March 10, 2016
We deal with matters involving deceased estates regularly, from disputes over inheritances, such as family provision claims, through to uncontested probate and administration matters. While matters of this nature are relatively straightforward, often there are larger issues within those matters that must be dealt with before a resolution can be achieved.
One of the most interesting is cases involving estates consisting of property located overseas. In one such case we were involved in, the deceased owned real estate in the form of island properties overseas, although was survived by no family there, and left only one last will and testament, executed under NSW law only. Further, that will did not deal specifically with the foreign property, but rather disposed of the entire estate generally, and while the will left the estate to each of the two children of the deceased in equal shares, one of the two had already taken steps to secure the foreign property for himself, prior to the other even discovering it, and was opposed to either having that property dealt with under the laws of NSW or reaching a settlement agreement in relation to it.
In a case like this, there are often several critical and complex issues. The first in this case was a jurisdictional issue, i.e. whether the Supreme Court of NSW would even deal with the foreign property. The second issue was also jurisdictional, i.e. provided our Supreme Court could deal with the foreign property, whether it had to do so according to the law in NSW, or that of the foreign country. Further, there was a question as to whether any orders made by our Court would be binding and enforceable in the foreign country, and if not, what would be required at the overseas end to achieve this. Moreover, there were then the practical and mechanical issues surrounding the actual implementation of the end result, i.e. how to effect a valid transfer of the foreign property, much like a conveyance in NSW. Finally, the taxation of any testamentary dispositions was also an issue both parties needed to consider, in relation to both legal systems, and given this had the potential to have significant consequences, they both needed to do so prior to formulating the orders they each proposed (as should generally be done in any civil, commercial or equitable type case).
While we prevailed, answering such questions and dealing with such issues in the meantime is a difficult and careful task. However, it is a necessary one to both ensure certainty and security, and that the property is not eaten away in tax and / or legal costs. Making sure it is approached in the right way will also ensure that even those with the best intentions do not accidentally engulf the estate in fees. It is therefore important to at least have a general idea of the type of issues that might arise, and how to at least start to approach them.
Generally speaking, a person can dispose of property in NSW through a NSW will, and at least attempt to dispose of foreign property through that will, although the latter may not always work without taking further legal steps abroad and / or at home. A will executed in a foreign country is taken to be valid here if it was executed in conformity with that particular foreign legal system. If so, our Courts will usually try to uphold and apply that foreign law, and deal with relevant property in compliance with that law, as opposed to our own. However, that does not necessarily mean any orders of our Courts will be carried into effect abroad, or that the intentions set out in a foreign will are necessarily going to be upheld here in practice. There are a variety of factors to be considered and variables to be addressed to ensure that will occur.
In most jurisdictions, there is a “fall back” position for intestate persons (those who die without leaving a valid will). The intestacy rules in each country will determine to whom the property should be distributed, in what proportion and so on, if there is no valid will in place. One problem with leaving matters to intestacy law is that often this is not what the deceased intended. Another problem is that the intestacy laws differ as between countries, so someone who is content with the pecking order in the “home country” may be inadvertently leaving everything in the “new country” to the wrong child (i.e. the wealthy child instead of the disabled child), for example, by failing to execute a valid will there. A third problem is that the law of a particular country does not necessarily correspond with the law of even the majority religion, which could result in something entirely different to what was intended even in a country dominated by a particular religion, unless of course there is a valid will in place.
Even in circumstances where a will has been left in one country, it has been found to be valid, and a Court has made orders in relation to it, there is nothing to guarantee that it will be upheld in the other country. While we know from the above that a valid foreign will should at least be sought to be upheld here, that is not necessarily the case with a valid will under NSW being upheld elsewhere. In each case, it will depend on how the foreign legal system deals with our wills. Further, orders made by our Courts are not necessarily enforceable overseas, and sometimes when they are, there is an onerous administrative, procedural or even judicial process to follow first. Further, much like family provision claims in NSW, in some overseas jurisdictions, there are claims available to some people that would, if successfully made out, have the effect of overriding a will.
The list of potential pitfalls goes on… Fortunately in our case, although our NSW will was not binding overseas, the foreign intestacy laws were in our favour. As such, we were able to quickly obtain judicial orders for our foreign property, and quickly register those orders here with binding effect in NSW. In doing so, we were able to draw on international contacts and outsource part of the work, in terms of obtaining both the judicial relief and expert evidence (including property valuation evidence) we required. In our case, we were able to act with efficiency. However, we could see how the costs could have easily blown out into the tens of thousands of dollars for others less resourceful. In addition, because we were able to effectively bring the foreign property within the estate for Australian purposes, and therefore increase the recognised inheritance received by the other side, we were able to defeat the family provision claim as well. As such if the situation arises, it pays to seek out lawyers with experience in dealing with similar situations, and also with expertise in the domestic litigation area.
Of course, prevention is always the best cure though… In order to ensure testamentary intentions are carried out in similar cases, and to avoid leaving behind a legacy of litigation for family, the best option by far is for people with property in more than one country to have a valid will duly executed in each country during their life. Naturally, this should take into consideration the effect of, and interaction between, both legal systems involved, to ensure the intended disposition is valid and effective. Perhaps more importantly, the tax implications likely to arise owing to the transfer or “liquidation” of that property on their death, or any other specific dealings the recipients or beneficiaries they leave behind are likely to have with that property, in the context of the personal financial circumstances of those people (and of the estate itself generally).
In NSW, our law also recognises what are called “international wills”, which are wills that comply with international law (specific conventions). In theory, such a will could adequately deal with the property of a single estate located in many different countries throughout the world. However, as international law depends not only on the specific country in question being a party to the treaty, and to have implemented the treaty through its own legal system for effectiveness, international wills are not always as safe as having a valid will in each jurisdiction.
As always, feel free to contact us about this or any related issues.