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Family Trusts and Relationship Property _________________________________
Relationship Property After Death
Most people are aware that the Property (Relationships) Act (“the Act”) is a statutory regime which classifies property as relationship property or separate property and which provides for the division of relationship property in the event that a couple separate. It is fairly common knowledge that relationship property is generally shared equally if the parties are married or are living in a de facto relationship for three years or more. It is less common knowledge that the Act provides that upon the death of a spouse or partner, the survivor must elect whether to accept the benefits they are entitled to receive under the Will of their deceased spouse or partner (or the standard provisions on intestacy if the spouse or partner dies without a Will) or to apply for a division of relationship property under the Act.
Depending on the size of the Estate, the surviving partner or spouse has six months either from the date of the grant of administration by the Court, or from the date of death, to make the election. If the survivor fails to make a choice in time, then they will be deemed to have elected to receive whatever benefits they have been left under the Will of the deceased or on intestacy. A surviving partner needs to consider very carefully his or her options before making an election.
If a survivor elects to bring a claim for division of relationship property, then any gift in the Will to the survivor is deemed to have been revoked and all relationship property will be divided equally between the survivor and the Estate. The fact that the survivor has six months to make the election can mean a delay in the administration of the Estate, particularly when the survivor is not aware of the extent of the relationship assets or is not in an emotional state to be able to consider his or her rights soon after the death of their partner. There are some formalities to follow in making the election. The election must be in writing and on a prescribed form. A lawyer must explain to the surviving spouse or de facto partner fully the effects and implications of the notice of election so that they can weigh up the advantages and disadvantages of each option. And in order to do that, the lawyer needs to be aware of all the assets of the deceased and the survivor and the classification of such assets as separate or relationship property. The lawyer needs to sign a certificate confirming that they have given the survivor advice on their election. Once the surviving partner has made the decision, it is irrevocable and can only be set aside on application to the Court. The Court may set aside the election if the estate has not been finally distributed, and if it would be unjust to enforce the election or if one of the following circumstances apply: The election was not freely made; The surviving spouse or partner did not fully understand the effect and implications of the election; Since making the election the surviving spouse or partner has become aware of information relevant to the election made; or Since making the election, a person has made an application under the Law Reform (Testamentary Promises) Act or the Family Protection Act in respect of the Estate of their deceased spouse or partner. In conclusion, a surviving spouse or partner will be able to override the provisions of their spouse’s or partner’s Will by electing to make a relationship property claim. This could have implications for other relatives, particularly children of the deceased, who the testator expected to provide for financially in their Will. In addition, the drafting of Wills is no longer a straightforward process. Lawyers need to consider more complex asset planning structures and possibly even a relationship property agreement when preparing Wills for couples.
For more information on this topic, please contact Cathy Fisher on (09) 915 2412 or email firstname.lastname@example.org