The end of a relationship is tough. The loss of dreams and expectations can be heartbreaking.
When separating, every conversation becomes all about looking after the kids and dividing up your property.
However, now that you are no longer a couple, you also need to give some urgent attention to your estate planning.
Failing to update your estate planning documents can have serious consequences for you, your assets and your children.
Your Will
Whether you are married or de facto, separatidoes not have an effect on your Will, so the terms of your Will stay the same, unless you take steps to change your Will.
Many couples make ‘I love you’ Wills that give most or all of their assets to each other in the first instance.
If you have a typical Will that follows this structure, and you don’t update your Will after separating, then your former partner will continue to benefit from your Will when you die.
For this reason, the time-period of separation that occurs prior to divorce is an important time to ensure your Will reflects your changed circumstances.
If you are lawfully married, when you finally divorce (and obtain your decree absolute, which is different to a decree nisi) , under South Australian law your existing Will is automatically amended to remove appointments and gifts to your former partner.
While this means that your former partner will not receive what could be a large portion of your estate, it can also have the effect that you could be left with no valid appointments in your Will or you can be left ‘intestate’, meaning without a valid or effective Will.
It is therefore vital to create a new Will as soon as possible to ensure your estate planning objectives are carried out.
There is no equivalent of divorce for domestic or de facto couples, so the very informality of the relationship that you chose in preference to marriage, now means that you must create a new Will, or risk your former partner continuing to benefit from your estate.
If you and your former partner are going through property settlement proceedings in the Family Court, it is even more important to put in place a comprehensive Will.
Our preference is your Will specifies the reason why you have excluded your former partner, having regard to the family provision legislation that applies from State to State.
In some circumstances it can also be helpful for you to make a Statutory Declaration that sets out in greater detail what provision you have already made to your former partner, why you have excluded them from your new Will, and why you have chosen to provide for the beneficiaries named in your new Will.
Your Power of Attorney
A Power of Attorney is a powerful legal document, and can do some real damage if the wrong person(s) are appointed as agents.
Unfortunately, the trust that you once had in your former partner is probably not going to remain following the breakdown of your relationship, and it might not be safe or prudent to allow that person to continue to have lawful authority to open and close your bank accounts and sell your house following a separation.
Under a Power of Attorney document, a person (your ‘agent’ or ‘attorney’) is authorised to make decisions and sign documents on your behalf in relation to your legal and financial affairs.
You are known as the ‘principal’ or ‘donor’ under a Power of Attorney, because you have ‘donated’ the power under the document.
A General Power of Attorney becomes effective straight away, but expires when you lose mental capacity.
An Enduring Power of Attorney applies from or notwithstanding the time you lose mental capacity, and continues on until your death, unless expressly revoked.
Many people make a General & Enduring Power of Attorney, which becomes effective straight away and lasts through until you die.
It is a good idea to revoke and replace any Power of Attorney where you have appointed your former partner as your attorney.
It is important to note that a person’s appointment under a Power of Attorney is only terminated once that person is notified of the document’s revocation.
This means that written notice should be provided to your former partner to inform them that the document has been cancelled and that their appointment as attorney is no longer effective.
Your superannuation death benefit nominations
For many people, their superannuation represents one of their biggest assets. Younger people might think they are too young or don’t have sufficient assets to create an estate plan.
However because they typically hold their life insurance through super they can be ‘worth more dead than alive’.
Whereas for older couples, they may be putting a lot of their spare money into increasing the value of super in preparation for retirement.
When you die, all your superannuation entitlement and the value of any life insurances owned in super get combined into one pot which is called your ‘superannuation death benefits’.
A ‘superannuation death benefit nomination’ is used to direct where your superannuation death benefits go when you die.
This nomination is required regardless of whether you are part of an industry super fund, a retail fund or have a Self Managed Superannuation Fund (SMSF).
If you do not have a superannuation binding death benefit nomination in place, the trustee of your super fund decides who gets your super death benefits when you die.
Some death benefit nominations also have a lapsing date (usually 3 years from the date they are made), and if a nomination has lapsed it will not be binding on the trustee.
For this reason, it is important to keep nominations up to date.
If you separate, you should update your superannuation death benefit nomination as soon as possible to safeguard your super.
If you have a binding nomination in place naming your former partner as the beneficiary, you should make a new binding nomination directing your superannuation death benefits either to your children or to your estate.
Any superannuation death benefits that are paid to your estate will be dealt with as directed by your Will, so it is important to make sure that your Will then directs your super death benefits to your new beneficiaries.
If you and your former partner share a SMSF, it is even more important to ensure that your binding death benefit nomination is updated following separation.
This is because if you die your former partner is likely to be left as the sole trustee of the SMSF.
As the sole trustee, your former partner will get to decide where to pay your super death benefits (including to themselves) unless you have a binding nomination in place.
What you can do
Reviewing and updating your estate planning documents when there is a significant change in your life is crucial.
Separation is a big life change, and it usually requires a complete overhaul of your existing estate planning documents.
We have a wealth of experience in helping separated people update their estate planning documents to best protect them and their children
Genders and Partners is the oldest law firm in South Australia, established 1848.
Contact us to learn how to protect yourself, your family and your assets through modern integrated estate planning solutions, by visiting our website today and schedule a free no obligation telephone consultation to find out how they can help you and yours.
Remember – any mistakes you make in your estate planning documents won’t become apparent until after it’s too late for you to fix them. Get proper advice, and do it right.
It is also vitally important that you keep your estate plan up to date – it is not a set-and-forget exercise.
To learn how to protect yourself, your family and your assets, by creating a professionally-made estate plan, claim your FREE 15 minute Telephone Consultation
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