Inheritances and crime loom as a wills and estate planning issue

A massive money transfer across generations threatens to create more crimes, and estate planning experts say there are key rules to understand.

A massive money transfer across generations threatens to create more crimes, and estate planning experts say there are key rules to understand.

People with a criminal record face serious issues with visas, job applications and employer checks, but can they inherit money from a will?

As the biggest shift of wealth in Australia’s history revs up, legal experts say the looming transfer of trillions of dollars could be complicated by crimes, and there is one key rule where a beneficiary gets nothing.

The latest Australian Bureau of Statistics figures show police launched criminal proceedings against almost 340,000 people in 2022-23, and in the June quarter of this year 44,051 people were in custody while 80,987 were serving community-based corrections orders.

Equity Trustees legal counsel Nick McColl said an often-asked question was whether committing a crime or having a criminal record could impact estate planning.

He said a criminal record did not automatically prevent someone from benefiting under a will or being appointed an executor, but it was a factor to be considered.

“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,” Mr McColl said.

Armstrong Legal contested estates division national director Alun Hill said every person had the legal freedom to dispose of their estate however they wished, criminals included.

“Generally, there is no bar to a person with a criminal history inheriting unless they are directly responsible for the testator’s death,” he said.

“The forfeiture rule provides that where a person is criminally responsible for the death of a testator, they forfeit the right to inherit from the testator’s estate.”

Mr Hill said he would not be surprised if there was an increase in instances involving forfeiture in the coming years.

“With the impending great Aussie wealth transfer, which is estimated to involve $3.5 trillion in intergenerational wealth being transferred over the next 20 years, and the growing disparity between the wealth of older generations and economic factors impacting on the younger generations, it’s possible that we will see an increase in criminal activity directed at obtaining inheritances,” he said.

Mr Hill said a family member’s criminal history was often not raised in estate planning discussions. He said anyone with questions or concerns should consult an accredited specialist.

“You can still provide for your loved ones, regardless of their criminal convictions.”

Fraud is another crime that could loom larger in the future, and Equity Trustees says fraud is likely to make all or part of a will invalid.

Mr McColl said where fraud was alleged, it must be shown that another person misled or deceived the will-maker.

“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,” he said.

Fraud can invalidate a will and destroy an inheritance. Picture: iStock

Mr McColl said criminals could be appointed as executors or trustees 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.

While people can choose to leave assets to family members with criminal histories, sometimes that wealth might need protection – for example if the beneficiary is in prison or is a drug user at risk of blowing it all.

“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,” Mr McColl said.

He noted a client who left their entire estate to their son, a convicted drug dealer, decided to include a protective trust under the will managed by a professional trustee.

Originally published as Inheritances and crime loom as a wills and estate planning issue