Why finalising your divorce is important when making a new Will.
One in three marriages in Australia will end in divorce after, on average, 12 years. By this time, most couples are likely to have two or more children, are probably in the process of paying off the family home, have some level of superannuation and some other investments.
Whilst the normal course in divorce settlements involves the separation and distribution of the couples’ matrimonial assets, there are times when this does not take place. In addition to this, the couple may not take the final step in obtaining orders dissolving the marriage. When then does this become a problem for estate planning?
Estate Claims and Existing Spouses
Under Part IV of the Administration and Probate Act 1958 (VIC), an ‘eligible person’ is entitled to bring a claim against the estate of a deceased person for provision out of their assets. An ‘eligible person’ can include:
- Spouse, including defacto partner satisfying the test identifying a defacto relationship under the Relationships Act 2008 (VIC);
- Child, including an adult child;
- Grandchildren, who were living with the deceased as at the date of death and were financially dependent on the deceased for support;
Although a couple may be separated, they may still be deemed to be a spouse at law, if their marriage is not formally dissolved. Couples separate and move on into new relationships, whilst still remaining married to each other. The troubles arise when one of them dies. Divorce and separation do not invalidate a Will. If a person dies without a Will (intestate), this also causes problems for the new partner and the former spouse, when it comes to dividing the estate of the Deceased.
If your spouse is named in your Will, they are entitled to receive any gift left to them in that document, provided you have not remarried. Marriage invalidates a Will, provided you have formally divorced in the first instance. The complications arise when a new partner (usually a defacto partner) challenges the estate. In most cases, it is clear that the deceased spouse did not intend for their estate to pass to their surviving ex-spouse. However, if there is no formal dissolution of marriage, the ex-spouse may have the law on their side in seeking further provision from the estate of the deceased. Afterall, they are recognised as being ‘the spouse’ of the deceased as at the date of death, thereby increasing the moral duty of the deceased spouse to ensure that their surviving partner is properly provided for. This issue becomes further complicated where there has not been a family law property settlement and where a Will has not made provision for the surviving spouse that meets their financial needs moving forward in life. The new partner may think that they are entitled to the assets of their deceased partner, only to find that the deceased partner did not resolve the financial aspect of their matrimonial affairs with their ex-spouse, prior to becoming involved in the new relationship.
Many couples give the reason that the failure to not complete property settlements and final marriage dissolution orders is that they are time consuming and difficult to resolve. However, the failure to address both issues upon separation is a disaster for all concerned when one of the partners later dies. Many people do not realise that, remaining married, at law, opens the door for a bitter spouse to contest the estate of a deceased partner, just to spite the new partner. This is usually at the cost of the children to that first union.
If you are considering making a new Will, are separated and not yet divorced, it is recommended that you obtain advice as to finalising the dissolution of your marriage as soon as possible. In the interim, you should consider what steps you need to take in preparing your Will in such a way as to limit the ability of the ex-spouse to make a claim on your estate. If you have children, are formally divorced and have finalised a property settlement, you may wish to consider creating a testamentary trust in your new Will to protect your children from the former spouse, or a new partner.
If you have recently separated, or are considering a divorce, contact our Family Law and Wills and Estates teams to see how we can help plan for your future succession needs.