Family relationships can often be complicated, especially when it comes to estate planning. What happens if the person who stands to inherit has a criminal record? Or if the person named as the executor of the will has an impact?
To answer what can be a knotty question, I asked Equity Trustees legal counsel Nick McColl, who explained that a criminal record, in particular the nature of a crime, can impact whether or not a person benefits under a will or remains in the position as an executor, trustee or testamentary guardian under a will.
“While a criminal record doesn’t automatically prevent a person from benefitting under a will or being appointed as an executor, trustee or testamentary guardian, it is most certainly a factor that would be taken into account when advising a client who to appoint as executor, trustee or testamentary guardian,” he says.
Mr McColl explained that a crime can impact a will in a variety of situations. If an heir has killed or injured the will maker, in estate administration, one key legal principle is the forfeiture rule, which prevents a beneficiary who has killed or injured the will maker (testator) from inheriting any part of their estate.
Mr McColl says this rule is based on the idea that no-one should profit from their wrongdoing, particularly in cases involving violence against the testator. If a beneficiary is found guilty of intentionally causing the death or serious injury of the testator, then they are legally barred from receiving any inheritance under their will.
“A person who has unlawfully killed another is also unable to obtain a grant of probate or letters of administration and, if a grant has already been made, then it will be revoked.”
Mr McColl cited one case where the forfeiture rule was applied in a case of defensive homicide and upheld on appeal. Even though there had been a history of domestic violence, and the will maker’s murder was committed in self-defence, it was held that the rule applied to all cases of murder and manslaughter without exception.
Does a fraud conviction impact a will?
A similar rule can be applied when it comes to fraud, another situation very likely to invalidate a will.
In fact, Mr McColl explained that generally the only crime that would affect the validity of the whole or part of a will is fraud.
“Where fraud is alleged, it must be shown that another person deceived or misled the testator in such a way as to materially impact the making of the whole or part of a will in a certain way,” he said.
“This includes wilfully false statements or the suppression of key facts by another person, intended either to gain benefits under a will for themselves or to prevent benefits being received by a person who would ordinarily expect to benefit under a will.”
What if a beneficiary is a convicted criminal?
Generally, a beneficiary who is a convicted criminal is entitled to inherit under a will, provided that their crime is not directly related to the testator’s death.
“However, it can impact the way in which they should benefit under a will,” Mr McColl said.
“For example a protective trust may be more suitable than leaving a direct benefit to a person in this particular set of circumstances, especially if they could potentially misuse the money left to them,” he said.
That said, the testator has the freedom to disinherit or limit an inheritance to any beneficiary, including a convicted criminal, if they want to.
Mr McColl went on to give an example of a client who left their entire estate to their only son, a convicted drug dealer. While it wasn’t illegal for the son to inherit the estate, the parent was concerned with how the funds would be used.
For this reason, the client opted to include a protective trust under the will managed by a professional trustee, in this case Equity Trustees.
The terms of the protective trust allowed for the son’s financial needs to be met with the safety of a professional trustee managing his inheritance, minimising the risk of misuse. It also had the added benefit of not putting anyone in the family in a position (by appointing them as trustee for example) where they might have to make difficult decisions which might impact family relationships.
What if an appointed trustee, executor or testamentary guardian has a criminal record?
Mr McColl confirmed that a person with a criminal record can be appointed as an executor or trustee under a will.
“However, where the crime was an offence involving dishonesty, it can constitute grounds for their passing over as executor or removal as trustee by the court,” he said.
If a person who has committed a crime is appointed as testamentary guardian, which is someone who assumes parental responsibility in the event that both parents have died, the Federal Circuit and Family Court of Australia may intervene and appoint another person as guardian or even put the child into foster care, Mr McColl concluded.
Is this an issue you’ve had to face? How has it impacted your estate planning? Let us know in the comments section below.
Also read: Will a reverse mortgage impact your inheritance planning?
Any advice in this article is general of nature and is not reflective of the views on YourLifeChoices. Always consult a financial or legal professional before making any decisions.
