Proper Estate Planning When Terminally Ill

Proper Estate Planning When Terminally Ill

Proper Estate Planning When Terminally Ill 1200 761 Alfred Ip
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When you or a loved one becomes terminally ill, due to cancer or another disease, things are going to be complicated. Unfortunately, death is an inevitability of life and when someone learns that it is soon approaching, they will quickly think of the family and loved ones that will be left behind. This can lead to desired changes in estate planning or the creation of estate plans previously not in place.

Whilst each person’s circumstance is different, a person diagnosed with a life-threatening condition may want to address the following estate planning issues.

The Will

A Will is a document which sets out how a person’s assets are to be distributed after his or her death. There are many advantages to writing a Will as it sets out how your estate should be arranged after your death. If someone wants to leave assets to beneficiaries who are not related to them (friends, charities, etc.) or wants to appoint specific executors to manage and distribute assets then they can state these terms in a written Will. There are certain formalities for making a valid Will, which are governed by Hong Kong Law. The likelihood of disputes regarding the estate will be reduced by a well drafted Will.

If a couple are married, but there is no Will, the rules of intestacy will be followed and assets distributed in accordance with the “Intestates’ Estates Ordinance”, Cap. 73 (“IEO”), the spouse will be left with a significant portion of the estate. However, same sex marriages are not recognised in Hong Kong. We have been presented with cases where a couple in a same sex relationship have failed to recognise the need for the Will and one of the partners has died. The IEO gives no entitlement to the surviving partner, hence a claim under the “Inheritance Provision for Family and Dependants Ordinance” had to be made. This entitled the surviving partner to a portion of the inheritance on the basis that she was financially maintained by the deceased partner, but it was significantly less than would have been received had the marriage been recognised. Making this claim usually means a drawn -out process in court, and emotional hardship to all parties involved. Hiring a solicitor to help draft a Will can save significant time and legal costs, should problems like  this occur after your death (please see our previous article “Protecting Rights and Assets in a Same Sex Marriage” for more information).

Assigning your residuary estate should be considered. The residuary estate is the portion of your estate that is not specifically accounted for. This is a deceptively important part of writing a Will as people cannot foresee the future and what residue estate they will have. If someone wins the lottery and then dies the next day, it is unlikely that the person would have had time to adjust their estate plans to include these winnings. It would be considered residue. The rules of intestacy would be followed, and the residue estate may end up in the hands of someone who you do not wish to receive it.

In your Will, you should declare your place of domicile as it dictates the jurisdiction that should be followed in the event of your death. As different countries have different laws with regards to Wills, this is important. Executors should also be considered. Executors are the people in charge of administrating your estate. If you have minor children (under the age of 18) who you want to leave a portion of your estate to, you will have to leave it on trust with the executor(s). How the children receive their inheritance can vary. You may want the children to obtain it at a later age or receive it in stages. Discretionary powers can also be left to the executor(s).

Other factors including personal belongings, legacies, common disaster clauses, persons under disability and obligations to maintain others should also be considered in the construction of a Will.

Changing estate plans which are already in place

Once hit with a terminal illness, things may change significantly regarding the planning of your estate. Matters that you had never considered may suddenly become pressing. It is common that people want to change their Will and consider future medical decisions once they find out such news.

Changing one’s testamentary dispositions is generally done in two ways:

  1. by executing a Codicil which serves as an addendum to an existing Will,
  2. or to execute a fresh Will that provides for revocation of previous Wills.

At Hugill & Ip we have had to tackle cases where alterations to estate plans have presented problems. For example, a case involved two Wills made at different times but signing pages were missing from the later Will which was meant to revoke the earlier Will. In cases where signing is not evident or a person has failed to sign before their death, then section 5(2) of the “Wills Ordinance”, Cap. 30 can be applied and testamentary evidence can make a Will valid; however, the burden of proof under this section is at a much higher threshold than usual, as the evidence must be such that there is “no reasonable doubt” that the deceased intended for that document to be his or her Will. Having a solicitor will significantly help in proving this evidence. Including a solicitor in your estate planning will ensure these formalities are followed and can also guarantee safe custody of the Will (so signing pages won’t be lost!).

