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Feb 06
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Statutory Wills and Testamentary Capacity

By Will No Comments

Testamentary capacity is necessary and significant when making, updating, or revoking a will. It refers to the person’s mental state when formally executing their testamentary intentions.

If someone lacked testamentary capacity and had made a will at such a time, its validity is in great question. If a prospective will-maker lacks testamentary capacity but tries to execute a will anyway, this can be quite complex for the family and any other eligible persons left behind.

However, if someone lacks testamentary capacity. the law allows for another will to be made, but on strict circumstances.

Statutory Will

A court-ordered instrument can be created to help the person make, update, or revoke their Will.

It is known as a Statutory Will, designed to assist testators who lack testamentary capacity to form valid testamentary intentions to ensure that their estate is best dealt with and protected in accordance with their wishes. The effect of a Statutory Will means that even if they lack the capacity to make a will, they can still have one validly executed, as ordered by the Court.

In this circumstance, the Supreme Court, under s 18 of the Succession Act 2006 (“the Act”), has the power to “authorise a Will to be made, altered or revoked for a person without testamentary capacity” upon application by some other person.

Type of capacity issues that can give rise to granting a statutory will

While medical assessments can assist in assessing a person’s capacity to make a Will, whether one lacks testamentary capacity is ultimately a legal test. It considers the mental state of the person who has made, or wishes to make, their Will, at the time of this request.

As we have established, testamentary capacity refers to whether someone has the mental ability to make a Will. Therefore, any factors relating to the cognitive abilities of the will-maker (or “testator”) will be considered. Examples of individuals who may lack testamentary capacity are those who suffer from cognitive decline (such as dementia), have been diagnosed with an intellectual disability, or are a minor at law, and, unless otherwise exempted, cannot execute a valid will.

If a testator does not have this mental ability, there are three capacity categories that the court may consider. These are lost capacity, nil capacity, and pre-limited capacity.[1]

1. Lost capacity

A testator who has lost capacity for making a will may have a genuine need to change their Will or make a new one altogether. This may arise if, for example, a sole or significant beneficiary dies and the person’s existing will does not make allowance for what might then happen. If this happens, that person who lacks or has lost capacity cannot make another valid will or update their existing Will (also known as a “codicil”). If there is no one to challenge the Will and to make a successful family provision claim; there would need to be total or impartial intestacy (if there is no valid will when you die, intestacy laws set out the way in which an estate will be distributed). If there is no one to take the Estate upon the intestacy, some or all of the estate might fall to the Crown and not to any of the desired or entitled beneficiaries.[2]

2. Nil capacity

This matter could arise, for example, if there are no family or eligible persons who survive the deceased or have been able to form any relationship of a kind, entitling a claim under the family provision legislation. Statutory wills are available for people with nil capacity and can help them validity leave their estate to whom they wish.[4]

3. Pre-empted capacity

Nil capacity cases involve people who have never had testamentary capacity, usually because of mental infirmity from an early age.[3] In some of these types of cases, the incapacitated person may be in possession of valuable property, which emphasises the importance of having a legally executed instrument to protect their estate for when they pass.

Pre-empted capacity can be present in cases where a person, though still a minor and therefore lacking testamentary capacity, was old enough to form relationships and express reasonable wishes about their assets before losing testamentary capacity.

A typical example would be a person of seventeen years of age who suffers severe and permanent brain injury from a motor vehicle accident and is subsequently awarded extensive damages.

While the Act holds that minors are not eligible to make a valid will, if such a person is in a position where they could form relationships and express their testamentary wishes, the Court may order a Statutory Will.[5]

So, when a person wants to make a will, but lacks testamentary capacity, they can apply for a Statutory will.

If a person makes, alters, or revokes a Will at a time that they lack testamentary capacity, their Will might be challenged on those grounds, and that Will, codicil, or revocation may be held invalid. If a Will is made, or being considered, or updated by the person who is held to have lacked testamentary capacity, at law, that person would be held to have died intestate (which, essentially, has the same effect as dying without a Will).

Depending on the type of claim that may arise by an eligible person against the estate, leaving an invalid will results in not having any will at all.

The potential for family provision claims can arise whether a person leaves a will, or not. While the testator can make provisions in their Will to best reflect the protection of their estate in accordance with their wishes, whether a family member or beneficiary makes a claim upon their estate is out of their control.

