Opinion
Court decision overruling legal will sets troubling precedent
Money columnist
It is important to have an updated and valid will, but many people don’t understand that some assets fall outside it. These include money in superannuation, insurance bonds and assets held as joint tenants.
Joint tenancies are known in law as "will substitutes" in that they take the place of a will and even have precedence over it.
In NSW, we don’t just have an “estate” - we can have a “notional estate”.Credit:
If an asset, such as a house, is held in joint tenancy, then the entire asset passes to the survivor on death of the other joint tenant, irrespective of what the will stipulates. This happens even if the someone dies intestate (not having made a will), in which case the estate is divided in terms of the laws of intestacy.
If assets are held as tenants in common, the part owned by the deceased may be transferred under the terms of their will.
The major challenge in this area is that the law is continually changing, the outcome may depend on which state in which you live, and most people’s circumstances are fluid. Relationships change, people may die or become incapacitated, some assets may be sold and others acquired. To make it even more confusing, some assets form part of the estate and some do not.
Historically, it was recognised that when one of the joint owners of an asset held in joint names died, the asset automatically passed to the surviving owner irrespective of the terms of a will.
However, in February, the NSW Court of Appeal handed down judgement of Cowap v Cowap in such a manner that the deceased’s will was effectively ignored.
Geoffrey Cowap died in December, 2015, and was survived by his wife, Barbara, of 57 years.
At the time of his death, they had five children between them, and she had several children from a previous marriage, including Nicholas, who was adopted by Geoffrey.
The couple's only significant asset was their family home, worth about $1.35 million. As it was held in joint names, it automatically passed to the widow on Geoffrey’s death.
The estate was almost worthless apart from the house that passed to Barbara.
However, Nicholas suffered a series of heart attacks in May 2016 that left him with permanent brain injuries that prevented him from working and from being self-sufficient. He sued the estate to obtain a share of the value of the house, even though it was not part of the estate.
The primary judge’s decision, after weighing each party’s needs against one another, ruled that even though Geoffrey and Barbara had been joint tenants, the law in NSW permitted the court to claw back the property and call it part of Geoffrey’s "notional estate". The Court of Appeal agreed.
The court ordered the house be sold and $600,000 of the proceeds be awarded to Nicholas on the grounds of his need. At the time of the appeal judgment, Nicholas was 64 and Barbara was 91.
So now, in NSW at least, we don’t just have an “estate”; we can have a “notional estate”. As one lawyer recently opined, there is now no such thing as a watertight will.