Estate planning after divorce is very important, because in the event of your death, the consequences can be catastrophic for those you leave behind.
Estate Planning After Divorce: What Can Go Wrong
It’s the usual love story, but with a twist. Aaron and Lisa* met while in their early twenties, fell in love and got married. But only three years later, the relationship soured and they decided to divorce. Although the separation was acrimonious at times, the couple eventually split their property and moved on with new lives, and new partners. At least that’s what they thought they did.
Aaron’s sudden death at only the age of 31 revealed the limits of the law, for two reasons:
– He hadn’t signed the divorce papers Lisa had sent him
– He died without a will
Aaron had unwittingly left his estate to his estranged wife, even though they had already split their assets and moved on.
Aaron’s immediate family – his parents and siblings – had no recourse to his assets. If he had signed the divorce papers or left a will, Lisa would have no claim to the estate, which included a house, superannuation and a death benefit. But because they were still legally married, Lisa received the entire estate.
Aaron had started living with a new partner at the time of his death, but the law around de facto relationships require a couple to live together for two years or have a child together to give her any right to his estate. She has lodged a family provision claim in the Supreme Court, in a final attempt to receive some of Aaron’s estate.
What can we learn from this story of divorce?
Always sign the divorce papers and make it legal. Because Aaron failed to sign the divorce papers, he was still legally married, which is why Lisa inherited his estate.
Have a will. If you have a will, you can stipulate who you would like to receive your assets. Not having a will means that the law will decide for you – and as in Aaron’s case, it’s led to a bitter family dispute. The rules of intestacy (or the rules that govern how your estate will be split if you don’t have a will) are set by the state in which you live. The only way to ensure that your wishes are taken into consideration upon your death is to have a will in place.
Think financial. A good idea once you separate is creating two separate accounts and then closing your joint account. This can be something you easily forget in the confusion and stress of divorce. However, it is vitally important to your estate. You would not wish for someone to be continuously be spending the money that you worked hard to receive. Also, a financial stocktake is also a step in the right direction. You can figure out how much debt you both owe or how many assets you own individually.
Seek legal advice. The law is not always simple, as this case demonstrates. Aaron didn’t realise that not signing his divorce papers would lead to such an extraordinary result. A lawyer specialising in estate planning would be able to advise how this scenario could have been avoided – and how the families could have avoided a lengthy and expensive court battle over his estate.
Lawyers can not only assist you in writing your will, but can help you think of all the what-if scenarios, including how to approach estate planning after divorce. A specialist in this area of the law will also help you with asset protection, tax minimisation, flexibility and avoiding litigation on your estate when you’re gone.
Contact us today if you need any assistance with making a will or disputing an estate, and especially if you’re considering estate planning after divorce. Making a will is vitally important and you should ensure that you do not leave it as the last thing to do. Also, remember that wills should be updated regularly. In the event of a new child being born, a new asset being bought or sold and in the event of a divorce, you should update your will. Estate planning can be complex, however, visiting us at Estate Battles can make the process easier.
We offer a FREE, 10-minute phone consultation. Contact us today.
* Not their real names.