The recent Queensland Supreme Court judgment of Re Matsis; Charalambous v  Charalambous & Ors [2012] QSC 349 is a perfect example of the developing use of a statutory innovation which provides the Court with the power to order that wills be made for people without mental capacity to make a will.

My two-part article published recently in the LexisNexis Retirement and Estate Planning Bulletin Court-Ordered Wills, foreshadowed innovation in this area of law.

Until recently, the statutory power has been used for somewhat pedestrian purposes: the simple making of wills with a view to ensuring that injustice does not result following the death of a person who cannot make a will, either because the rules of intestacy would apply, or because an out-of-date will would prevail. This is a wonderful innovation.

But I have been arguing that this power could be used for other more innovative purposes that arise out of my estate planning practice.

Re Matsis was application for orders that a codicil to a will be made on behalf of John Matsis, who is a 90 year old man who does not have capacity to alter his will, or make a new one.

A codicil is a type of will document that revokes part but not all of a previous will. Together the codicil and the will carry out a will-maker’s testamentary intentions.

Why make a codicil and not a new will?

Mr Matsis has a large and valuable estate, valued in excess of $13 million, some of which is located in Greece.

His existing will made on 14 May 2001 provided that his estate passes as follows: a house at Spring Street West End was left to his grandson John Paul; and the rest of his estate was to be divided equally between sons Harry and Carl, and John Paul.

Harry and Carl were engaged in businesses and necessarily those businesses carry a degree of financial risk. It was desirable that their inheritance pass to them within a protected environment.

But Mr Matzsis had lost testamentary capacity since that will was made, so any amendment could only be made by order of the court.

Although there was no current evidence of any creditor claims or any current exposure to liability, the court accepted that there is a potential exposure to liability in relation to their business activities. The court also accepted that it would be advantageous, for estate planning purposes, with the substantial legacies they stand to receive from Mr Matsis’ estate, that they be placed into testamentary trust rather than received as outright gifts.

Although John Paul is a student, still living at home, it was recognised that receiving his
inheritance in trust will provide protection of his inheritance into the future.

The proposed alteration did not disturb the scheme for distribution set out in the existing will, merely providing that the gift for each beneficiary be paid to a testamentary trust for each beneficiary.

There was evidence which the court accepted that were Mr Matsis able to understand the protection that a testamentary trust can provide, he would have been strongly supportive of the concept.

The reason that the application was for a codicil rather than a new will which would revoke the previous will, was simply because Mr Matsis had assets located in Greece, and it was not known and not able to ascertain in a timely way whether the Greek law would recognise the court ordered will.

Accordingly it was preferable that the existing will be retained except for the terms of the codicil and if the Greek law did not recognise the latter document, the existing will would be preserved in regard to Mr Matsis’s Greek assets.

Interesting, isn’t it?