Most separated partners try to resolve all outstanding financial issues as soon as possible. This makes sense; you no longer maintain shared goals and commitments to your ex, so why not sever the financial ties immediately too?
For many reasons, property settlements often do not progress as expeditiously as parties desire. There can be long delays, particularly if you are involved in litigation via the family law courts.
A consequence of this is that sometimes a party will die during the period between separation and the finalisation of their property settlement. Aside from the obvious distress death causes family members, it can also create unintended legal consequences.
Below is an outline of the different death scenarios and the contrasting legal effects.
Death before finalising property settlement and there are no court proceedings
In this instance, any legal interests held by the deceased party will be retained by their estate and distributed according to their Will.
This could be disastrous in a family law matter where, for example, most of the assets were placed in the name of one spouse and that spouse dies before their property settlement is finalised. If there are no court proceedings, the surviving spouse will only receive the assets they have a legal interest in (which could be nothing), and they have no family law recourse.
There may be alternate avenues for the surviving spouse; such as a family provision application (FPA), but these are outside the family law sphere. An FPA might also see the surviving spouse receive a much lower entitlement than they would via the family law property settlement process.
It is worth noting that for any property held as joint tenants, if one party dies, then the surviving party receives the deceased’s interest in the property regardless of the terms of their Will. This can be changed by severing the joint tenancy such that each party has an equal interest as tenants in common.
Death before finalising property settlement but there are court proceedings
If a party dies while there are proceedings in the family law courts, then a legal personal representative will be appointed to act on behalf of the estate of the deceased.
While the death of a party will likely have an impact on the entitlement the surviving party and estate receives (e.g. it will no longer be relevant to consider the future needs of the deceased), the proceedings will otherwise continue as normal.
There may however be other consequences of death on the calculation of the parties’ property interests. For example, a superannuation binding death nomination may direct the deceased’s entitlements to be distributed to their children. Therefore, the deceased’s superannuation will not form part of their estate and it will not be available for distribution to the surviving spouse in the property settlement.
The death of a party can create unwanted legal issues, depending how assets are held and whether there are already court proceedings on foot.
Separated parties should obtain legal advice about whether anything can be done to protect their property interests in the period between separation and the finalisation of their property settlement.