Queensland has updated the Capacity Assessment Guidelines which are to be applied in assessing an adult’s capacity to make decisions. The Guidelines assists practitioners, families and the public in testing the key criteria of capacity. The following summarises the critical sections of the Guidelines.
What is capacity?
Capacity is a legal term referring to the ability to exercise the decision-making process.
When an adult has capacity to make a certain decision, they are able to:
» understand and retain (even for a short while) the information relating to the decision
» understand the main choices available
» understand and weigh up the consequences of the choices
» communicate the decision
» make a decision freely and voluntarily.
It is the adult’s ability to exercise the decision-making process that is assessed when you carry out a capacity assessment.
It is important to remember that while an intellectual or cognitive impairment might impact on an
adult’s decision-making ability, it doesn’t necessarily mean they lack capacity. The same can be said
for mental illness, brain injury, dementia and age. Whether the adult makes a decision that others
might think is wrong, risky or immoral is also irrelevant.
The five principals in assessment of capacity:
- Always presume an adult has capacity: Under the law it is not up to the adult in question to prove they have capacity. It is presumed that every adult has capacity to make all decisions until proven otherwise. This presumption is not affected by any personal characteristics such as disability, mental illness or age (if the person is over 18 years of age). The responsibility is on the person seeking to challenge the adult’s decision-making capacity to prove the adult has impaired capacity. This can be done through a capacity assessment.
- Capacity is decision-specific and time-specific: Capacity is specific to the type of decision to be made and the time the decision is made. Someone might have capacity to make certain types of decisions (e.g. a personal decision about where to live) and not others (e.g. a financial decision about whether to sell their house).
- Provide the adult with the support and information they need to make and communicate decisions:
- Capacity can fluctuate: Capacity can change or fluctuate. An adult with a medical condition or illness may temporarily lose capacity, but then regain capacity at a later date. On the other hand, an adult with dementia or delirium, for example, might have capacity on some days (or during some parts of the day)and not others.
- Capacity can change with support: An adult’s capacity can improve depending on the support available to them. For this reason, an adult cannot be found to lack capacity until all practical steps have been taken to provide the support and information needed to make the decision.
- Assess the adult’s decision-making ability rather than the decision they make: An adult is free to make bad or poor decisions, provided they have the decision-making ability to make that decision. It is not the decision that is tested, but the capacity to make any decision.
- Respect the adult’s dignity and privacy: This process is perhaps the most invasive and overwhelming in the adult’s life. At all times, the adult is to be given dignity and privacy in the process and given full advantage of assistance to ensure that the adult’s decision-making capacity is truly impaired. Planning the capacity ahead of time and performing the assessment in circumstances comfortable to the adult are critical.
Tests of Capacity:
- General test of capacity —is applied when assessing capacity for decisions about personal,
health or financial matters. This test requires the adult to:
- understand the nature and effect of decisions about the matter;
- freely and voluntarily make decisions about the matter; and
- communicate the decision in some way.
- Test for making an enduring document—is applied when assessing capacity for making an
advance health directive or enduring power of attorney. This test requires the adult to:
- understand the nature and effect of the document. The law requires the adult to actually understand the powers the document gives and when it operates and how and when it can be cancelled or revoked; and
- make the document freely and voluntarily.
Our practitioners are frequently called to assist families in both the making of estate planning documents, and in effecting processes once loved ones lose capacity or there is a question of a loss of capacity. We are compassionate and understanding, and can assist in a wide range of services when this time comes.
If you or your family has a concern about capacity or wishes to make estate planning instruments, please do not hesitate to contact our scheduling director, Vicki Baker, on 61 7 5574 3560 or Vicki@nautiluslaw.com.au to arrange a meeting. We conduct meetings by Zoom or in person.
Thank you – Katrina Elizabeth Brown, Senior Lawyer (Katrina@nautiluslaw.com.au)
A Will is one of the most important legal documents you will make and must be tailored in accordance with your individual needs. It sets out your wishes for the distribution of your estate and provides directions as to who is appointed as your executor and how they should manage your estate.
