Hypotheticals by Manny Wood Published in the Coffs Coast Advocate on 6 April 2019.
Penny makes a will, leaving the whole of her estate to her second husband Michael and her three children to a previous relationship, on the basis that they each receive an equal share of her estate.
Penny also makes a power of attorney appointing Michael as her attorney.
Several years later, Penny loses the ability to manage her financial affairs and under the power of attorney, Michael sells an investment property owned by Penny and deposits the proceeds of sales into their joint bank account.
When Penny dies, Michael administers her estate under his appointment as her executor.
Michael does not include the proceeds of sale of Penny’s investment property as part of her estate because the balance of the joint bank account passed to him as the surviving account holder.
Penny’s children alleged that Michael had breached his duty as attorney by not acting in Penny’s best interests and has breached his duty as executor because he has not properly collected the assets of their late mother.
The children commence action in the Supreme Court of New South Wales.
Michael argues that there was no “loss” to the estate because the bank account was in joint names and that he could have withdrawn the funds at any time prior to Penny’s passing.
The court finds that Michael had a duty to call-in and collect the assets of the deceased and that in this case, the assets of the estate included the proceeds of sale in the joint account.
The court also finds that the deposit of funds into a joint account did not excuse Michael of any misconduct.
Michael was ultimately ordered to compensate Penny’s children and ordered to pay their legal costs.
If would like Manny to address a particular legal issue, send your request to manny.wood@ticliblaxland.com.au or call him on (02) 6648 7487.
