Our Ageing Population Face Unique Challenges

The ageing population of Australia is set to face some unique challenges, both in terms of their increasing life expectancy and the largest inter-generational wealth transfer in history.

More than $400 billion of housing stock will change hands in Australia over the next 15 years as the parents of the baby boomers, and then the boomers themselves, shuffle off the mortal coil and leave their property to their children.

It will be the biggest intergenerational wealth transfer in Australia’s history, according to a report released by Bankwest.

Rising property prices, an ageing population and high home-ownership rates are expected to boost the pick-up in housing inheritance as a large number of “veterans” (people now aged 70 and above), followed by the boomers, succumb to old age and pass on a vast pool of property assets to their adult children.

Coupled with this is the fact that we are living longer than ever before. Increasing life expectancy has partly driven the ageing population of Australia. In 1901, only 4% of Australians were aged 65 years or older. By June 2010, this proportion had risen to 13.5%, and is projected to increase to between 21% and 23% by 2041. Living longer produces some of its own problems, including a rise in degenerative diseases such as dementia.

Ageing Population Issue 1: Mental Capacity

ageing population, estate planning, wills, power of attorney, elder abuseThis impacts estate planning across the generations because a person must have mental capacity to validly execute a will. Testing mental capacity is a notoriously difficult and complex task. For this reason, Alzheimer’s disease and other progressive medical conditions associated with both aging and dementia provide fertile ground for estate litigation. Such illnesses can deprive someone of the capacity to dispose of property and, potentially, invalidate parts or all of an estate plan made during alleged mental incapacity. Creating a will and other testamentary documents prior to the onset of symptoms of these illnesses affecting capacity will play an increasingly important role in preventing litigation. In estate litigation, court cases frequently involve disputes over capacity appear to be on the rise. This trend will only increase due to our ageing population, particularly as the value of real property and the size of superannuation funds increase.

Ageing Population Issue 2: Power of Attorney

 A power of attorney is a crucial document to supplement your estate plan. A person who is named as an attorney for property, personal care, or both, acts with legal authority on behalf of the person who executed the document. Powers of attorney for personal care, called an advance health directive, should address end-of-life care so that the named attorney is provided with an understanding of the grantor’s wishes. Appointing people you trust as attorneys for property and personal care can help protect against elder abuse during a subsequent period of vulnerability. It’s important to think carefully on this last point. A person who has previously shown a history of dishonesty or unscrupulous behaviour will not change just because you hope they will. An unscrupulous person with a power of attorney can cause untold damage to your assets, your family and your health. Only choose someone you trust completely.

Powers of attorney for both property and personal care should be executed well in advance of the onset of capacity issues. You may otherwise find yourself in the estate planning of last resort courtroom, where a judge will decide the best course of action. Or you may need to bring guardianship proceedings in order to determine who can make decisions on an incapable person’s behalf or personal care decision. Sometimes, the Public Trustee Trustee may become involved and make decisions on behalf of the incapable person. In either scenario, you may find yourself with an outcome you didn’t want.

It’s not uncommon for disputes to arise around guardianship and power of attorney decisions. Allegations of elder abuse can arise where adult children don’t agree on the appropriate use of assets on behalf of the aging parent, for example.

Ageing Population Issue 3: Predatory Marriage

ageing population, power of attorney, estate planning, wills, elder abuseAnother issue that arises in the aging population is that of predatory marriages. Predatory spouses take advantage of elderly victims and assume control of their financial affairs. This can have severe consequences for the victim and their family.

The term “predatory marriage” has been coined to refer to a marriage entered into for a singular purpose of exploitation, personal gain or profit. Frequently, it involves an interested party (i.e. friend, neighbour, etc.) assuming the role of a caregiver and persuading a vulnerable person to marry.  Often, the victim is elderly, dependent and suffering from some degree of cognitive impairment. After marriage, the predator spouse takes advantage of the vulnerable victim spouse, and assumes control and management of the victim spouse’s financial affairs.’

The apparent solution is to merely execute a new Will, right? Unfortunately, it’s not always that simple.  As often is the case with predatory marriages, although the victim spouse has the legal capacity to marry (which entails a low threshold), he or she lacks the requisite testamentary capacity (which requires a high threshold of understanding). The result is that the victim spouse cannot execute a new will and ultimately, his or her estate will have to be distributed in accordance with intestacy laws. In Queensland, if a spouse dies without a will, the surviving spouse automatically receives the preferential share of an estate as well as a portion of the remainder. This translates to the predator spouse inheriting the majority of an average estate.

The significance of this is best demonstrated by way of an example:

John, age 82, suffers from cognitive impairments. He is a widower, and has 3 children and 6 grandchildren. Although he is still living independently at home, his children are assisting him with his finances. Years ago, John had executed a Will which left his modest estate (valued at approximately $300,000) to his children and grandchildren.  Under his Will, his estate is to be divided as follows: $75,000 to each of his children and $12,500 to each of his grandchildren.

Jane, age 63, lives on the same street as John. She contrives a scheme to obtain control and ultimately ownership of John’s property. She “befriends” John and quickly gains his trust.  She begins to alienate him from his family. Through her companionship and assistance, Jane assures John that so long as he is with her, he will be taken care of and will not need to go to a nursing home. Within 5 months of their “friendship”, and to the shock of John’s children, John and Jane announce their intention to marry.

As a result of the marriage, John’s will is revoked.

Assuming John lacks testamentary capacity to execute a new will, he will die intestate. Upon his death, his estate will have to be distributed under the intestacy laws. Jane will automatically receive the first $150,000.00 (i.e. the preferential share). She will also receive one-third of the remaining estate, another $50,000. The remainder, $100,000.00, will be split between John’s children. Jane will ultimately receive a total of $200,000.00 and John’s children will receive just over $30,000 each. The grandchildren will not receive any part of the estate.

The result is distressing, to say the least.

So, what recourse do the family members of a victim spouse have?  The only option is to try to nullify the marriage due to a lack of capacity. However, what the loved ones of a victim spouse quickly learn is that challenging the capacity to marry is very difficult. The courts equate marriage to a simple contract with capacity requirements that are relatively easy to satisfy. To be capable of marrying, a person need only be able to understand the information relevant to the marriage and appreciate its consequences. The ensuing court battle can be exhausting and costly for all parties concerned.

Because of these complex issues that arise, it’s important to seek the advice of a specialist in wills and estates, so that you can avoid expensive mistakes and disputes that may arise. A specialist will also be able to assist in the area of determining capacity, and acting on suspicions that a older person is being preyed upon.

For your free, 10-minute consultation, please contact us today.