When would a Statutory be needed, and who can apply?

As shown in the tables below (Figures 1 and 2), each jurisdiction has provisions for who can apply for a Statutory Will in Australia.

 Standing to apply
NSW‘on application by a person’ s 18(1) Succession Act 2006 (NSW)
QLD‘on application’ s 21(1) Succession Act 1981 (QLD)
ACT‘on application’ s 16A(1) Wills Act 1968 (ACT)
NT‘on application’ s 19(1) Wills Act 2000 (NT)
Figure 1[6]

 Standing to apply
WA‘on application made by any person’ s 40(1) Wills Act 1970 (WA)
TAS‘on application by any person’ s 22(1) Wills Act 2008 (TAS)
VIC‘any person may make an application for an order under this section’ s 21(2) Wills Act 1997 (VIC)
SA‘on application made by any person’ s 7(1) Wills Act 1936 (SA)
Figure 2[7]

In most states, leave [or permission] is required from the Court to proceed with the application. However, there are exceptions in WA and Victoria, in which the evidence is provided with the application.[8]

Nevertheless, the Court must still be satisfied that an applicant is an appropriate person in most states. That is done when leave is considered by the Court for the application to proceed.

The court must also be satisfied that the person applying for the Statutory Will is qualified

Keeping in mind that there are subtle differences between the various jurisdictions, these are the issues the Court must consider in the application procedure for a statutory will:

  • An applicant is an appropriate person;
  • The person whose will is under consideration is incapable of making a will or lacks testamentary capacity;
  • Adequate steps have been taken to allow persons with a proper interest to be represented; and
  • The proposed will is one which the person would have made if the individual had testamentary capacity (or if, in Victoria, reflects their likely intentions or what those intentions might reasonably be expected to be).[9]

There is a ‘core test’ when the Court considers the proposed Will

The core test involves an assessment by the Court, as to whether the proposed will, codicil, or will revocation best reflect the anticipated intentions and wishes of the will-maker. This test is assessed based on what or whom the person who lacks capacity would have been likely to include in their will if they possessed the capacity to execute one themselves.[10]

The core test is not uniform across Australia.

In Queensland (QLD), Western Australia (WA), and the Northern Territory (NT), the legislation appears to have a lower threshold requiring that the proposed Will is one that the person might have made.

This test is differently stated in NSW, Tasmania, and the ACT, which has the requirement that the Will would have been “reasonably likely to be one that would have been made.”[11]

In Re Will of Jane [2011] NSWSC 624, the NSW Court’s concern under s 22(b) of the Act was with the actual or reasonably likely, subjective intention of the person lacking capacity. With this in mind, the Court discussed the following:

  • It is the specific individual [incapable of making a will], [who] must be considered;
  • It is not an objective or hypothetical person;
  • The jurisdiction of the Court is to make a statutory will [which] … would have been made by that person [at the time of the hearing of the application]; and

if the person had testamentary capacity.[12]

Further, the case of R v J [2017] WASC 53 (“R v J”)is a primary example of how a statutory will can be granted by the Court to benefit the will-maker.

R v J involved an application made to the Court, to grant a statutory will to remove the will-maker’s father from conferring any benefit from his estate. The testator was estranged from his father. The Court granted the statutory will, and the father was removed as a beneficiary.

This example shows how an application for a statutory will can be granted if the testator has lost the capacity to amend the will themself to best reflect their wishes despite their lack or absence of testamentary capacity.

Elderlaw Legal Services notes that this article is written for the purpose of providing generalised information and not to provide specialised legal advice. If you require qualified legal advice on anything mentioned in this article, our experienced team of solicitors at Elderlaw Legal Services are here to help. Please get in touch with us on 02 9979 1009 today to make an enquiry.

[1] Rodney Lewis, Elderlaw Legal Services (2019), ‘The Use of Statutory Wills to Protect Elderly Testators’ Capacity, Care and Control: The Second Annual Elder Law Symposium, Marriott Hotel Melbourne, Australia.

[2] Op Cit.

[3] ibid.

[4] Ibid 7.

[5] Ibid.

[6] Above n 1.

[7] Above n 1.

[8] Above n 1.

[9] Above n 1.

[10] Above n 2.

[11] Above n 1.

[12] Re Will of Jane [2011] NSWSC 624; Above n 1.

