What Happens To Your Will/Estate When You Divorce?
Going through a separation, and then, ultimately a divorce can be a very traumatic time in an individual’s life, and the lives of their loved ones too. Amongst the chaos, one thing that is often overlooked is what happens to your Estate if you die…
The Validity of Your Will In A Separation
When you separate from a spouse or partner, any Will that you have in place will remain legally valid, even though you most likely do not want your partner to share in your Estate. It is therefore important that you update your Will and your Binding Death Benefit Nomination in your superannuation.
Until a property settlement is finalised through the Court, it is likely that many of your assets will be jointly held with your spouse or partner. It is for this reason that many people think that they should not amend their Will until a settlement is finalised. However, this is not the case.
There are two main things involved in protecting your assets after separation:
Family Law Matters
It is important to contact a lawyer to receive advice after separation, even if you do not want to act on this advice straight away. You should always know your rights and where you stand with your ex-spouse or ex-partner.
After receiving advice from a Family Lawyer, you need to attempt to resolve the matter through negotiation. If this negotiation is successful, your lawyer will have consent orders prepared and approved by the Court. Once the consent orders are approved, the assets are divided in accordance with these Orders and the matter is finalised. Any updated Will, then becomes incredibly important.
If negotiations, including mediation, are unsuccessful, your lawyer will need to issue proceedings in the Court. However, if you pass away prior to the consent orders being made, or alternatively the Court proceedings being issued, the property will pass in accordance with any joint proprietorship and remain the property of the surviving spouse.
Many people find separation, and the process after separating, extremely overwhelming. While you can never predict death, for this and a variety of other reasons, you should act to finalise your property settlement as soon as possible after separation.
Updating Your Will
As soon as you have made the decision to separate, you should amend your Will to remove any reference to your spouse or partner. It is important to appoint a trusted person into the role of Executor, as it will be your Executor who will ‘stand in your shoes’ to continue any Court proceedings that are on foot if you die.
Without a Will or an updated Will, two issues would arise. These issues are only relevant if you are separated and not divorced:
- If you have a Will that provides for a spouse or partner and you do not change this before you die, the assets will still pass to your former spouse or partner. This is the case even if you have had final orders in the Court dividing your assets; and
- If you have never made a Will and pass away, the law of intestacy applies. This means that your spouse would also be entitled to share in your Estate and the matter can be further complicated if you have a new partner.
Want to know more about just how important Wills are? Head to this previous article we’ve put together: The Importance Of Creating A Will.
Binding Death Benefit Nominations
As a rule of thumb, your superannuation is not controlled by your Will. It is your individual superannuation company that determines who receives your superannuation, in accordance with the legislation. To have control over who receives your superannuation, you need to ensure you have nominated a beneficiary or beneficiaries. There are two types of nominations:
- Non-Binding Nomination – this type of nomination means that the person or persons you choose will not necessarily receive the benefit. The nomination is simply an expression of your wishes, and the superannuation company has the discretion to override this nomination. This would only be the case if (1) someone challenges the nomination or (2) the nomination is invalid. This is particularly important if you have separated, as your spouse could in theory still receive your superannuation.
- Binding Death Benefit Nomination – if you complete this type of nomination, the superannuation company cannot override your nomination unless you have selected a beneficiary who does not fall within the rules, in which case they are unable to honour this.
We would always recommend that you complete a Binding Death Benefit Nomination. It is important that you receive advice in relation to what is a valid nomination so that you can have peace of mind that you have selected the appropriate beneficiary or beneficiaries.
Want to know more about the importance of Binding Death Benefit Nominations in your superannuation? Check out this previous article we have put together: Superannuation + Binding Death Benefit Nominations.
Once you have finalised your divorce through the Court, any reference in your Will to your spouse is revoked. Therefore, if your spouse is appointed as an Executor and a beneficiary, these two appointments would be removed. While this would mean that your ex-spouse or ex-partner would not receive your Estate, but it would also leave a huge hole in your Will and be extremely unsatisfactory.
This is why it is extremely important to ensure that once your divorce is finalised, your Will is updated as a matter of urgency.
Powers of Attorney
Powers of Attorney are not revoked by separation or divorce and therefore they will remain in place until they are amended. It is important to create or update your Powers of Attorney for several reasons, including:
Enduring Power of Attorney (Financial + Personal)
If you have an Enduring Power of Attorney in place appointing your spouse, they will continue to have the power to make financial and personal decisions on your behalf even after you are separated or divorced. There are many issues with this, the main one being that your finances could potentially be abused.
Appointment of Medical Treatment Decision Maker
This Power of Attorney is probably more important than the Enduring Power of Attorney for the following reasons:
- If you have a Medical Treatment Decision Maker Power of Attorney, you have most likely appointed your spouse and therefore would want to revoke this once the relationship has ended; and
- If you do not have a Medical Treatment Decision Maker Power of Attorney, the legislation governs who is entitled to make medical treatment decisions on your behalf. Therefore, if you are separated but not divorced, your spouse or partner would be the most entitled person to make these decisions.
Want to know more about Powers of Attorney and just how much power they hold? Check out this previous article we put together: The ‘Power’ In Powers of Attorney.
Canny Legal + Expert Legal Advice
The process of separating and/or divorce can be an extremely stressful and overwhelming time. Often updating or creating a Will and Powers of Attorney are the last thing on your mind, however, it is arguably one of the most important tasks that need to be completed.
Get in touch with our team today so that we can make sure that your legal documents are up to date and reflective of your current circumstances.