'Till Death Does Our Property Part

Family Law - 21 December 2018

Summary

The interaction of family law and wills and estates law after a person’s death can have significant consequences on the allocation of property between married and de facto couples. The two jurisdictions converge regularly, particularly in the areas of incapacity (guardianship and administration), family law maintenance, property division, trusts, superannuation, and wills and estate administration.

The right of a person to seek matrimonial property division from the family law courts ceases after the death of a party if urgent action is not taken, so it is important to seek legal advice in this area.

 


Can I continue family law proceedings if my spouse dies?

Under the Family Law Act (1975) (Cth) (Family Law Act), separated couples may apply to the Family Law Court of Australia (or the Federal Circuit Court of Australia) for orders with respect of the division of matrimonial assets

However, if one member of the couple has died, this will impact significantly on the ability of the surviving party to bring family law property proceedings for a property settlement.

The Family Law Act permits a surviving spouse to continue family law proceedings that were instituted prior to the death of a deceased spouse, provided that the Court is satisfied that certain requirements have been established.

For married couples, section 79(8) of the Family Law Act provides that property settlement proceedings may be continued by the deceased person’s legal representative if the court is of the opinion that it would have made an order with respect to the property if the deceased had not died, and that it is still appropriate to make an order.

For de facto couples, section 90SM(8) effectively sets out a mirror provision including one important difference — de facto couples are required to establish that the relationship has broken down prior to initiating family law proceedings, in addition to providing the existence of the de facto relationship.

How do I know if the Court would have made an order with respect to property?

The law in this area is complex and you should always seek legal advice.

In 2012, the High Court decision of Stanford v Stanford1 refined the traditional “four step” process adopted by the Court in determining property cases.

The courts must now first consider whether it is “just and equitable” in all the circumstances of a case to alter the parties’ existing legal and/or equitable interests at all. This means that the Court must consider whether it would have made a property order had the deceased not actually died, and whether it is fair to alter those rights.

The question as to whether it is “just and equitable” to alter the property interests of a separated couple can be demonstrated through the example of Peter and Prudence:

  • Peter and Prudence were married in 1980. They have two adult children who both suffer from significant health issues. Peter and Prudence also suffer from very poor health.
  • Peter and Prudence decide to separate under the same roof in 2000 and Peter moves out of the former matrimonial home which is registered in the joint names of the parties in 2004.
  • In 2011, Peter is diagnosed with cancer and commences property proceedings in the Family Court of Australia seeking that the home be sold and the net proceeds distributed between the parties by way of property settlement.
  • Given that Peter and Prudence have separated but are not yet divorced, Peter is entitled to commence property proceedings under the Family Law Act. However, if Peter and Prudence were divorced, a one-year time limitation to commence proceedings will apply (and two years in the case of separating de facto couples).
  • Peter dies in late 2015 during the family law proceedings and his brother is granted permission by the Court to continue the family law proceedings on behalf of Peter’s Estate.
  • Prudence and the two adult children continue to suffer from health problems and seek that there be no alteration as to property interests given that they are living in the home and have significant future needs.

The above scenario was seen in the case of Paxton & Paxton (2016) FCCA 1689. Ultimately, the Court declined to make the orders sought by the husband’s Estate.

One of the factors that the Court considered was the fact that had the proceedings not been commenced, then the former matrimonial home is likely to have been transferred to the wife under the rights of survivorship.

The Court held that it was not just and equitable, that is, fair to make any orders altering the property interests of the parties in circumstances where the wife and children had significant future needs, and the future needs of the husband were non- existent given his passing.

If family law proceedings are ongoing, what happens to the deceased party’s Will?

Where property proceedings in the Family Court are ongoing, and an application for family provision under the State legislation has been made, the Family Court proceedings must be dealt with first. This is because the outcome of the family law proceedings will determine what remains in the estate available for division between the beneficiaries of the deceased’s estate.

It is important to remember that usually the “family law asset pool” is likely to be bigger than the assets of the Estate. This is because a number of assets are simply not caught in the wills and estates area of law, for example, superannuation. This is dealt with separately.

Therefore, it may be advantageous to make an application for property division under the Family Law Act to ensure that these assets are included in the pool available for division.

What happens if my spouse dies before family law proceedings are commenced?

Where family law proceedings under the Family Law Act have not been instituted prior to the death of a person, their surviving spouse is limited to bringing a claim under the relevant State legislation. In Victoria, this is the Administration and Probate Act 1958 (Vic). In NSW, this is the probate and Administration Act 1898 (NSW).

If you are seeking an alteration of property interests in the event of the breakdown of your relationship (or in a situation of “involuntary separation” such as one person becoming legally incapacitated) and it is a case where death is imminent, we recommend seeking legal advice as soon as possible in the event that an urgent application in the family law courts is necessary.

 

Further information


1. [20012] HCA 52

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