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What are options under the Property (Relationships) Act 1976?

14/8/2014

 
If your partner dies while you are still living together in a marriage, de facto relationship or civil union there are Options in the Property (Relationships) Act 1976 ("the Act") which a surviving spouse are put to electing and there are impacts resulting from those elections or failure to make an election. Every couple will separate at some stage.  This is because "separation" under the Act is defined as when the parties cease living together during the course of the relationship or one of them dies.

This means that any contracting out agreement to protect property as separate property will eventually become effective whether you have acrimonious separation during your lifetime or if one of you unexpectedly dies while you are still in relationship.

The options in the Act only operate in the event of death of one of the spouses.  They are either:


1.       Option A to make an application under the Act for a division of relationship property;  or
2.       Option B if you are a beneficiary under the will to receive that property.

The problem is that Option A is, for the most part, ineffective if you are party to a contracting out agreement as most agreements already set out settlement of any claim.  Option A might only be of use if you can also apply to set the agreement aside (which has a very high threshold).  This leaves Option B and if there is no property left to you under the will then there is no property to receive, leaving you only with any separate property you may have protected under the agreement.  If you have been living together for a long time this seems harsh as all your deceased spouse's separate property falls into his or her estate to be dealt with under the will.

Election of an Option must be notified to the Executors of an estate within 6 months after the date of death.  If there is no notice of election served then your are deemed to have accepted Option B.

Many contracting out agreements contain provisions that purport to prevent any claims against estates.  In my view this type of provision is unlawful where the parties were still living together in a marriage, de facto relationship or civil union at the time of death.

The Family Protection Act (FPA) under which spouses have a duty to provide for their surviving spouse still applies.  These rights are discrete rights which are not affected by any relationship property agreement and can operate against the separate property which has fallen into an estate.  Although an agreement may say that you will make no claim against your partner's separate property on his or her death,  that barrier is or should be,  limited to claims under the Act without affecting your rights under the FPA.  If anyone is trying to hold the no claim agreement as being pertinent to the FPA rights, then as there are no express provisions in the FPA allowing contracting out of the FPA, it is a widely held view that such provisions debarring claims by a surviving spouse under the FPA are unlawful.

A Will which makes no provision or inadequate provision for a surviving spouse falls short of the moral obligation which a deceased partner had to provide for the surviving spouse's maintenance and support.

In these circumstances there would be a good foundation for a claim under the FPA for further and better provision from the deceased partner's estate.  Notice of any intention to do so must be made within 6 months of the date of grant of probate and in addition any claim must be actually filed and served within 12 months of the date of grant of probate.  If the Executors receive notice within the 6 months (and this need only be a letter stating your intention) then any distribution of the estate by the Executors before the 12 month period could be clawed back against them personally in the event that a Court claim is successful.

During the period between notice being given and a claim being filed there is ample time for negotiations between the beneficiaries of the will about possible settlements. 

In these circumstances it is usual that the Executors would step back and allow the beneficiaries to settle claims and provided they are not unlawful endorse them.

If you are in this position you should be taking urgent legal advice to ensure that the time limits are not infringed.



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    Author

    Patricia Wardill, LL.B

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