The failure to execute a Will before your death will mean that you die ‘intestate’, leaving your assets to be distributed in accordance with legislative provisions (in Queensland, this is pursuant to the Succession Act 1981 (QLD) (the Act) – other States have similar legislation), which may not be in accordance with your wishes.
Further, a failure to seek professional legal advice to prepare a Will, attempting to draft your own Will, or neglecting to make sufficient provision for your spouse, descendants and dependants may result in a Family Provision Claim against your estate.
What is a Family Provision Claim?
Family Provision Claims are made under Part IV of the Act and are the most common type of challenge to a Will. The Act provides that whether a person dies testate (having a Will) or intestate (without a Will), the court may, in its discretion, apply such provision as the court thinks fit having regard to the status of the individual making the claim and whether they qualify as a dependant on the deceased.
Who can make a Family Provision Application?
A deceased person’s spouse, child or dependant is entitled to bring a Family Provision Application seeking proper support and maintenance from the estate of the deceased. Each potential claimant will be considered in detail below.
At law, a person’s spouse is entitled to a distribution from the estate if they are the husband, wife, de-facto partner or a registered partner of the deceased.
The definition of child under the Act is broad. Children who may bring a Family Provision Claim include not only the deceased’s natural or legitimate children, but also step-children and adopted children. Foster children may bring a claim if they can establish that they were wholly or partially dependent on the deceased and were a member of the deceased’s household.
A claimant may also fall within the category of a Dependant, which is defined as “any person who was wholly or substantially maintained or supported … by that deceased person at the time of the person’s death being:
- a parent of that deceased person; or
- the parent of a surviving child under the age of 18 years of that deceased person; or
- a person under the age of 18 years.”
Accordingly, a dependant may be a parent of the deceasd person.
So – if a Family Provision Claim can be made in any instance, what’s the point in writing a Will?
In the event of a Family Provision Claim, the Will is one of the primary documents upon which a court will rely, as this document sets out the testamentary intentions of the deceased.
While there is no concrete method of preventing a Family Provision Claim being lodged – there are various methods by which the chances of a claim being lodged, or of such a claim being successful, can be decreased.
When a court considers a Family Provision Claim, the deceased’s views will be considered. However, there is no guarantee that the court will uphold the wishes contained within the Will if the claimant can demonstrate the need for proper support or maintenance. It is, therefore, paramount to consider every possibility which may arise, and to draft a Will that considers all potential claimants and provides security and protection to ensure your estate is distributed as you intend.
If you are excluding any of the potential claimants from receiving a distribution under the Will, or effecting a distribution that is less than what may be considered by a court to be “proper entitlement”, it is important that you record the reasons for such exclusion or reduction with either a clause included in the Will or alternatively executing a signed statement to be kept with the Will. There are various supplementary documents which can be prepared by your solicitor setting out the reasons a lesser provision was made for potential claimaints.
If you would like to speak to our estate planning team about drawing a Will or potential Family Provision Claims, please contact our office on 07 5574 3560 or via email at email@example.com.
It’s official…Jacinda Arden is Nautilus’ pick for leader of the year.
This amazing human being is a mum of a young bub, prime minister of New Zealand, she led a nation through a tragic terrorist attack, she protected her masses through the Covid-19 pandemic, she soothed families and a nation mourning after a volcano disaster took many souls and now…she has conducted a press conference in an earthquake.
The world needs more cool, caring leaders – like Jacinda!
We at Nautilus – just want to give a shout out to Jacinda and say – thanks…thanks for finding positivity in bleakness, thanks for showing empathy in times of turmoil, thanks for showing perseverance against criticism and thanks for demonstrating humour under pressure. We aspire to be a bit more like Jacinda!
