ESTATE PLANNING & FAMILY LAW ARTICLES
HOW SEPARATION WILL IMPACT UPON YOUR ESTATE PLANNING
Separation from your partner or spouse is not an easy time for anyone.
While there might be a number of other issues at the top of the stress list, it is extremely vital that you prioritise the reviewing and updating of your will. Without doing so, in the unfortunate event that you pass away or become incapacitated, the consequences can be disastrous.
A will is a legal document that allows the distribution of a person’s assets, pursuant to the wishes one left behind before he or she died.
Firstly, What is a Will?
A will is a legal document that allows the distribution of a person’s assets, pursuant to the wishes one left behind before he or she died. A will appoints a person or persons as executor who will then be responsible for the distribution of the assets on the deceased’s behalf, in accordance with their instructions.
Assets are essentially the tangible valuables that belong to a person. These can include land, houses, cars, and bank accounts. Wills appoint a beneficiary who in the event of your death or incapacitation will inherit your belongings.
Without a will in NSW, the distribution of your assets will be in accordance with a strict formula via what are termed intestacy rules of that apply under relevant legislation about to whom and how assets of a deceased estate are to be divided.
There are factors besides simply separating from a marriage or a de facto partner that should be considered and they include reviewing and updating your last will and testament and or making a last will and testament if you do not already have one.
There are factors besides simply separating from a marriage or a de facto partner that should be considered and they include reviewing and updating your last will and testament and or making a last will and testament if you do not already have one. Such factors can include changes in family circumstances, including:
- Marriage or the start of a de facto relationship (especially if there are children from a previous relationship);
- The birth of children or grandchildren;
- If an executor or beneficiary already named in your will dies; and
- If financial circumstances change.
Depending on the type of relationship between yourself and your partner, the entitlements to each other’s estates can dramatically differ. Wills are not the only part of estate planning, but the management of your financial affairs must also be considered. Some of the main points of review following a separation might include:
- Jointly owned properties;
- Superannuation funds and death benefit nominations;
- Life and risk insurance policies;
- The circumstances surrounding the decision as to whether your will should include Testamentary Trusts;
- Any powers of attorney and personal arrangements; and
- Having knowledge of the reasons for asset protection and benefits of owning property in family discretionary trusts.
Separation and Wills
One of the most important steps that any person should take after separating is to change their Will and, if applicable, revoke their Power of Attorney that may be in place to their former partner. This is particularly relevant where separated couples have already done reciprocal Wills and Powers of Attorney.
A separated couple can be apart for several years and have agreed on a property settlement but if a former partner unexpectedly dies during this process before they are divorced, the former partner will then inherit the entire estate of the deceased former spouse by virtue of the fact that they are still “married” (usually subject to the rights of any children or other eligible persons). This can also apply to Superannuation benefits.
This can apply even where there are no Wills in place. Under the laws of intestacy, the surviving former ‘spouse’ is the person who inherits the estate, even though they were legally separated at the time of the death and there was obviously no intention from the surviving former spouse to make any provision for their former partner. This also applies to de facto couples.
Most people would be mortified if their now former partner inherited even part of their estate!
You should also bear in mind that getting a divorce needs to be done as quickly as possible after separation. Until the divorce is finalised and the decree nisi received, your former partner still has a right to claim against your estate. The best example of this is where a spouse dies before the divorce is finalised without a Will and the entire estate passes to their now former partner (this can occur even though the divorce has been filed but the decree nisi has not yet been received from the courts).
A divorce, on the other hand, involves a process with a few more intricate steps. A divorce may only be sought 12 months after separation, and this can be either before or after the parties have completed their property settlement.
There are different outcomes depending on which state you are in as to the effect of a divorce upon Powers of Attorney or being able to claim against the estate of someone who dies.
In New South Wales a divorce does not render a Power of Attorney invalid but does render an Enduring Guardian invalid. It is particularly important in New South Wales even after you are divorced to ensure that any Power of Attorney you have given to your now former partner is formally revoked.
Whatever the case is so critical after separation to change your last will or make a will if you do not already have one.
Family Provision Claims by your former partner
In Australia, different states and territories apply different criteria as to who may make a family provision claim, if they feel they have been inadequately provided for or excluded in a Will or even where there was no will at all.
In NSW this can include your former partner, even if you were married and then divorced or a former de facto couple.
NSW is one of the few jurisdictions throughout Australia, where there is the capacity to ensure that a property settlement, if agreed upon, or ordered by court, to require each party to apply to the Supreme Court of NSW to request that the Supreme Court release each separated former partner of their right to bring a family provision claim.
This is why it is critical to engage one of our experienced family lawyers to advise you of such issues.
Family Provision Claims by children / your stepchildren
If your former partner had children, and in most cases having become your stepchildren, unless you left them a gift in your will, under NSW legislation, stepchildren are not eligible to challenge wills on the basis of a family provision claim, saying they were left out. As they are not direct blood relatives to a deceased, stepchildren cannot apply to the court for family provision and will have to take a slightly different legal path to access the estate of a deceased parent.
However, it is important to remember that a stepchild can still make a Family Provisions Claim if they meet certain criteria, namely:
- Dependence: If the stepchild was ever wholly or partly dependent on the deceased person, then this can mean they are eligible to challenge the will. This can be easy to prove if the families blended when the step-children were young.
- Living arrangements: Again, if a stepchild had lived in the same household as the deceased at any stage of life, then it is possible to make a Family Provisions Claim. Sufficient evidence would be required to prove this fact.
Updating your will
In the situation where you gift your estate to a partner who then becomes former partner, the affairs do not change in the event of your death unless you update your will. Therefore, assuming that you no longer want your former partner to be gifted your estate, it is important that you keep your will up to date or make a will.
It is vital that legal advice is sought from one of our experienced Sydney family lawyers to help navigate the legal intricacies surrounding these issues. Our experienced team of Sydney lawyers can help with the understanding of the laws involved, answer any questions you may have in relation to how things will change following a separation, and discuss the impact this will have on estate planning.
It’s imperative that you seek estate planning assistance as soon as possible following separation.