Mushroom murders: Inheritance lessons for every investor

The extraordinary case of Erin Patterson captures key aspects of how wealth is transferred between generations and how it could be done better.

Detective Inspector Dean Thomas talks to the media after a guilty verdict was reached against Erin Patterson. Picture: Alex Coppel

The ‘mushroom murders’ case of Erin Patterson highlights important changes to Australia’s rapidly evolving estate planning sector that lawyer and financial adviser, Chris Hill, has been trying to focus investor attention on for years.

Hill says Patterson, an heiress who has extensive financial interests, will now inevitably face claims on her assets from the estates of her murder victims in her notorious poisoning case.

In fact, Patterson’s own wealth came primarily through the estate planning of others. In 2007, she inherited $2m from her grandmother, and she inherited again when she received $900,000 from her mother in 2019.

In the latest episode of The Australian’s The Money Puzzle podcast, Hill says Patterson is now facing inevitable claims on her wealth under wrongful death legislation.

“If there’s a judgment, as there inevitably will be in respect of each of those estates, then the issue is how that judgment can be satisfied – and what assets can be taken. Well, whatever’s left of that wealth – and I believe there were some loans she made as well as other monies she inherited to help fund properties. Those loans and monies would constitute assets. So to that extent, that wealth, those assets, could be seized.”

As Hill points out, Patterson received her largest inheritance almost two decades ago. That wealth, and what is left of it after being spent on the top-tier defence team she used in the long-running trial is now most likely to be lost through wrongful death claims under the Wrongs Act in Victoria.

He also says the Patterson case highlights how the rising wealth of Australians, especially the enormous intergenerational wealth transfer now taking place across the nation, demands that investors go well beyond traditional moves of making a simple will and regularly updating it.

“We’re now seeing people that have more diverse relationships, blended families, multiple partners, children from different partners, same sex and binary, non-binary,” Hill says.

“So we’re seeing the complexity of Australian society change and I think more people are looking at … how do I make sure that my money gets into the right hands at the right time and doesn’t get lost to any other person or any other claim?

“And the trend is towards using testamentary trusts, especially if there’s more significant wealth and even more so restricted trust or capital protected trust arrangements where there is significant wealth.”

Hill says when will makers make the effort to include so-called “testamentary trusts” it can help reduce stress on families when things go very wrong and inheritance is passed on under circumstances that could never have been imagined years earlier.

“If we circle back to Erin Patterson and bring it into a wider context, if I left my wealth to say to my son, and he got sued or he had a relationship breakdown, that wealth will get lost or get dissipated or caught up as part of a claim by a creditor or claim by an ex-spouse. The testamentary trust is designed to protect that wealth and to quarantine it, if there’s a relationship breakdown.”

The grave of Don and Gail Patterson at the Korumburra General Cemetery. Picture: AFP

Hill, who has extensive experience as both a qualified financial adviser and lawyer with the Victorian-based Inherit Australia group, says high-profile cases such as the mushroom murders bring attention to his area which the profession finds difficult to achieve otherwise, since even the most pragmatic investors will avoid working on plans for what is to occur after they die.

He believes investors should renew estate plans regularly, especially after significant life events or changes in relationships. It is also important to discuss “what if” scenarios to identify risks before they arise.

He also points out that the wide reporting of court cases often captures major changes in estate planning familiar to those working in the area, but are often being discovered for the first time by the wider public.

Earlier this year, estate planning hit the headlines in a separate story of a large fortune where the only statement of the will maker, Colin Peak, was a note on an iPhone.

Peak had punched out the note on his iphone shortly before he died.

The family – who would inherit under the state-based intestacy regime if the iPhone note was held to be invalid – successfully argued the note was simply a working document and never intended to amount to a final (informal) will.”

In the Peak case the will was ultimately deemed invalid, but that was not because the contents were drafted on a mobile phone. Rather, it turned on the more traditional notion of establishing intent.

Hill says people need to be aware that the very nature of will making is changing – and they must be prepared for delivery by technologies which are still relatively new.

“There are provisions for what we call an informal will, and that can be a handwritten or typewritten note, it could be an SMS or an email or a text, a video recording or even an audio or a word document. The court will look at the variety of media on which a written record is made.”

As Hill makes very clear, it often takes a major tragedy or sensational story to get investors to concentrate on wills and estate planning and when they do, they can find things have been changing in area where nothing stays the same for long.

James Kirby hosts the twice-weekly Money Puzzle podcast