10 Jul What happens to my Property Settlement if I die?
Many clients who are in the separation process, will often ask the question; What happens to my property settlement if I was to die? The answer to the question is complex and requires a consideration of legal issues involving two areas of law; Family Law and Wills and Estate.
The first consideration will be whether there was or was not a Will at the time of the death, and what are the terms of the Will? The second consideration is what is the status of the family law proceedings at the time of the person’s death?
The Advice as to what occurs with the property settlement would be dependent upon:
- Whether the Court proceedings had commenced or not?
- Whether Court Orders have been made?
No Court Proceedings
If you are in the middle of the property settlement negotiations and you were to die, and you have not yet commenced Court proceedings, then your Estate will be divided depending upon the terms of your Will. If you do not have a Will, it will be dealt with pursuant to the relevant state Intestacy Laws.
The Family Law Act is no longer relevant and any potential beneficiaries will need to be able to find out about their interests pursuant to the law relating to Wills and Estates.
Court Proceedings on Foot
If, however, you are in the middle of Family Law property proceedings, then those proceedings are able to continue after your death. There is a process in the Family Law Act, where your personal legal representative (who is usually your Executor pursuant to your Will or the Administrator if there is no Will) is able to make an application that they be appointed as your personal legal representative, and request that the family law proceedings to continue as between the surviving spouse and the Estate. What this means is that the personal legal representative stands in the shoes of the deceased person and continues the family law proceedings.
Sometimes, a client may not get around to updating their Will from before their separation and what that means is there may be an old Will that still gives the whole of the estate to the former spouse – even if it was not the client’s intention at the time of their death. If that was to happen, a surviving spouse could potentially make an application to be the personal legal representative.
If the deceased person had not obtained a divorce, and the surviving spouse was the sole executor and sole beneficiary, this could potentially give rise to a conflict of interest because at the time of the death, the surviving spouse was in dispute with the Estate. If a divorce had been obtained before the death, then the Will is interpreted as if the surviving spouse had died before the deceased person in relation to both their appointment as Executor and in relation to any gifts to them as a beneficiary.
If that was to occur, then any persons who were left out of Will and who are potential family provisions claimants (for example other spouses or children of the marriage), those claimants should seriously give consideration to seeking specialist advice from a Wills and Estate lawyer, and make an application to have an alternative Executor be appointed on the basis of the conflict of interest.
This may first start with an invitation for the surviving spouse to stand down as executor of the deceased spouse’s estate and for one of these remaining potential claimants to give consideration for an application to be appointed as the Executor.
The potential claimants should also consider obtaining their own advice as to contesting the original Will, and seeking a Family Provision claim under the Succession Act, or if they were to contest any Letters of Administration.
Court Proceedings are Concluded – No Court Orders are Made
If the settlement negotiations have completed and the parties had entered into Family Law court orders, and those Court orders were made, the Orders are now binding upon the estate. This means that your Estate is duty bound to comply with the orders that are made by the Court.
This distribution, is still, however, subject to the terms of the final Will. This is why it is extremely important for parties following a separation to give serious consideration to having a Will prepared; so as to ensure that there is not a dispute between surviving loved ones after their death.
Practical Arrangements after Death
When speaking with a Wills and Estate lawyer, your loved ones will need to know and be able to inform your lawyer:
- Did you have a Will?
- Which Will is the last Will? Who holds the original Will?
- What if you didn’t have a Will – then what happens?
- What were the details of your assets, liabilities and superannuation at the date of your death?
- How do you own that property?
- Did you have superannuation; a life insurance policy? A funeral policy?
- Where are you up to in the Family Law process; for example, were you separated? Were Family Law proceedings commenced? Were Family Law Orders made? Were you divorced?
These are the first practical questions that your loved ones will need to consider. Therefore, you should communicate this information, with a loved one, so they know the answers to assist in finalising your Estate.
It is an idea that if you have separated, that you advise your Family Law solicitor of emergency contact details for a loved one and what information of yours, you would like your current lawyer to be able to tell or communicate with your loved one, in the event of your death.
What to do to Protect your Estate Now?
Ultimately, clients will usually prefer that when they are separated, that their interest in their estate will go to their chosen or intended loved ones, and not normally to their former spouse. This is particularly the case, when the separation is acrimonious or when the client left children at the date of their death.
They would usually prefer that the children were to receive the monies rather than the monies automatically going to the former spouse, and the children thereafter have to wait to receive their share from their surviving parent’s estate.
To be able to protect your estate, it is important that when you separate you consider the following:
- You have a current Will, or you have updated your old Will;
- If you own property in joint names as ‘joint tenants’ you need to consider making an application to sever the joint tenancy. This has the effect of changing how you own your property from joint tenants to ‘tenants in common’.
Ordinarily when people buy property together as a couple (whether married or de facto) they will often purchase the property as joint tenants. This means that both parties own the property jointly together. If one of the parties dies the other person automatically receives the other person’s interest on death. If you own property as ‘tenants in common’ in means your half share in the property will be bequeathed in accordance with the terms of your Will.
Why should I be Updating my Will?
You should consider updating your Will or making sure you have a valid Will.
If you do not a have a Will, then if you die without a Will there are intestacy laws in place in each State. The Intestacy laws provides for how Wills are to be distributed in the event of your death. There is a List of beneficiaries under the relevant Act. In New South Wales, an Application for Letters of Administration is required to be made through the Supreme Court and this is more complicated that a simple Application for Probate (when there is a Will).
The Intestacy laws set out the order of priority of distributions to be made. If you leave a spouse at the date of your death (whether you were together or separated at the time of your death) then their provision in the intestacy law provides for a certain amount of your estate to first go to your spouse, and then to your other possible beneficiaries, for example your children. Therefore, your monies could go to your former spouse even if that was not your intention. If, however you were Divorced, then your spouse is not considered in the same category of spouse. This is why it is important to consider making your Application for Divorce as soon as you are legally able to.
If you left children, the children still have the ability to make an application for provision under the Succession Act, if they have been left out of the Will or was a contest their interest as part of the application for Letters of Administration.
If you are experiencing any issues following separation you can speak with one Solari and Stock’s Family Law Team or alternatively, if you are disputing a Will speak to one of our Wills and Estates Team. You can reach our Miranda office on 8525 2700, or click here to request an appointment with of our team.
Article written by Nicole Quirk
Photo by Caleb George on Unsplash