What would Darth Vader's Will look like?

A new client walks in. He’s wearing a helmet covering his face, but he assures you that he has a good medical reason for doing so, so you let that one go by. And he seems to be potentially a good client (after all, he’s dressed like royalty with all the robes and has a whole entourage of guys in hard white suits – maybe he’s an Arabian prince or something??).

So you sit him down in your office and tell him to leave his entourage out in the waiting room for privacy reasons. Okay, how can we help you?

Well, my name is Darth Eric Vader. I’m in my 40’s and currently single. My occupation is, umm, Chief Security Officer with a foreign government department. I had a wife, but she passed away during childbirth. I have two children, who are both now adults. But I only found out about them recently. They’re twins, a son Luke and a daughter Leia. My daughter was adopted by a wealthy family, whilst my son was taken in by some relatives of mine who are, umm, recently deceased. Unfortunately he’s been left to his own devices since then, and has gotten mixed up with some crowd who are a bunch of rebels.

My kids are estranged from me. That’s not their fault, nor mine, given that I never knew them until recently. But things have not gone smoothly between us. I happened to cross paths with my son on a job recently, but the meeting did not go well. I told him I was his father, but he refused to believe me and he just kept saying “Noooooooooooooooo, that’s impossible”, and I didn’t have any actual proof handy (like a birth certificate or something) so we left things at that. I really do want to find him though and turn him into a useful member of society – I really don’t like the crowd he is hanging out with, I think they are a really bad influence on him.

My daughter I think doesn’t know yet that I’m her father. Unfortunately her family, whilst wealthy, are on the wrong side of the law, so I don’t really want to provide anything for her, she’s well looked after. It’s really my son that I want to take care of when I’m gone.

I don’t think I have any other children, but I was a bit of a ladies man in my younger days, so you never know who might turn up out of the woodwork when I’m gone. Is there anything I can do about that?

As far as my assets are concerned, I’m pretty well off, but because of my work I do move around a lot, so all of my wealth is in liquid assets, mostly shares in my employer (low risk and high return, government guaranteed, and invested in ethical organisations so they’re pretty sweet!) and the rest in cash. I don’t have any life insurance (something about occupational risks), but I do have a few million in my employer’s default superfund. I live in accommodation provided by my employer.

So I want to look after my son when I die, but I also want to encourage him to turn his life around and get a decent job. Maybe with my employer, that would be nice. I don’t think I can trust him with a large inheritance straight away, not until he proves himself worthy. I don’t want to spoil him though.

And I don’t want to provide for my daughter, she’s well off as it is and she goes around acting like she’s some sort of a princess. How can I stop her making a claim on my estate? The rest I want to go to charity, there’s a really good one I like called “Sith for Kids” which takes in and looks after the orphaned kids of criminals who rebel against the Empire, and trains and educates them to become upstanding citizens.

So you make the following recommendations to Darth:

1. You need to have a Will. We would suggest that, given your son’s background, you provide for his inheritance via a “protective style” of Testamentary Trust where the trustees are persons who you know and trust will manage the monies properly. Some of the features of the trust might include:

(a)  Having a primary purpose of looking after the education, accommodation and advancement in life of Luke during his lifetime, and after his death then his own children (if any) can take over control;

(b)  Possibly allowing Luke to have access to the capital of the trust for any purpose that the trustees agree is a worthwhile purpose (eg, buying a house in Sydney), ideally by way of loan rather than as a direct gift from the trust so that if he gets into financial strife the trust can call in the loan (especially if it is secured) and safeguard his inheritance;

(c)  You might also allow him limited access to the capital of the trust for any purpose, for example his access could be “staggered” over a number of years based on his age – eg, 10% until age 30, another 20% at age 35, another 30% at age 40, and the rest at age 50;

(d)  You can also impose conditions on his access that the trustees have to enforce, such as requiring him to show that he is actively looking for gainful employment, and that he is no longer associating with his rebel crowd (it will be up to him to prove this to the trustees). In fact, in the recent case of Hickin v Carroll & Ors (No 2) [2014] NSWSC 1059, a father made gifts under his Will to his four children conditional upon them attending his funeral and becoming Roman Catholic within three months of his death, and the Court held that the condition was valid and enforceable.

2. The gift to the charity will usually be as a direct gift, not via a trust, although you can still impose conditions on the gift (such as requiring part of the gift to establish a Darth Vader Scholarship Fund or something, that’s up to you), although we would suggest that you discuss this with the charity before we finalise your Will.

3. As far as leaving your daughter out of your Will, you need to be aware that under section 57 of the NSW Succession Act 2006 she is an “eligible person” who could make a family provision claim against your estate. However, that doesn’t mean she will automatically get anything. In fact, in the recent case of Beatrice McCleary v Metlik Investments Pty Limited Beatrice McCleary v Benedict Chan; Clement Chan v Benedict Chan [2015] NSWSC 1043 it was held that the deceased (who gave the vast bulk of his considerable wealth to his son) had adequately provided for his daughters by leaving them nothing at all in his Will, because they had been well looked after already during their lives – even though what they had received was much less than what their brother inherited.

4. We would also suggest that you put your reasons for excluding your daughter (in non-inflammatory language) in a separate statutory declaration which your executors can if necessary use to help defend your estate in the event that she does try to make a claim. Under section 100 of the Succession Act 2006 such statement can be used as evidence of your reasons which can be taken into account by the Court.

5. As far as anyone else making a claim against your estate, they need to first show that they are an eligible person to make a claim, and second they need to show that adequate provision has not been made for them under your Will. Note that the Court’s role here is not to re-write your Will to achieve a “fair” disposition of your estate, but to only make the orders necessary to make adequate provision for the claimant’s proper maintenance, education and advancement in life.

The Court will take into account a variety of factors, such as the needs of the claimant for maintenance, education and advancement in life (including future needs such as the need to guard against unforeseen contingencies), the needs of any competing claimants or Will beneficiaries, the size of your estate, your relationship with the claimant, contributions the claimant may have made to your support and care and to your property, and the age, health and financial circumstances of the claimant and of any competing persons. There is also a time limit for making such a claim in NSW, being 12 months from the date of your death, although this can be extended by the Court in special circumstances.

6. Note that in NSW there are special rules that apply if you try to divest yourself of assets in order to minimise the size of your estate that may be subject to such claims. These “notional estate” rules can apply to certain prescribed transactions that were entered into within the 3 years prior to your date of death with the intention, wholly or partly, of denying or limiting provision being made out of your estate for the maintenance, education or advancement in life of any person who is entitled to apply for a family provision order, or even further back if there are special circumstances that warrant the making of a family provision order.

7. Darth might also consider establishing a Private Ancillary Fund (or PAF) as a tax-effective way to benefit his favourite charities now during his lifetime. It would enable him to establish his own charitable trust and enjoy full tax deductibility for donations into the PAF. And if Darth can reconcile with his son Luke at some point during his lifetime, Luke could one day take over the PAF. Darth could also direct funds to the PAF via his Will.

For further information or clarification please contact us on 02 8296 6266.