The Court Creates a ‘Statutory Will’ for a Child Lacking Testamentary Capacity’

The Australian recently reported a story under the headline ‘No will, but the judge finds a way to distribute dying boy’s “many millions”’. As reported, the situation concerned a boy, aged 13, who had suffered brain injuries at birth for which he had received substantial compensation and now had a fortune of almost $9 million.

The boy needed an urgent operation on his lungs, which he might not have survived. Clearly, he had no capacity to make a Will and should he die, his parents would inherit his fortune equally under the intestacy (no Will) rules. The mother was unhappy with this as she considered that the boy’s father had effectively abandoned caring for their son when they had separated when the child was aged 7. Accordingly, she made an application to the New South Wales Supreme Court asking that the Court make a Will on behalf of her son prior to the imminent dangerous surgical procedure.

The Court was concerned that the father had little time to be properly represented but, in view of the operation, agreed a Will that gave the mother 42.5% of the residual estate, the father 15% and the remaining 42.5% to the boy’s six siblings. The boy survived the operation and the matter came back to Court with the boy’s father arguing his contribution had been understated, with the award amounting to little more than 3% of the total estate. The Court, however, accepted the mother’s proposal that the father should receive a lower amount still.

These cases, A Ltd v J (2017) and the subsequent A Ltd (No.2) v J (2017) are examples of statutory Wills, authorised by the Court, for a person with ‘nil capacity’ to make a Will themselves.

What is a court authorised statutory Will?

Many people will be aware that the usual position is that a person who does not have the required legal capacity (‘testamentary capacity’) cannot make a valid Will.  However, the Succession Act 2006 changed that position in certain circumstances. A statutory Will is one that is ordered by the Supreme Court for a person lacking the capacity to make a Will for themselves. This may be because of ‘lost capacity’ through illness or an accident, ‘nil capacity’, where a person has been mentally incapable since birth, or pre-emptive capacity, where a minor was previously able to express wishes about property before losing testamentary capacity by, for example, suffering brain damage in an accident.  Once the Court is satisfied that a person lacks testamentary capacity it will consider, in determining whether to make a Will, if it is reasonably likely that it would have been made by the individual if that person had the capacity to do it themselves.

The NSW Supreme Court considered its new powers for the first time in 2009 in two cases: Re Fenwick and Re Charles. Re Charles, for example, involved a minor who had sustained head injuries at just four months of age and had been awarded damages. The Public Trustee held these funds in trust for him until he became 18 years of age. If Charles, as he was known, was to die intestate his estate would go to his parents in equal shares. The issue was that the parents were suspected of deliberately causing the head injuries and the Minister for Community Services felt the parents should not benefit from Charles’ intestacy and that the estate should all go to his sister. This was granted and a statutory Will made as proposed. The judge found that Charles ‘never had, and never will have, testamentary capacity’ describing the case as a ‘nil capacity case’.

Key issues

Testamentary capacity

In deciding the two cases, the judge affirmed that the test of testamentary capacity is as in the long-standing English case of Banks v Goodfellow (1870), which is based on the Will-maker understanding the nature of the Will and its effect.

Reasonableness

The test for a proposed Will, alteration or revocation, is that the Court must be satisfied that the person in question does not have testamentary capacity but also that it is satisfied that the Will is reasonably likely to be one that would have been made by that person had they been able to do so.

What does it mean?

A Ltd v J (2017) and Re Charles are examples of ‘nil capacity’ cases but opportunities for applying for a statutory Will occur under the two other categories mentioned too.

A statutory Will is a significant estate planning development that can provide tax and asset protection benefits to beneficiaries if used correctly. One benefit of a statutory Will is, for example, the situation where it can prevent an estate passing to someone who would no longer have been a beneficiary had the individual still had the capacity to make a new Will. But there are limits! In Hausfield v Hausfield (2012) the NSW Supreme Court refused to alter a Will when a son was facing bankruptcy and wanted to divert his inheritance to his wife. The Court accepted it was reasonably likely that the incapacitated father would have agreed to this but the purpose of avoiding creditors made it inappropriate.

Anyone can make an application for a statutory Will but there obviously needs to be good reasons, and a checklist outlines these in s.19 of the Succession Act.

A statutory Will can be a useful way of ensuring a person’s intentions can be fulfilled even where capacity to make a Will has been lost.

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