Terminal illness will not prevent a person from creating or modifying a Will but could present issues. The key question is whether the illness has robbed the terminally ill person of the testamentary capacity necessary to create or modify a Will. A purely physical ailment, for example, may affect the ability to sign a Will, however the law does allow for a Will to be signed either under a guiding hand or by someone else under the testator’s instructions.

On the other hand, something that affects your mental capacity, such as dementia or brain cancer, could have implications on your testamentary capacity as we have seen in cases that we have worked on. In the event that a Will is contested, the courts must be convinced that a person was mentally competent when altering or making their Will. Courts may evaluate several elements to determine mental capacity.

Generally, an individual will be considered mentally competent if, at the time the Will is drafted and executed, they

  1. knew they are signing/forming a Will,
  2. was able to understand the nature of the act of making a Will,
  3. understood the nature and situation of the property referred to in the Will and remembered and
  4. was aware of the identities of those who would benefit or were expected to benefit under the Will (even if they were ultimately excluded from it).

Solicitors are able to carry out various procedures, follow certain guidelines (“Assessment of Mental Capacity: A Practical Guide for Doctors and Lawyers”) and use case law to ensure elements that the courts will consider are fulfilled and the person can be easily identified as mentally competent.

In disputes over mental capacity, the perception of the courts will likely have a big effect on the distribution of the estate. In one case, a person was receiving a big portion of an inheritance and there were questions over the testator’s mental capacity, leading the opposing party to argue undue influence. In these situations, scrutinization of the official guidelines and an acute analysis of the facts are required to prove mental competence. Having a doctor on hand to do a medical assessment at the time the Will is altered will likely be good evidence of mental competence in the future. Intricacies like these are essential to consider not only when altering a Will, but also when preparing a Will for someone elderly or suffering from terminal illness.

Medical decisions

If you are terminally ill it is likely that there will be a point at which life-sustaining treatment (LST) will need to be applied at the end stage of a disease. In this case, the patient, family and healthcare workers can discuss whether futile LST should be provided or not, so that the patient can secure a peaceful death. Future medical decisions, regarding how doctors should treat you if you do not have mental competence, are therefore crucial.

In an article published by the Hospital Authority of Hong Kong, two situations in which withdrawing LST would be acceptable were recognised. If the treatment is futile or if a mentally competent patient refuses it. With a terminal illness it is likely that by the time a decision must be made on whether you should receive LST or not, you will not be mentally competent. If you want to have a say in how you are treated in the future it is therefore essential, you put something in place.

An advanced medical decision can be put in place but is not technically legal. However, it is not uncommon for doctors to follow them regardless. Therefore, putting in place an “Advance Health Directive” alongside an “Enduring Power of Attorney” is usually a good idea especially if you have been struck with an illness that may end your life soon. Please see previous articles Living Wills and Advance Health Directives and Enduring Power of Attorney: Sound Advice for the Unsound Mind! for more information.

Our take

Of course, when someone is struck with cancer or a terminal illness the need for estate planning becomes more urgent. At Hugill & Ip we strive to facilitate the people in such positions by ensuring the smooth transition of assets to loved ones or favoured charitable causes, and by assisting in any complications that may arise as a result of the situation. A thorough estate planning review can help put the patient’s mind at ease and we are passionate about achieving this for them.

This month Hugill & Ip has joined the World Cancer Day’s #IAmAndIWill campaign in support of Asian Fund for Cancer Research (AFCR). The firm will be donating part of its profits, helping to spread cancer awareness and raising funds from other corporations and individuals. Every contribution counts to fund cancer research and to save the lives of cancer patients.

Get involved in any way you can. Together we can create change.

For additional information about the campaign, please click on the following link. For donations, you can access AFCR “Ways to Give” link and set up gifts as one-off, monthly, in memoriam or in honor.

 

This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.

Alfred Ip

Alfred Ip

Alfred assists high net-worth individuals (HNWIs) in handling their wealth-related issues, such as contentious and non-contentious trust and probate, mental capacity, family office, amongst other wealth management matters. He is also a leading Dispute Resolution lawyer with over 20 years of experience in Hong Kong. Moreover, Alfred helps clients with issues regarding Family Law.

All articles by : Alfred Ip
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