that the Government takes a deceased person’s property if there is no will. This can happen only in exceptional cases where there are no close relatives or persons in a family relationship surviving the deceased.

What is a will?
A will is a legal document that names the people you want to receive the property and possessions you own at the date of your death.

These people are known as your beneficiaries. Your property and possessions include everything you own: your home, land, car, money in bank accounts, insurance policies, shares, jewellery, pictures, furniture, and so on. Making a will is the only way you can ensure your assets will be distributed in the way you want after you die.

The will should also state who you appoint as your representative to carry out your wishes in the distribution of your assets. That representative is known as the Executor.

Your representative should be some one you trust explicitly. The representative should also be financially savvy as he or she may have to invest the estate’s money. We suggest you email any queries you may have regarding wills.

As an introductory offer, Tan and Tan prepare wills for a fixed sum of $120.00 if the referral is from this website.

To Cut A Long Story Short…
We acted for a 70 year widower whose wife died without leaving a will. Prior to his wife’s death, our client and his wife had bought certain properties in their son’s name. The son was in the process of transferring the properties back to our client and his wife at the request of our client’s wife.

However the wife of our client died prior to the agreed transfer. Our client then had to sue his own natural son because his son refused to acknowledge that the properties belonged to our client and his wife. Our client was forced to endure 6 gruelling days of cross examination in the Supreme Court regarding his financial and family background. It was a lucky thing our client did not die during the process.

We won the case but at a great price to our client. His family had totally disintegrated as a result of his children fighting each other because of the failure of his wife to prepare a will. His fatherly love for his wayward son probably broke his heart even though he won the court case. Moral of the story: Make sure you prepare a will as families have broken up in many instances because of greed.

On the Light Side…
An engineer dies and reports to hell. Pretty soon, the engineer gets dissatisfied with the level of comfort in hell, and starts designing and building improvements. After a while, they’ve got air conditioning and flush toilets and escalators, and the engineer is a pretty popular guy.

One day God calls Satan up on the telephone and says with a sneer, "So, how’s it going down there in hell?"

Satan replies, "Hey things are going great. We’ve got air conditioning and flush toilets and escalators, and there’s no telling what this engineer is going to come up with next."

God replies, "What??? You’ve got an engineer? That’s a mistake — he should never have gotten down there; send him up here."

Satan says, "No way. I like having an engineer on the staff, and I’m keeping him." God says, "Send him back up here or I’ll sue."

Satan laughs uproariously and answers, "Yeah, right. And just where are you going to get a lawyer? They all come here!!