Thank you to Australian Associated Press for their article: https://www.news.com.au/world/breaking-news/wellington-shakes-to-58-earthquake/news-story/93d518f37f242b5c09d4ef6ed6e7a37e
Willmakers often want to set a date for which a minor or young beneficiary receives a gift from their estate. The most common is to suggest that their child receives their estate at 21 or 25 years of age. This is, however, not enforceable and the child can demand the whole of the provision at 18 years of age from the estate, unless provisions are written correctly.
In planning for minor or vulnerable beneficiaries, even a simple will (that is a will without a testamentary trust) needs to consider that a beneficiary who has entitlement to an asset (such as the residue of an estate) is entitled to take the provision upon reaching the age of minority – unless a condition prevents the vesting of the estate.
Conditions may include an obligation to survive by a certain date, with the provision that if the child does not survive until such date than an alternate beneficiary takes. Another condition may be that the child must reach a certain age and obtain a degree or level of training, with a failure of meeting such condition being sufficient to prevent the vesting of the estate (there are limitations in this regard). Alternatively, the provision can be made for the child out of a testamentary trust, with the child being one of many alternate beneficiaries until a date selected by a trustee.
We recommend that any provision to a minor or young person contain conditions. There have been many cases called to answer the rights of a person of legal age (18) calling upon the vesting of a provision from an estate. Proper legal advice can ensure your wishes are considered and upheld – with the obvious benefit being a savings of the estate until the beneficiary is of more suitable age and/or circumstances to inherit.
Nautilus Law Group’s Succession Law Team are trained in conditional planning and can assist you in achieving your wishes for your beneficiaries. We welcome you to contact Caitlin Bampton, on Caitlin@nautiluslaw.com.au or by telephoning at (07) 5574 3560, to arrange a no-obligation consultation with a member of our team.
Nautilus Law Group refers personal injury matters to GC Law. Gavin Mills, the Practice Director of GC Law and Personal Injury Specialist Lawyer, recently asked, in an article, this very question. We found the question interesting, given lawyers (and most of our clients we suspect), rely heavily on hands free communication in transit. We pose the question to you, and leave it to you to consider whether lobbying for use of mobile phones in cars should be a priority. Given the dangers posed by the distraction of the mobile phones, it goes without saying that a hazard exists – even when the mobile phones are used hands-free. What do you think?
Commentary by GC Law:
“As compensation law experts, we see many clients injured in car accidents as a result of drivers not paying attention while driving and using a mobile phone at the same time.
The risk of an accident while driving and using a mobile device is so high, that most States are now calling for a complete ban on drivers using a mobile device while driving.
There is evidence that talking on a mobile phone hands free and driving should also be banned, because it presents just as great a risk of crashing as holding a phone.
Politically there are movements to amend the road rules to ban all mobile use when driving. Some authorities are also lobbying for in-car technologies to prevent drivers from using a mobile device while driving.
“Localised fields” can be developed to surround a driver restricting incoming and outgoing calls, but the field would need to be automated to ensure that the ban was effective. Some motor vehicle manufacturers are considering this feature as a standard on all models.
It is presently illegal in all states and territories to use a hand held mobile phone while driving. This includes talking, texting, playing games, taking photos or videos and using any other phone functions.
Using a hand held mobile phone is also illegal when your vehicle is stationery but not parked, for example when you’re stopped at a red traffic light.
It is illegal for a Learner or P Plate driver to use a hands free mobile at all.
The most common type of car accidents associated with the use of mobile devices is “running off the road” or “rear end” crashes.
Statistics show that using a mobile phone while driving is so distracting that it increases the risk of having an accident by five times.
Despite the dangers and the illegality, about 25% of Queensland drivers recently surveyed admitted to using their mobile phone on a daily basis to answer or make calls and read text messages, while 14% reported using their hand held mobile phone to send a text message on a daily basis.
Driver distraction is one of the main causes of car accidents estimated to account for approximately one quarter of all car crashes.
At GC Law we are compensation law experts. If you, a family member or a friend has been injured in a car accident, it’s important to obtain legal advice about your rights quickly because strict time limits apply.
