When a couple separates or divorces, it’s usual for legal and financial professionals to advise both parties to finalise their property settlement as quickly as possible. There are compelling reasons for this.
One of these is to tie things up from a financial perspective in the event that something, like death, happens to one of the parties. It happens more than you think and hence why it’s an important consideration by family lawyers when advising on issues related to property settlement.
If mediation or court proceedings leading to a property settlement are not started before one of the parties dies, the surviving ex-spouse may not be able to recover their share of the deceased person’s estate. This might be especially upsetting if the deceased person was the primary breadwinner or owned the majority of the assets during the relationship or marriage.
Other possibilities, like making a claim on the deceased person’s estate are an option, but it’s another legal process that is often very lengthy and maybe highly contested by other beneficiaries of the estate.
Because this scenario can become rather complicated, both legally and financially, it is recommended that you seek the advice of an experienced lawyer. At Mediations Australia, we can help!
To give you some context of all this. Let’s consider some relevant case law.
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The case of Alagiah v Crouch.
The case of Alagiah v Crouch, decided by the Supreme Court of Queensland in 2015, is an example of what happens when one person dies before a property settlement is achieved.
Mrs. Alagiah and her former spouse have no children after 22 years of marriage. They divorced in May 2012 after separating in 2006. In early 2013, the husband died unexpectedly.
The spouses had attempted to negotiate an agreement on property after their divorce, but no agreement had been reached at the time of the husband’s death, and neither party had filed court papers. As a result, Mrs Alagiah’s possibilities for claiming a part of the marriage’s assets were limited.
Mrs Alagiah then attempted to file a family provision application to her former husband’s estate for enough provision for maintenance and support. However, the court determined that she was not a dependent former wife who received or was entitled to maintenance from Dr. Alagiah prior to his death. Mrs Alagiah was no longer supported by the deceased after their divorce.
Her application was also well outside the statutory time limit for such applications, having been filed 18 months after the death, rather than the nine-month time limit for filing a family provision application.
Mrs. Alagiah’s case highlights a number of key factors for persons who are divorcing but have not yet reached an agreement on property division. The importance of moving fast to finalise a property settlement or legal financial agreement once a couple separates is one of these. While property settlement applications must be filed within 12 months of divorce, failing to do so before then may put you in Mrs Alagiah’s shoes if your former spouse passes away.
Mrs Alagiah would have been entitled to continue her property settlement case against her former husband’s legal personal representative if court proceedings had been initiated before his death.
Mrs Alagiah could not make a family provision application since she had divorced and no longer relied on her former husband for financial support.
Death occurs before the property settlement is completed, and there are no legal proceedings.
In this case, the estate will maintain any legal rights owned by the deceased party and distribute them according to their Will.
This might be fatal in a family court case when, for example, the majority of the assets are held in the name of one spouse and that spouse passes away before the property settlement is completed. If no court action is taken, the surviving spouse will receive only the assets in which they have a legal stake (which could be nothing), and they will have no family law redress.
There may be other options for the surviving spouse, such as filing a family provision application (FPA), although these fall beyond the scope of family law. The surviving spouse may also receive a substantially lower entitlement under an FPA than they would in the family law property settlement process.
It’s worth noting that if one of the joint tenants dies, the surviving joint tenant inherits the deceased’s share of the property, regardless of the terms of their Will. This can be modified by breaking the joint tenancy and making each party tenants in common.
Considering a Property Settlement?
Death occurs before a property settlement is finalised, but there are legal proceedings.
If a party dies while family law procedures are pending, a legal personal representative will be appointed to act on behalf of the deceased’s estate.
While the death of a party will almost certainly affect the entitlement received by the surviving party and estate (for example, it will no longer be relevant to assess the deceased’s future needs), the proceedings will otherwise proceed as usual.
However, death may have other implications for the computation of the parties’ property interests. A superannuation binding death nomination, for example, could request that the deceased’s benefits be passed to their children. As a result, the deceased’s superannuation will not be included in their estate and will not be distributed to the surviving spouse as part of the property settlement.
The Bottom Line
If you have recently separated or have been separated for a while and haven’t commenced property settlement proceedings, you need to as soon as possible. At Mediations Australia, we’re early-resolution focused and can assist you to reach a settlement faster and cheaper than other alternatives. Talk to one of our family lawyers or mediators today. Who can assist you in Canberra, Perth, Adelaide, Melbourne, Sydney and all other locations in Australia.