It is often said that there are only two certainties in life: death and taxes.
This is very true, but have you considered what would happen to your estate if your relationship has broken down?
Separating from your significant other may not be a certainty, but it is a risk when it comes to your will and estate planning.
What happens to your assets if you're separated and you die?
Not a pleasant thought, is it? Sadly, we have seen this happen all too often where people have not got their affairs in order at critical stages in their life then suddenly die, with disastrous consequences for all concerned.
When we say "separation" we mean separation in the context of a significant relationship you may have with another person, whether a marriage of opposite sexes or the same sex, de facto partners, or parties to what SA law calls "domestic partners", each of which give rise to different entitlements to estates whether or not people have wills.
Trust us: wills and estate planning generally in the context of separation is a very complex area of law if you do not get your affairs in order with the benefit of specialist legal advice.
Below are some things to take note of and if any apply to you we urge you take action right now.
If you have no will
Like about half of Australians, you may not have a will at all. This is just plain risky in any event, more so if you're in a significant relationship or exiting one.
If you don't have a will, and your marriage or relationship breaks down, your ex-spouse or partner may well be entitled to a share in your estate if you die.
There are two very simple rules when it comes to wills.
Rule No 1: get a will!
Rule No 2: review it regularly!
If you have a will
If you are smart enough to have a will, perhaps you have made one with your spouse or partner, you will need to urgently review it in the event you separate.
Marriage revokes a will, so if you made a will when you were single, it automatically is revoked (cancelled, rendered null and void) on the day you marry, which means if you die you will be die intestate, and your assets will be administered in accordance with a predetermined, statutory formula (remember the above two very simple rules?)
However, if you already have a will, and you separate, it does not mean that your will is revoked or that your affairs have suddenly changed in the event of your death.
If you have a will and your will makes a gift of your estate to your spouse or partner, your ex-spouse or ex-partner is still legally entitled to the gift if you die.
Therefore, it is imperative that you review the gifts in your will if you're thinking about separating or have in fact separated from your spouse or partner.
Separation (and divorce)
We are family lawyers as well as wills and estate practitioners.
Whenever we are instructed to act for someone whose relationship has broken down is to discuss with them the need to review their will.
It is important to understand that separation is an objective fact where parties to a relationship have decided unilaterally or mutually that their relationship has suffered an irretrievable breakdown but does not entitle either party to a divorce.
Separated parties can mutually agree or seek a Court Order settling their financial affairs as between them as soon as possible after separation occurs (known as a "property settlement").
A formal property settlement between parties to a relationship certainly prevents any claims that either party may have against the other while they are alive. However, this does not necessarily preclude a claim being made by a surviving partner if the other party dies (particularly if the other party has not changed his or her will).
A divorce on the other hand can only be sought 12 months after separation (which can be before or after the parties have achieved their property settlement) and has the effect of revoking any gifts to spouses set out in a person's will, but otherwise leaving intact the clauses set out in the will.
While some people may be happy with outcome as far as their former spouse is concerned, we would urge you if you are divorced to review your will in any event because the remaining gifts in your will may have unintended consequences.
Sound complicated? It certainly is, even for lawyers, much less for hapless clients, but you only need to remember two very simple rules when it comes to wills in the context of your close personal relationships.
Rule No 1: get a will!
Rule No 2: review it regularly!
Estate planning generally post-separation
Estate planning encompasses not only your will, which only has any legal operation after your death, but a number of other considerations about how your financial affairs are managed prior to your death.
We would recommend that you not only review your will in the event that you have separated, but discuss with us any of the part of a review of your estate plan which may or may not entail us acting for you in your property settlement if you do have a lawyer or have already achieved a property settlement with your former partner.
Updating your estate plan post-separation may well include reviewing:
- your jointly owned properties
- your superannuation funds and death benefit nominations
- your life and risk insurance policies
- your circumstances to decide whether your will should include Testamentary Trusts
- any powers of attorney and your arrangements where you are unable to manage your own affairs
- understanding the reasons for asset protection and benefits of owning property in family discretionary trusts.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.