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 firstname.lastname@example.org.
CGT and the small business home office – big tax mistakes
The amount of Capital Gains Tax (CGT) you will be required to pay when you sell your home is calculated by multiplying the gross capital gains on the sale of your home by the percentage of business use over the period of ownership. To illustrate, if your home is sold for $800,000, but you invested $600,000 between acquisition costs and repairs – and you have deducted 5% of the costs of the home for your “business use” over a period of the 5 out of 10 years you have held the home – then your assessable capital gains will be calculated as follows: [($800,000-$600,000) x 0.05] x [10/5] = $5,000.
Caution needs to be had when opting to claim business expenses in respect to your home, via your annual business tax return. Although you are able to claim back a portion of your interest costs and other hold costs for the percentage of business use in your home, the loss of capital gains exemption for that part of the home may not justify the short term savings.
The ATO provides helpful tools for business owners to assist in assessing their personal circumstances and capital gains. Please click the following link to check out the tools offered by the ATO: ATO planning templates and tools.
Nautilus Law Group assists business owners in assessing and designing business and personal wealth structures, and consideration of capital gains tax is one of the services we offer.
If you are running a home office and have questions about your structure, please do not hesitate to contact our team to arrange a conference by emailing email@example.com or phoning our enquiries manager – Vicki on 07 5574 3550.
Following your death, your Executor is responsible for the administration of your Estate; this includes calling in the assets of your Estate, attending to payment of debts and liabilities, and distributing the net proceeds to the beneficiaries in accordance with your Will (subject to any direction of the Court).
There are various debts that must be considered in Estate administration:
Funeral expenses may be paid directly from the deceased’s bank accounts upon presentation of a certified copy of the Will and the funeral account to the deceased’s financial institution (however, this will result in freezing the accounts).
Costs of administration of the Estate
The Executor is authorised to engage professionals to complete the necessary works to administer the Estate. In doing so, the Executor personally engages accountants, lawyers, agents and other professionals, and in doing so the Executor is generally entitled to a full right of indemnity from the Estate in relation to the reimbursement of such properly incurred costs as an administration expense.
Aside from funeral, testamentary and administration expenses of the Estate (which take priority to other Estate debts in accordance with the Succession Act 1981 (Qld)), the remaining debts of the deceased and Estate must be paid prior to distribution of the Estate to the beneficiaries.
The Executor is not personally liable for the payment of such expenses, but rather they are borne by the Estate. In the event that the Estate does not have sufficient assets to attend to payment of all such debts, the Estate may become insolvent and be declared bankrupt.
The Executor becomes personally responsible for payment of Estate debts only in the circumstance where administration of the Estate has been completed without the Executor having given proper statutory notice to potential claimants.
If you would like to discuss the administration of an Estate, please contact our team on 07 5574 3560 or via email to firstname.lastname@example.org.