The end of a relationship is, more often than not, a very difficult, upsetting and stressful event. Stemming from the breakdown of a relationship, clients have at the forefront of their minds, understandably, more pressing considerations such as alternative living arrangements and the care of their children. Also at the top of their priorities list is dealing with property and assets – usually the division of them between the warring parties, rather than ensuring the assets are dealt with in accordance with their changed circumstances and estate planning objectives.
Estate planning is an important aspect to consider for people who have suffered a relationship breakdown. The consequences of not having their affairs in order can lead to unintended outcomes.
Enduring power of attorney
An enduring power of attorney (EPA) is not automatically revoked by a separation. Termination of a registered relationship or a divorce revokes an EPA only to the extent it gives power to the divorced spouse or previous registered partner. However, for the sake of completeness, and as the finalisation of divorce can take some time, we recommend that any clients who have suffered a relationship breakdown to immediately prepare a new EPA.
The preparation of a new EPA will ensure that the right person/s are appointed to make decisions on behalf of the client if he/she is unable to make decisions for himself/herself.
Similar to an EPA, a will is not automatically revoked by a separation. It is important, therefore, for those who have suffered a relationship breakdown to review his/her will to ensure the appropriate people are appointed as executors and that the estate passes to the intended beneficiaries. It is important to note that a person’s spouse remains his/her spouse until they are formally divorced. Regardless of how many years a person has been separated, if they have not divorced then their spouse legally remains an “eligible applicant” to make a claim against the deceased estate.
To avoid unintended outcomes (eg: the spouse remains sole executor and beneficiary), a new will should be prepared to reflect the client’s current circumstances and estate planning objectives.
Binding death benefit nominations
A binding death benefit nomination (BDBN) is a binding direction to the trustee of a superannuation fund to pay a member’s death benefits to a nominated beneficiary (a dependant (spouse, child, etc) or legal personal representative). Most BDBNs lapse after three years, but there are occasions where a non-lapsing BDBN can be prepared, depending on the terms of the superannuation fund trust deed, which means that any nomination made by a member will not cease to have effect until the non-lapsing BDBN is revoked or a new BDBN is prepared.
As superannuation accounts can contain significant sums (there is often a life insurance component attached to a member’s fund), it is imperative that a client review and update any previous nominations or consider preparing a BDBN to ensure the death benefits go to the appropriate nominee.
Joint tenancy, real property and other assets
Property held as joint tenants is subject to the rule of survivorship (ie: on the death of a joint owner, the property will pass automatically to the surviving joint owner). Whereas property held as tenants in common is dealt with as a discrete interest of each co-owner (ie: on the death of a co-owner, his/her interest will be dealt with by his/her will). Most couples own property as joint tenants. While it may be that the property is dealt with as part of a property settlement, there is still merit in considering the severance of a joint tenancy upon the breakdown of a relationship. Especially if the property settlement is likely to be delayed or if there are health issues or anything that present risk to the party trying to protect his/her asset.
Other assets a client should consider severing are bank accounts and any shares.
Relationship breakdown checklist
In light of the above information, below is a checklist to consider upon the breakdown of a relationship:
Click here to view checklist.
If there are any ticks in the “yes” column, then we recommend that legal advice be sought to ensure that personal matters, estate planning and other affairs are in order so as to avoid any unintended outcomes occurring if something unexpected happens prior to the finalisation of a divorce.