Estate planning for same-sex marriages and common triggers to prepare or update your estate plan
It is great news that Australia has legalised same-sex marriage. This will bring significant benefits to same-sex couples, as marriage grants more rights in relation to death, medical and financial decisions. However, with what is likely to be a boom in new marriages, it is important that couples (same-sex or otherwise) consider the effect of their marriage on their estate planning documents and update them, even though it is unlikely to be the most urgent thing on their mind in planning their celebrations!
In this article, we look at the effect of marriage (and separation and divorce) on a Will and other estate planning documents. We also include a checklist of some other common triggers to prepare or update your estate plan.
Effect of marriage
All Australian States and Territories contain provisions in their succession legislation which revoke a Will made prior to marriage. However, there is a general exception which allows a Will made in contemplation of marriage to remain valid, although the exception is not uniform in its application:
- In New South Wales, Victoria, the Northern Territory, Queensland and Tasmania a Will is not revoked by a subsequent marriage where it is made, expressly or impliedly, in contemplation of that marriage, or of marriage generally.
- In Western Australia, South Australia and the ACT, a Will is not revoked by a subsequent marriage but only where it is made in contemplation of that particular marriage.
Apart from this exception, a new Will is necessary and if you fail to make one, the rules of intestacy will apply and these may not produce the desired result. If you also plan to marry, the wording of the contemplation of marriage clause requires careful drafting to ensure it is effective.
Other estate and succession planning documents
It is also important that a couple considers whether the following documents need to be prepared or updated, as although the legislation does not provide that these are revoked by marriage, they may need to reflect the change in circumstances:
- Incapacity documents to cover legal, financial, medical and lifestyle decisions if you are unable to make these decisions yourself.
- Binding death benefit nominations for superannuation, as they usually need renewing every three years and the rules of some funds (both industry and self-managed) may revoke them by marriage.
- Documents to deal with succession to family trusts and other entities, as trusts do not form part of your estate for your Will to deal with.
- Binding financial agreements, also known as prenuptial agreements.
Effect of divorce and separation
Unfortunately, many marriages now end in divorce. Divorce affects your Will, but the effect differs between States and Territories:
- In New South Wales, Victoria, the ACT, the Northern Territory, Tasmania, Queensland and South Australia, the legislation provides that unless a contrary intention is expressed in the Will, on divorce, the following are revoked:
- a gift to a former spouse. The effect will be that the gift will pass as if the former spouse had predeceased the testator
- an appointment of the former spouse as an executor, trustee, or guardian and
- a grant made by the Will of a power of appointment exercisable by, or in favour of, the former spouse.
- In Western Australia, divorce revokes a Will unless a contrary intention is expressed in the Will or other evidence exists to prove such an intention.
However, many couples separate for a considerable period before divorcing or even do not divorce. Separation, unlike divorce, does not have an effect on a Will. If the Will is not updated on separation and the testator dies, their existing Will remains valid. This may include the appointment of their spouse as executor and a gift of their estate to them which they may not have wanted.
It is also essential that their other estate and succession planning documents are updated to reflect the separation and/or divorce, as it is common that their spouse is named in them and the legislation does not usually revoke this.
Other estate planning triggers
There are many other triggers to prepare or update your estate plan other than marriage, separation and divorce. It is equally important that your estate plan is updated to reflect these, as not doing so can sometimes create more problems and be far more expensive than not having a Will at all. The following are some common examples:
- Entering in to or ending a de facto relationship. This is especially important as a de facto partner may not be considered next of kin and allowed to make medical and end of life decisions on behalf of their partner, or may have problems in proving their right to their deceased partner’s estate. This can force them to have to prove their relationship status in Court and is one of the significant legal benefits of marriage, as it removes this risk.
- Having over $1.6 million in superannuation. The 2017 changes to superannuation (which does not form part of your estate for your Will to deal with), may require changes to your succession planning strategy, as any excess over $1.6 million must be paid out as a lump sum, but there are strategies to deal with this. Other triggers include if you have changed your superannuation fund, established a self-managed superannuation fund, retired or not updated your death benefit nominations within the last three years. What happens to your life insurance (which could be held in superannuation) also needs to be considered.
- Establishing a new trust or changing your intentions regarding who should control an existing trust if you die or lose mental capacity (given trusts do not form part of your estate for your Will to deal with).You should also check that your trust deed does not need updating to reflect recent tax and stamp duty changes.
- Not considering the use of tax effective and asset protective testamentary trusts in your Will which can provide significant benefits for your surviving family.
- Having a child, a child becoming an adult, a child becoming subject to physical or mental health issues, a child entering into a new relationship or relationship breakdown, lending money to a child or having a significant dispute with a child.
- Experiencing significant changes to your wealth including receiving an inheritance, purchasing new life insurance or real estate or taking on a significant debt or other liability.
- Selling or giving away assets which are specifically gifted in your Will.
- Experiencing threats to your wealth (or that of a child), including being sued, threats from creditors or a change in career putting you in a more at risk position.
- Changing your intentions about who to benefit, or about when, how or how much they should receive including whether to try and protect their inheritance from threats.
- Changing your intentions about who should be your executor(s), guardian(s) of any minor children, attorney(s) under your power of attorney or guardian(s) under appointment of enduring guardian.
- Moving to Australia or to a different State or Territory, acquiring assets abroad, having a child live abroad or enter into a relationship with someone who is not Australian.
- Establishing a new business or selling or restructuring an existing business.
- Having a child enter the family business or having a family business which you are considering selling or passing control to your children.
What to do next?
We know that contemplating your mortality and making time to plan can be difficult, but your estate plan does not have to be complicated or time consuming. If you are getting married or have experienced any of the other triggers mentioned in this article, our experienced team can help you navigate through all the issues providing an easy to understand, step by step process to get your plan in shape for a fixed price.
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