Case Study – Why You Should Make a Will and Have Your Affairs in Order

Jack and his wife have three young children. They own a house as joint tenants (meaning the property will pass to the survivor) and a dress-making business. Jack and his wife each make a Will leaving everything to each other and then to their children in equal shares. Jack’s wife dies unexpectedly.

Several years later…

Jill owns a dress boutique. Jill meets Jack when buying dresses from Jack’s dress-making business. Jack and Jill start dating and eventually enter into a relationship.

Jack suggests to Jill that she sells her boutique and works with him in the dress-making business. Subsequently, Jack and Jill move into Jack’s home to raise the children together.

Each morning, Jack wakes up and says, ‘Darling Jill, I love you. One day all this will be yours.’

TIME FREEZE – Is it true that one day all this will be Jill’s?

Jack owns the dress-making business and the main residence in his sole name. Jack has a Will leaving everything to his wife (who is now deceased), and on her death to the three children in equal shares. If Jack dies tomorrow, the dress-making business and the main residence will pass in accordance with Jack’s Will to the three children.

Jill would have to make a claim under the Family Provisions Act in order to receive any benefit from Jack’s Estate.

Jill continues to work in Jack’s dress-making business. Believing that the business will one day be hers if anything happens to Jack. She works very hard and long hours to develop the business for little pay. Jack and Jill build the business together. Jill continues to live in Jack’s home and they share expenses.

Each morning, Jack wakes up and says, ‘Darling Jill, I love you. One day all this will be yours’.

TIME FREEZE

The dress-making business is still in Jack’s sole name and under his control.

In accordance with Jack’s Will, the business will continue to pass to his three children. Until Jack takes steps to give Jill a share in the business she will have no direct claim to the business and will remain an employee.

The main residence remains in Jack’s name. Until Jack takes steps to transfer a share of the family home into Jill’s name, the main residence will transfer to the children in the first instance in accordance with Jack’s Will.

If Jack dies, Jill would have to make a claim under the Family Provisions Act in order to receive any benefit from Jack’s Estate.

Jack and Jill get married. They continue to live in Jack’s home and work together in the dress-making business, which by now, is three times its original size.

Each morning, Jack wakes up and says, ‘Darling Jill, I love you. One day all this will be yours.’

After several happy and prosperous years of marriage, Jack passes away.

After the funeral, Jack’s three children inform Jill that Jack had made a Will leaving everything to them and that they now wish to sell the dress-making business as neither of the three children have any interest in developing the business further. They also inform Jill that they wish to sell the main residence as they have no further use for what was previously the family home.

Jill is confused. She recalls Jack’s words each morning, ‘Darling Jill, I love you. One day all this will be yours.’ She makes the decision to go and see a lawyer.

The lawyer explains to her the good news that in WA marriage and divorce makes a Will null and void. In effect, because Jack and Jill got married, Jack’s Will is no longer valid and Jack is deemed to have died intestate (ie. without leaving a Will). Consequently, Jack’s Estate will be distributed in accordance with the rules governing intestacy. The bad news is that under the rules of intestacy, Jill will only receive the first $50,000.00 and one third of the total Estate. The remaining two thirds will pass to the three children.

Unless Jill has surplus funds to pay out the three children’s share this will mean in reality that the dress-making business and the family home will both need to be sold in order to provide two thirds of their value to Jack’s three children.

When Jill protests that she has spent the last 20 years working long hours to build the business up at a much-reduced rate of pay because she was told that one day the business would be hers, the lawyer explains that she can make an application to the Court to vary the entitlement but that this will be very expensive.

Conclusion

We all work hard and want to provide for our families. It is imperative that we take the step to ensure that our affairs are in order if we want to be certain that our estate will pass to our chosen loved ones and not be distributed in accordance with statute law which will predetermine who receives your Estate.

At Brook Legal we offer free advice relating to Estate Planning, binding nominations, superannuation entitlements and Mutual Wills with every Will prepared, and we prepare Enduring Powers of Attorney and Enduring Powers of Guardianship where required.

Call (08) 9287 1855 now to receive assistance in putting your affairs in order.