Make your last wishes everlasting

When wealthy Sydney philanthropist Virginia Kahlbetzer died in 2013, she left a final bequest to the Garvan Institute of Medical Research. Now her 49-year-old son, John, a wealthy businessman and resident of Monaco, is chasing a share of his mother's estate in the NSW Supreme Court for his "maintenance and advancement in life".

Earlier this year, the secret daughter of late Perth billionaire Michael Wright successfully challenged her father's will, claiming she was entitled to more than the $3 million he left her. The court agreed and awarded 18-year-old Olivia Mead $25 million.

These cases illustrate how difficult it can be to craft a will that can't be challenged, although success isn't guaranteed.

In February, a mistress of late billionaire businessman Richard Pratt, Madison Ashton, lost a six-year legal battle for a multimillion-dollar slice of his estate.

No firm data exists on the number of wills contested in Australia, but academic studies suggest that the number is growing.

The size of the will doesn't seem to be a factor, says Cheryl Tilse, lead researcher of a recent University of Queensland study, Having the last word? Will making and contestation in Australia.

However, if it's a large estate, there appears to be a growing tendency to "have a go", she says. "Lawyers tell us that `go-away money' is an issue with large estates."

This trend is reflected in the tightening of family provision legislation in Victoria earlier this year, as well as a rise in aggressive marketing by lawyers spruiking "Get what you are entitled to", "Do you have a case?" and "No win, no fee".

When wills are challenged, there is a high rate of success. About three-quarters of contested estates result in a change of distribution.

The only way to avoid a challenge is to leave nothing in your estate, says Anna Hacker, national manager estate planning at Equity Trustees.

In other words, give money away while you are alive or put it out of the reach of your will in some form of trust, where it can be directed to chosen beneficiaries, but even that is not bulletproof.

All states and territories have their own family provision laws, saying who is eligible to make a claim. Generally speaking, an eligible person is a spouse or de-facto partner of the deceased, former spouse, children or a financial dependent such as a carer.

"Fairness is not the issue," says the principal of Townsends Business and Corporate Lawyers, Peter Townsend. "It's more about ensuring an eligible person is adequately looked after. It's not supposed to be a reward or a punishment, but based on financial need."

When claims are made, the court must strike a balance between the need of a claimant, the competing needs of other beneficiaries and the value of the estate, which was a factor in Wright's estate.

Community expectations also play a role. There is a commonly held view in Australia that the family should be provided for first, before money is left to charity. "It's hard to bypass the kids", Hacker says.

According to the University of Queensland study, only 16 per cent of Australians say it's important to include charities in your will. Almost all parents say they would leave the kids equal shares. Unequal shares are more likely in blended families or if one child has already received financial assistance, has a disability or is in line to take over the family business. People without partners or children were more likely to prioritise providing for carers, friends or pets before charities.

Where a will is contested, most claimants are adult children in conflict with siblings or their parent's partner. Unfortunately, the report concluded that greed, not need, was often the driving force.

Claims by partners and ex-partners are most successful, followed by children, extended family and others.

"If you feel strongly about a charitable bequest, then there are strategies other than simply writing it in your will", says the acting chief executive of Philanthropy Australia, Chris Wootton.

It is easier to safeguard a charitable bequest if you have a history of donating to that charity and you use a structure such as a private ancillary fund, sub-fund in a public ancillary fund, private charitable trust or testamentary trust.

Victoria recently changed its legislation from one of the broadest interpretations of eligible claimants to one of the strictest. In the past, neighbours and even business associates were testing their hand in court. Now, claimants must show a family connection and/or financial dependence on the deceased.

NSW has the toughest family provision laws, thanks to the concept of the notional estate which allows claimants to pursue assets held outside the will in structures such as superannuation, family trusts and charitable trusts.

The court is more likely to make a notional estate order if the will maker transferred assets within three years of their death with the intention of cutting someone out of their will. In making a decision, the court will look for things such as a history of disputes between the deceased and the claimant. A similar principle applies to deathbed bequests to people who might be viewed as gold-diggers. If the bequest is challenged by the family, the court will look at the history of the relationship.

Cases involving suspected gold-diggers are often settled before they come to court to avoid embarrassment, Hacker says. If there's a boarder who says he had a sexual relationship with grandma, for example, the last thing the family wants is to air that in court.

Townsend urges families to look after ageing parents and relatives. "Where that vacuum exists, someone will move in to fill it," he says.

Almost 60 per cent of Australians have a will, rising to 93 per cent of people over 70, but, as important as it is to have a will, making it watertight is another matter.

"To the extent that you may have not adequately provided for an eligible person, there is no such thing as a watertight will," Townsend says. The best you can do is to understand the laws of succession and to provide for family members who might have a legitimate claim on your estate.

Unfortunately, fairness and rationality are the first casualties where family money is concerned, even with relatively modest estates. In one case, a grandfather died leaving a house worth $400,000 and a small bank account. In his will he left 90 per cent to his daughter and 10 per cent to his grandson. She made a family provision claim for the 10 per cent, despite advice that she was likely to lose.

The judge ruled in favour of her son and awarded indemnity costs (100 per cent of court costs). Instead of a $360,000 inheritance, she got $200,000. The rest went on legal costs", Townsend says.

The cost of challenging a will varies from state to state, but it can be substantial. The first step is generally mediation, which can cost $80,000 to $120,000 before a matter gets to court, Hacker says.

According to the University of Queensland study, a review of contested cases handled by Public Trustees found that the median cost to estates was $11,900, but as high as $500,000. The individuals involved incurred additional costs of up to $105,000.

"People often think they are making a claim on a matter of principle or because it's `what Mum wanted', but when they see the costs involved, they may rethink their principles," Hacker says.

The costs aren't just financial. While 18 per cent of relationships were poor before the contents of the will were known, this jumped to 26 per cent afterwards. It can take years for cases to be settled, adding to friction between family members.

If you want to exclude someone from your will or leave more to one child than another, you need to make your reasons clear, preferably in a separate letter or affidavit that can be brought out in court. your The affidavit needs to be honest and factual, not emotional, Hacker says and to provide as much evidence as possible. She cites one case where a mother kept nasty letters a daughter had sent her to support her decision to exclude the daughter from her will, and these were used successfully in court.

To minimise potential challenges to your will:

Sydney Morning Herald