Hypothetical by Manny Wood published in the Coffs Coast Advocate on 13 June 2020.
Larry has a child to his first marriage, Ken. Larry is now remarried to his second wife, Michelle.
Larry makes a will appointing Ken and Michelle as his executors. He leaves his investment property to Ken and grants Michelle the right to reside in his home, in which they both live, for life. Ken then stands to receive Larry’s home when Michelle ceases to reside in the property. The rest of his estate is split equally between Ken and Michelle.
When Larry dies at the age of 80, he has been married to Michelle for 40 years. Each of his properties are worth $1 million and he has $100,000 in savings.
Michelle is 75 years of age when Larry passes-away. Michelle has an investment property worth $1 million and savings of $200,000.
Michelle is concerned that in the near future, she will need to move out of Larry’s home and into more suitable accommodation, such as a retirement village. She is worried that Larry’s will gives his home to Ken when she vacates the property. She is also worried that after she pays for a unit in a retirement village, she will have insufficient funds to provide herself with a comfortable retirement.
Michelle seeks legal advice and decides to challenge Larry’s will.
Michelle and Ken are unable to reach a compromise amongst themselves and the matter proceeds to a hearing in the Supreme Court.
The Court ultimately grants Michelle a “flexible” life interest which allows her to sell Larry’s house and use the proceeds to acquire accommodation elsewhere and only upon her death, does Ken receive the proceeds. Michelle also receives an additional $45,000 to fund repairs to Larry’s house if they are required.
Proper estate planning could have prevented Ken and Michelle each incurring legal costs of $100,000.
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