Ordered that second-reading speech be incorporated into Hansard on motion of Ms TIERNEY (Minister for Training and Skills).
Ms TIERNEY (Minister for Training and Skills) — I move:
That the bill be now read a second time.
Incorporated speech as follows:
The bill will implement most of the outstanding recommendations from the Victorian Law Reform Commission’s 2013 Succession Laws report (the report). These recommendations relate to intestacy (where a person dies without a valid will), executors’ fees, and the law of ademption.
The report found that Victoria’s intestacy regime needs to be modernised, to better reflect the way that families operate in the 21st century.
In particular, the report identified a need to improve the position of the deceased’s partner in the case of an intestacy. For example, currently where the deceased and the deceased’s partner were a couple with a young child, and the deceased owned the property that the family lived in, then the minor child would often inherit a greater share of the property than the partner.
The bill implements the report’s recommendation that where all the deceased’s children are also the children of the deceased’s surviving partner, the partner should receive the whole of the estate, and the children should not receive anything. The partner can then remain in their home, and can use the property that they have inherited to take care of the children, and eventually make distributions to the children upon the partner’s death.
Where the deceased’s partner is not the parent of all the deceased’s children, the estate will still be distributed between the partner and the children, but the bill will provide the partner with a much greater share of the estate and an expanded right to elect to acquire property of the estate.
At present, in the case of intestacy, the estate can pass to any ‘next of kin’ regardless of how remote their relationship was to the deceased. The bill will limit the distributions on an intestacy to relatives no more distant than the deceased’s first cousins, who would only inherit if their parents had already died.
The bill will provide that where an intestate dies with multiple current partners, the partners can enter into a ‘distribution agreement’, or failing that, seek a ‘distribution order’ from the Supreme Court. At present, the act sets a formula for dividing the property, based on how many years the deceased has lived with an ‘unregistered domestic partner’, that the VLRC found was unlikely to result in an outcome which satisfied all the beneficiaries.
The bill will repeal the common law ‘hotchpot’ rule, which is a rule whereby the distribution of an intestate estate must take into account any gifts that the deceased gave to their children during the deceased’s lifetime.
The bill will clarify that a person must survive the intestate by at least 30 days in order to inherit from the estate. This is the same rule that applies in respect of estates that are distributed under a will.
The bill will set the interest rate on pecuniary legacies (gifts of money under a will) and statutory legacies (the amount the deceased’s partner receives on an intestacy) at 2 per cent above the Reserve Bank’s cash rate.
The bill will also implement recommendations from the report in relation to executors’ fees. Most executors of deceased estates are family members of the deceased and are not paid for their work (although they are entitled to be reimbursed for out-of-pocket expenses). However, sometimes a will appoints an individual professional (such as a lawyer or an accountant) as an executor, and a clause in the will gives the executor the right to charge for their work, or an executor asks beneficiaries to consent to payment, or makes application to the court for approval.
The report found that charging or commission clauses are often not well understood by the will-maker, that beneficiaries do not understand their rights to agree to commission or to be given costs estimates, and that sometimes estates are being charged too much.
The bill will require the informed consent of the will-maker, or of the beneficiaries, to payment of an executor. It will compel a paid executor to provide a costs estimate to the beneficiaries and it will allow an executor to elect to charge fees rather than commission as long as the fees do not exceed the commission that would otherwise be payable.
The cost estimate provisions will not apply to State Trustees or to an executor which is a licensed trustee company. State Trustees and licensed trustees companies are already regulated by other legislation, and are already required to give details of their charges for executorial work.
The bill will also amend the Administration and Probate Act 1958 to give the Supreme Court the power to review and vary the fees, charges and commissions charged by executors and administrators of estates, including trustee companies, but not State Trustees which is already subject to Supreme Court review. The court will be able to exercise this power either on its own motion or on the application of any interested party, including beneficiaries, under a will.
Lastly, the bill will implement the report’s recommendations in relation to ademption, which happens when a gift in a will has been sold or destroyed or given away prior to the death of the will-maker, and as a result the beneficiary who would have received the gift receives nothing. For example, the deceased may have left their daughter a car, but the gift will fail if, at the time of death, the deceased had already disposed of their car.
An exception to ademption applies where the deceased’s affairs have been managed by an administrator. An administrator can be appointed by the Victorian Civil and Administrative Tribunal to manage the affairs of a person who does not have the capacity to make reasonable judgements concerning financial or legal matters. If the car in the earlier example was sold by an administrator, the daughter would still receive its value from the estate if the funds from its sale were still in existence.
The bill will resolve a number of problems that the report identified with the law of ademption.
The bill will amend the Powers of Attorney Act 2014 to provide that an exception to ademption should also apply in the case of an enduring power of attorney. It is illogical that an exception applies to property dealt with by an administrator, but not by an attorney acting under an enduring power of attorney. The bill will also allow a person acting under an enduring power of attorney, where the person has lost testamentary capacity, to apply to the Victorian Civil and Administrative Tribunal for access to a will or part of a will, so that they can determine which specific assets are to become gifts and are at risk of ademption if they are disposed of.
The bill will amend the Administration and Probate Act 1958 to give beneficiaries the right to apply to the Supreme Court, where applying the exception to ademption would lead to an unjust outcome. The court would be able to make such orders as it thinks fit to adjust the benefits under the will. The bill will also give beneficiaries the right to any income that the gift has earned since it has been sold. For example, if the car in the above example was sold and the money invested, the beneficiary would be entitled to any income or capital growth from that investment.
The bill will ensure that the exceptions to ademption will apply, whether or not the will-maker had the capacity to make another will at the time the property was sold.
The bill will amend the Guardianship and Administration Act 1986 to improve the wording of the exception to ademption in section 53 of that act and to end the need for administrators to maintain separate accounts and records to deal with ademption, as keeping the funds separately may leave an insufficient amount to comfortably meet the needs of the represented person during their lifetime.
This bill is a good example of the government’s commitment to fair and practical law reform. It will have a wide impact and improve the laws of succession so that they operate more justly and clearly. Such laws are essential for Victorians during what can be a sad and upsetting time for them and their families.
I commend the bill to the house.
Debate adjourned for Mr RICH-PHILLIPS (South Eastern Metropolitan) on motion of Mr Ondarchie.
Debate adjourned until Thursday, 16 March.