Feb 03
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Estate Plan

Capacity Issues and Cognitive Decline: Why You Should Have an up-to-date Estate Plan

By Estate Planning, Will No Comments

An Estate Plan allows an arrangement of your affairs in the way that is desired how your estate will be distributed once you are no longer around.

However, in the event the mental capacity of the testator comes into question, creating or making updates to your Estate Plan may give rise to its own sets of challenges.

While cognitive decline is not exactly a light-hearted topic to discuss, it’s very important to consider when it comes to how you want to distribute your property and other financial assets while you still retain your legal capacity.

As we age, the unfortunate reality for some of us is that our cognitive abilities can begin to decline. when our memory and awareness do not align with the requisite criteria for testamentary capacity, problems may arise when we desire to execute legally binding documents, such as those relevant to an estate plan.

if issues do arise regarding your decision-making capacity during your lifetime, having an up-to-date estate plan allows the people you trust to make financial and health-related decisions on your behalf.

Types of capacity issues and their relevance to Estate Planning

At law, testamentary capacity refers to possessing the mental ability to understand the nature and effect of the document which make, to execute your testamentary intentions. this includes your capacity to make, alter or revoke a valid will.

Decision-making capacity refers to the mental ability to make decisions. This can include decisions about where to live, paying bills, and consenting to medical treatment.

Estate Plans are uniquely structured to best reflect the financial and health care requirements and protections for the individual. The documents and their contents will vary depending on the specific circumstances of the person making them, considering the extent of their financial wealth and/or their care and health needs.

Estate planning, or “Succession planning”, may include the implementation of testamentary trusts, discretionary and unit, business and asset holding, superannuation funds, and binding death benefit nominations,”[1] to name a few.

However, an Estate Plan is not limited to any one set of documents, but is catered to the needs, wishes, and circumstances of the individual. With professional assistance, the tricky territory that comes with ageing and possibly with cognitive decline, can be skilfully navigated.

Generally, a standard Estate Plan will consider at least three fundamental documents (or their equivalents, depending on the legislation in the state or territory in which the person lives). These three primary documents are:

  • a Will,
  • Power of Attorney (POA) (or Enduring Power of Attorney (EPOA)), and
  • an Appointment of an Enduring Guardian (AEG).

Will

The right of a person to be able to make any arrangements they want regarding their will, is in tension with the legal policy issue of having to make appropriate provisions for those persons in need as well as those who are entitled to make a claim on the testator’s (the person who makes the will) bounty.[2] The leading authority that sets out the capacity test for making a will is the decision of Cockburn CJ in Banks v Goodfellow[3](“Banks”). The cases of Timbury v Coffee,[4] and Bull v Fulton,[5] two cases from the early 1940s, further elaborate and apply the principles from Banks.

The elements of the capacity test require that the testator…

  • Must understand the nature and the effect of the will at the time it is made
  • Must understand the extent of their property
  • Should consider moral claims made by any potential beneficiaries
  • Must not be influenced by insane delusions

Power of Attorney [EPOA] and Appointment of Enduring Guardian [EGA]

Generally, a POA gives another person or persons (as appointed by you) the power to make financial decisions on your behalf. While not the only reason, the appointed attorney’s powers can come into play if, for example, the appointor suffers from cognitive decline to the extent that they lack legal capacity to make their own decisions rationally. Those appointed, then, may make financial decisions, either solely or together with another attorney, on your behalf when you are not in the position to do so yourself. The capacity test requires that the person making the EPOA understands its nature and effect.

On the other hand, a guardianship appointment generally provides the appointees the power to make health and lifestyle decisions on your behalf. Their powers can come into effect when you are no longer mentally or physically capable (or are otherwise not in a position) to carry out these wishes yourself. The appointed guardian/s must act in a way that serves your best interests, and their powers will vary based on the particular provisions you allocate to them when you execute the document.

Once again, the same test applies as for the EPOA. The appointer must understand the nature and effect of the document.

POA’s and AEG’s are often described as “living wills” because they are designed to protect your personal wishes best while you are still alive. It is best to prepare the person whom you appoint to act on your behalf to manage your affairs before becoming unable to take care of those matters yourself.

So why does Cognitive Decline impact your Estate Planning abilities, and what is the legal test for capacity?

