How your Will can affect a family law property settlement

Wills and family law property settlements run on different tracks, but they often collide. A Will can be affected by separation and divorce, an inheritance can be part of a property settlement, and a person's death during proceedings can change the outcome.

Does separation change my Will?

Separation alone does not cancel a Will. Until your divorce is finalised, your former partner may still inherit under your existing Will. In NSW, divorce generally revokes gifts to a former spouse and their appointment as executor or trustee, subject to limited exceptions, and marriage generally revokes a Will unless it was made in contemplation of that marriage. After separation, review your Will and your superannuation nominations.

Can I use my Will to protect assets from my ex?

No. A Will only takes effect when you die, and you can change it at any time. A property settlement deals with the assets and liabilities the parties hold now. Changing a Will, or moving assets to put them out of reach, will not defeat a claim, and steps like these may be taken into account by the Court.

What if I expect an inheritance?

A possible future inheritance is generally not treated as property, because the person making the Will can change it. However, the Court can take it into account in some cases, for example where the person making the Will is very unwell and unable to change it. In some cases the Court may adjourn proceedings if a significant change in finances is likely.

What if I have already received an inheritance?

An inheritance is not automatically protected. How it is treated depends on factors such as:

• when it was received: an inheritance received during the relationship is often treated as a contribution by the person who received it, but its weight can reduce over time;
• whether it was kept separate, or used for the family, for example to pay off a mortgage or buy a home;
• whether the other party contributed to it, for example by caring for the person who died or improving inherited property; and
• the size of the other assets, since an inheritance may carry more weight where the remaining pool is small.

An inheritance received after separation may be treated as the recipient's own, although it can still be relevant to what is fair. Full disclosure of inheritances is required.

What about testamentary trusts?

A testamentary trust is created by a Will. It can offer protection, but the protection is not guaranteed. The Court looks at who actually controls the trust, as trustee or appointor or through influence over the trustee. If a person has real control, trust assets may be treated as theirs. If they are only a discretionary beneficiary, their interest may still be treated as a financial resource.

What if someone dies during proceedings?

If property proceedings have already started, they can generally continue by or against the deceased person's legal personal representative, usually the executor, although the result may differ from what the Court would have ordered otherwise. If proceedings had not been started before the death, the Court generally cannot make property orders. A former spouse may also be an eligible person to make a family provision claim against the estate, so final orders and agreements should be drafted with this in mind.

This article is general information only and does not constitute legal advice. Every matter is different — speak with one of our family and estates lawyers about your specific circumstances.

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