Ensuring your estate planning arrangements are adequate to meet your needs is vitally important for both you and your family. We have provided the following case study to highlight a scenario that identifies why estate planning is important.
John lived in Moree. A divorced ex‑shearer and farm hand, he had two sons whom he hadn’t seen in several years. He spent most of his days in the local pub, where he worked part-time cleaning up. John’s only sister, Myra, lived in Western Australia and while they spoke once or twice a year, they were not particularly close.
Two weeks after his 67th birthday, John died of lung cancer relatively quickly. Myra was not able to be at his bedside for his passing and John’s sons arranged the funeral.
Myra received a letter from a solicitor four weeks later, informing her (to her surprise) that she was the executor of John’s estate. The letter stated that she should contact the children who were the named beneficiaries and begin the process of identifying John’s estate.
Myra had no idea where to start and was not able to get away from work for a couple of weeks. She eventually rang John’s sons, flew to Moree and began the process. Collecting the paperwork, superannuation information and bills took around four and half months to complete, most of which happened from Myra’s home. In that time a local grass fire spread to the house and burned it to the ground.
Dismayed, Myra sort to find the house insurance. To her dismay it had lapsed two weeks after his death. Myra contacted the insurance company to be told that due to non-payment of the premium, the house had been uninsured for more than 90 days, so the policy had therefore lapsed and they would not pay the claim. As the house had been uninhabited for more than 90 days, under the terms of the policy, the insurer would not have paid the claim, even if the premium was paid.
Myra spoke to the solicitor to discover that as executor, she was legally obliged to properly protect the assets of the estate (it is widely accepted that this means properly insuring estate property, such as houses and cars). Failing to have in place the appropriate insurance meant that she could be held legally liable for the value of the house. Upon hearing of the fire, John’s two children sought legal advice and took action against Myra for her
“… failure to properly execute her duties as executor of the estate of the late John”.
Myra was unable to use the other assets of the estate to settle this lawsuit, as they ‘belonged’ to the beneficiaries, not her. As is often the case, Myra settled the matter out of court and had to borrow more than $75,000 against her own house (and contribute $25,000 from her savings) to pay her nephews’ and her own legal bills.
(Source: Financial Planning Association of Australia)
It’s always important to know your rights and obligations, even with assets that you administer. As always, we suggest you seek quality advice from adequately experienced professionals. Please do not hesitate to contact us on (07) 3284 7875 for any assistance or to be referred to a quality solicitor/estate expert.