As we age, we may experience our mental sharpness gradually decline, such that it is not be as strong as it once was.

As established previously, if you are held to be legally incapable (i.e., you lack testamentary capacity), with the exception of a court-granted statutory will, you cannot validly execute your Estate Planning documents.

When it comes to one’s cognitive ability, “[t]o determine whether an individual has the capacity to make a particular decision at a particular point in time, it is necessary to consider the:

  • meaning of legal capacity;
  • relevant standard of capacity; and
  • means of assessing whether the person can meet the required standard.”[6]

What is the difference between testamentary capacity and decision-making capacity?

As established, testamentary capacity is important when executing a valid will and/or other documents in relation to Estate Planning.

A special and long-standing historical case, which addresses tests for making a will, shows us the essential difference between the capacity to make a testamentary instrument and decision-making capacity.

For most other legal commitments, documents and instruments and transactions, there is a more general test which arises from the High Court case of Gibbons v Wright.”

Gibbons v Wright

The case of Gibbons v Wright[7] is the leading case in Australia regarding the issue of capacity when entering into agreements (but not wills) that are legally binding.

The case notes that “[t]he law does not prescribe any fixed standard of sanity as requisite for the validity of all transactions. It requires in relation to each particular matter or piece of business transacted, that each party shall have such soundness of mind as to be capable of understanding the general nature of what he is doing by his participation.”[8]

In other words, there is no “one size fits all” approach to assessing capacity, and such an assessment is to be made on a case-by-case basis. With that said, it must be established that each person privy to the agreement is capable of understanding the nature and effect of what the agreement entails.

What is the General Test for Capacity?

The following table[9] provides guidance regarding different types of decisions and their corresponding general capacity tests, which are also relevant to decisions made in accordance with an Estate Plan:

DECISIONGENERAL CAPACITY TEST
Making a guardianship appointmentUnderstand the nature and effect of the document at the time it is made
Advance care directiveUnderstand the nature and effect of the document at the time it is made
Medical and dental treatmentUnderstand the nature and effect of the actual treatment being proposed at the time consent is required.  
ContractsUnderstand the nature and effect of the specific contract at the time it is made
Financial decisionsCan the person manage their own affairs? If not, is there a risk of disadvantage or loss or waste of money?
Making a power of attorneyUnderstand the nature and effect of the document at the time it is made
Making a willUnderstand the nature and effect of the will at the time it is made. That includes: Who would normally be expected to benefit?Who of family and friends would expect a benefit?Who might claim a benefit?Is the will made freely and voluntarily?Is the will made with the testator’s knowledge and approval?
Capacity to marryThe capacity to marry is dependent on being able to understand the nature of the relationship of marriage
Capacity to make gifts – for example: transfers for nil or nominal considerationSame test as for making a will

Our experience team of solicitors at Elder Law Services can help you resolve disputes concerning capacity to make decisions and sign documents.

Furthermore, whether it is a complex will, or a minor update to your existing estate plan, we are ready to assist you with your estate planning.

At Elderlaw Legal Services, we recognise the importance of an appropriate and well-structured Estate Plan that can ensure that your affairs are taken care of both while you are alive and when you are no longer around— such that your estate can be efficiently passed on to your intended beneficiaries. If you are ready to create or make updates to your Estate Plan, the team at Elderlaw Legal Services are ready to assist you. Contact us today on 02 9979 1009.

Please note that the content of this article is for general informational purposes only and not for the purpose of providing specialised legal advice.

[1]Lewis, Rodney, ‘Capacity, Decline and Ageing Clients’ (2020), Television Education Centre, Armidale, Sydney, Australia.

[2] See Lewis, R, Elder Law in Australia, 2nd edn, Lexis Nexis, Sydney 2011.

[3] (1870) LR 5 QB 549.

[4] (1941) 66 CLR 277.

[5] (1942) 66 CLR 295.

[6] Lewis, Rodney (2021) ‘“Now Where Was I? Dealing with Capacity, Cognitive Decline and Ageing Clients’ (Draft Paper for Ten Armidale – Capacity etc V2 15.01.2021).

[7] Ibid; (1954) CLR 423 at 437 per Dixon CJ, Kitto and Taylor JJ.

[8] Ibid.

[9] See Lewis, (n 2); see also Guthrie v Spence [2009] NSWCA 369 at [174].