It is often the case that couples separate and go through a formal financial settlement but do not necessarily get formally divorced for some time afterwards, or revisit their estate planning. In some cases, parties may never formally get divorced. Often, couples do this to avoid the cost of applying for a divorce and other times it is because of a misunderstanding as to the difference between a separation and formal property settlement and a legal divorce, which finally ends the marriage between the parties.
What is often not taken into consideration is the impact of not getting a divorce on your estate planning, if you were to pass away. Divorce is relevant to your estate planning because the person in the best position to claim against your estate is your spouse, even if you have been separated prior to death, but not formally divorced. In that case, according to the law, that person is still your legal spouse.
Does a spouse automatically inherit everything Australia
If you have no Will at the time of your death, the rules of intestacy will apply to your estate. This means that your spouse is automatically entitled to a large portion of your estate (if you have children) or your entire estate (if you have no children).
It does not matter that you may have been separated for a period before death. If you are still legally married (i.e. there is no divorce order dissolving the marriage) your spouse will be the first in line to your estate and to apply to be the administrator of your estate.
Leaving a Will Created Prior to Divorce
Section 13 of the Succession Act (2006) deals with the effect that a divorce has on estate planning created prior to the divorce. The effect of that section is that the formal divorce of the Will maker revokes a disposition to that person’s former spouse made in a Will that existed at the time of the divorce and also revokes the appointment of that former spouse as an executor or trustee of the Will.
It is therefore essential once you permanently separate from your spouse that you ensure that you also obtain a formal divorce order, It is also good practice to ensure that you revisit your estate planning. Writing a new will post separation, but not obtaining a divorce order, does not provide you with maximum protection from a claim against your estate by your former spouse.
Leaving a Will
People concerned to ensure that their former spouse receives nothing from their estate are often thought to be addressed by creating a new Will, which excludes the former spouse. Unfortunately, this is not necessarily the case.
A Will that excludes your former spouse may still be open to challenge if your former spouse makes a family provision claim against your estate. A Court has the power to award a portion of an estate to an eligible person, even if that eligible person has been deliberately left out of the Will by the deceased.
When it comes to someone challenging a Will, the first step is to determine whether or not that person is an “eligible person”. Only an eligible person as defined in the Act is entitled to bring a claim.
An ex-husband or ex-wife will be an eligible person under the Act. However, being eligible doesn’t mean that the person will get an order for provision. The former spouse will still need to establish to the Court’s satisfaction that there are factors warranting an order for provision.
This will be harder to do where there are pre-existing consent orders or a Binding Financial Agreement which provided for a just and equitable property settlement to the person after separation. Every case has its own unique set of facts that will determine whether an application for provision by an former spouse will succeed
Enduring Powers of Attorney
Divorce does not have any effect, nor does it revoke and Enduring Power of Attorney (EPA). This document allows your power of attorney lawyer to make financial decisions on your behalf and may start immediately upon signing. Your Attorney should at all times be someone you trust to act and make financial decisions on your behalf in your best interests. If you separate from your spouse this document should be updated as soon as practical to revoke the appointment of your former spouse and appoint a replacement Attorney.
A revocation must be prepared in the required form, signed by the Principal and served on the Attorney.
Enduring Guardianship
Divorce does not have any effect, nor does it revoke and Enduring Guardianship (EG). This document deals with who would make decisions relating to medical treatment or other lifestyle decisions if you have lost mental capacity to do so yourself.
Your Guardian should at all times be someone you trust to act and make medical and lifestyle decisions on your behalf and in your best interests. If you separate from your spouse this document should be updated as soon as possible to revoke the previous appointment.
Binding Superannuation Nomination (BSN)
Similarly if you have a BSN you should as soon as practical update that nomination. You could choose to nominate within the allowable categories being:
· A person dependent on you financially;
· A child; or
· A spouse (including de facto partners).
You may also choose to direct that your superannuation be paid into your Estate. In this instance your superannuation would be distributed in accordance with your Will. This is important where there are minor beneficiaries and funds are to be held upon trust for them until they reach the vesting age (usually 18 years old but can be any age of your choosing).
Separation is a big life change and in general requires a big overhaul of the estate planning documents you have previously prepared. For all of the reasons set out above, it is extremely important to get estate planning and family law advice when going through a separation. At all times in your life your Will and other estate planning documents should reflect your wishes.
- A child; or
- A spouse (including de facto partners).
You may also choose to direct that your superannuation be paid into your Estate. In this instance your superannuation would be distributed in accordance with your Will. This is important where there are minor beneficiaries and funds are to be held upon trust for them until they reach the vesting age (usually 18 years old but can be any age of your choosing).
Separation is a big life change and in general requires a big overhaul of the estate planning documents you have previously prepared. For all of the reasons set out above, it is extremely important to get estate planning and family law advice when going through a separation. At all times in your life your Will and other estate planning documents should reflect your wishes.
Our team of expert lawyers for wills and divorce lawyers can help you ensure that you are properly prepared for your divorce and have a thought out strategy when planning your estate.
Liability limited by a scheme approved under Professional Standards Legislation. This post provides a general overview and should not to be relied upon as legal advice or as a substitute for legal advice or as giving rise to a solicitor / client relationship. If you want advice specific to your circumstances, please contact us to arrange an appointment.
