More Than One Spouse in 6 Years?
If you die without a Will, you are said to have died ‘intestate’, and the laws of intestacy apply. New laws commenced on 1 November 2017 for the laws of intestacy in Victoria, and my previous article gave some information about those changes.
As part of those changes, one of the most significant changes has been to how the entitlement is calculated when there are multiple spouses of the person who has died. So, if you have separated from your husband or wife, but not divorced, and you have a new partner, then this applies to you.
Previously, the old laws had a declining entitlement to an ex-spouse over a 6 year period. Now, under the new laws, all spouses have an equal entitlement on the face of the law! No matter how long you have been separated! The new laws also are not clear about the time period that needs to expire for someone to be a spouse or not – previously it was nearly 6 years, but now it could potentially be longer!
Here’s an example:
Kenneth separates from his wife, Janelle. Luckily they didn’t have children, because it would be far more complex.
Within 12 months, Kenneth is living with his new spouse, Amy. Kenneth and Amy are planning their life together, but Kenneth has not divorced Janelle yet.
Six months later, Kenneth dies in a single-vehicle accident when his car left the road and hit a tree. He might have fallen asleep, or he may have been distracted by something on his phone, but no one can be blamed. It was just an accident.
Kenneth didn’t have a Will.
Kenneth’s estate includes his life insurance policy of $350,000, plus a bank account of $13,000 after the sale of the house he had owned with Janelle, and a share portfolio of $100,000 that he just inherited from his deceased grandmother. He also has superannuation with another death benefit of $300,000 to be paid as a lump sum to whomever the super fund decides (he also didn’t do a binding nomination on his super fund).
Janelle and Amy are both spouses of Kenneth for the purposes of the laws of intestacy. Despite Kenneth and Janelle selling their jointly owned house, and no longer having joint assets, Janelle is still entitled to half of Kenneth’s estate. Kenneth was building his new life with Amy, and he would have preferred Amy to inherit his whole estate, but he never made a Will.
So, his estate is worth $463,000 – Janelle and Amy will each get $231,500, unless Amy takes expensive family provision action to dispute the application of the intestacy laws. Janelle is not going to agree to give up $231,500 to give it willingly to Amy. Amy’s alternate action could be to seek a distribution order from the Supreme Court, but the result is too uncertain for her to take the risk and spend the legal fees.
The simple solution is for people to regularly review and prepare Wills, particularly in light of the new intestacy laws.