For more information, please feel free to call GC Law on 1300 302 388 for a free, no obligation opinion on where you stand.
At GC Law, we’re here to help.”
It comes as no surprise that the Tax Office has delivered its TR 2014/5 finding that distributions of property or money from a company as a consequence of Family Court Orders constitute assessable income. TR 2014/5 does, however, remind practitioners and parties that Tax Contingency Reports must be considered.
Whilst there exists significant roll over reliefs (essentially deferral of capital gains) and stamping exemptions arising as a consequence of Family Law Orders, the question is now answered definitively by the Tax Office that transfers of property or money, from a company structure in satisfaction of a claim to a family law property pool, are taxable.
It has been argued previously by a minority of tax practitioners that the transfers obligated as a consequence of Family Court Orders (section 79 of the Family Law Act 1975) constitute a “discharge of an obligation” by the company. This position, however, was at odds with section 44 of the Income Tax Assessment Act 1936 (ITAA 1936) which otherwise defined a dividend (in other words, assessable income) to be a payment out of profits of a company to a shareholder (or associate of the shareholder) and section 207 of the Income Tax Assessment Act 1997 (ITAA 1997) which deals with the availability of tax offsets (franking credits) in relation to dividends to shareholders (or associates). Certainly, within the context of Division 7A of ITAA 1936, the position has been that a payment, use or guarantee of company assets constitutes a deemed dividend.
In short, the Tax Office has its hand up whenever company assets are distributed or used for other than generating assessable income to the company. The upside of utilising the company as an operating entity is to quarantine (and recycle) profits at a 30% tax rate, until such time as determined reasonable to distribute the profits to shareholders (and/or associates). As confirmed by TR 2014/5 – the breakdown of a relationship does not change this position (reference includes an associate of a shareholder). Therefore, it is critical for parties to consider not only the equity of the family pool division – but also the tax consequences (and indeed the cash flow funding) of the proposed division.
A common situation arises wherein a husband and wife have conducted their family business through a company, and have retained profits. For this example, let us assume the couple have retained profits of $1,000,000 in the company, with cash in bank at $1,500,000. We shall further assume the company has a net market value (including assets and goodwill) of $5,000,000. Let us also assume the couple hold real estate in a family trust controlled by the couple that is worth $1,500,000. Finally, we assume the couple has a primary residence with a net value of $500,000.
Setting aside the potential for small business concessions and legal tax planning options, if the parties conclude that the wife should receive control of the family trust (valued at $1,500,000) and the family home (valued at $500,000), and a cash payment of $1,000,000 from the company and an asset of the company valued at $500,000 – this is not going to result in a 50/50 after tax outcome to the wife.
In fact, the $1,500,000 benefit from the company will attract tax at the wife’s marginal tax rate (in the ballpark of $650,000!). Whilst the company may be able to frank the payment to the wife, she will nonetheless bear a tax consequence of 16.5% of the franked dividend (in this case it could be in excess of $320,000!).
Therefore, it goes without saying that TR 2014/5 forces tax to be a significant factor in family law negotiations.
Katrina Brown, Senior Lawyer with Nautilus Law Group, authors Tax Contingency Reports for parties seeking definition of the possible tax contingencies factorable in property settlements. Consideration given in the Reports includes availability of franking banks (available for offset against tax payable on assessable income in the hands of a shareholder of associate), capital gains tax roll over reliefs and small business concessions, and funding options for legal entities operated in a family group. Further, it is often the case that non-family related business proprietors are associated with legal entities which are subject to family law proceedings (or threatened to be compromised as a consequence of such proceedings). The Reports, therefore, also have regard to best case outcomes for the non-family business proprietors.
If you are interested in speaking with Katrina Brown regarding Tax Contingency Reports, please feel free to arrange a meeting by our offices on (07) 5574 3560.
We thank you for considering Nautilus Law Group.