(SHORT ANSWER: IT CAN BE MESSY!)
Picture this scenario: You and your spouse have separated, but your divorce is not yet finalised when you receive news of their death.
This happens more frequently than you may think, particularly as you can’t file for a divorce until 12 months after you separate and then there’s a process to it. We also find many married couples have been separated for years but haven’t got around to ‘officially’ submitting the divorce paperwork.
So, where do things legally stand?
In Australia, if a person dies during a separation and before a divorce is finalised, the legal situation can become quite complex. Legally, the deceased is still considered married to their estranged spouse, which means the surviving spouse retains certain rights; this is even the case if the deceased is then in another relationship. If the deceased had a valid will, the provisions favouring the estranged spouse are still effective. If the deceased didn’t have a valid will, things are bound to be messy.
Thinking about your personal circumstances and what could happen, it can become particularly complicated in the following scenarios:
- Intestacy: If you don’t have a will, your estate is distributed according to intestacy laws – these will see your estranged spouse receiving all or a majority portion of the estate (depending on whether there are children to that relationship or a different one). There are also added complexities depending on how the assets are owned.
- Superannuation: Your superannuation will, more than likely, be paid to your estranged spouse unless you’ve done a valid binding death benefit nomination otherwise. Further information on this is detailed below.
- Property Settlement: If a property settlement was not finalised, your estranged spouse may claim a share of the assets of your estate (even where you’ve done an updated will).
- Family Provision Claims: Your estranged spouse is eligible to ‘contest your will’ under the Succession Act 2006 (NSW) and may seek to claim some or a larger share of your estate.
- Legal Representation: If you have initiated property settlement proceedings, your executor may need to step in to continue the process; there may be a position of conflict here.
- Family Trusts and Other Asset Structuring: Different types of structures are dealt with in different ways. For some of our clients, just having a will is not enough. Your various structures need to be considered and the succession provisions in terms of control of different structures should be tied up to avoid problems with your estranged spouse taking control of these when that was not the intended outcome.
At a basic level, making sure you have considered your superannuation death benefits and the terms of your will is an essential first step in dealing with a separation. Superannuation is an area where more and more problems are arising; particularly with blended families and the amount of wealth people have accrued in superannuation. Without proper planning, this area is fraught with danger.
A deceased’s superannuation benefits are only able to be paid to certain classes of people. There’s an ability to nominate who (within the eligible classes) are to benefit and these can be binding or non-binding. If the deceased had a valid Binding Death Benefit Nomination (BDBN), the superannuation fund trustee is legally required to follow these instructions. More often than not, the spouse is nominated and there is no discretion for the superannuation fund to pay the death benefit a different way; even if they wanted to.
In the absence of a BDBN, the trustee has the discretion to distribute the benefits to the dependants of the deceased. The purpose of superannuation is to provide for you and your spouse in retirement and, because of this, it means superannuation fund trustees will almost always pay death benefits to a spouse above other types of dependants.
Updating your estate planning as soon as separation occurs is crucial to ensure that your current wishes are accurately reflected. This helps prevent your estranged spouse from inheriting certain assets against your wishes and reduces the likelihood of disputes among surviving family members.
Promptly revising your estate plan can safeguard your estate and provide clear instructions for the distribution of your assets, which in turn minimises any potential legal complications and emotional stress for your loved ones.
If you or someone you know has recently separated, or you would like to discuss updating estate planning generally, please contact our Estate Planning Team on (02) 4927 2900.
