In this episode Ben talks to his colleague and solicitor Gemma Rope and Sydney based barrister Louise Goodchild about estate planning after separation and divorce. It’s something that often gets forgotten through the stressful period of separation, but as became clear in the podcast, it’s vitally important.
The issues discussed include:
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Benjamin Bryant: Welcome to episode 37 of our podcast. I’m your host Benjamin Bryant from Bryant McKinnon Lawyers coming to you from our office recording studio. Today we are going to talk about estate planning after separation or divorce. The last thing anyone wants to think about when facing the trauma of separation are Wills, Power of Attorney, superannuation nominations or any of that estate planning stuff? I mean, you’re young. Can’t this stuff wait? Well, we’re going to find out when we talk to our two esteemed guests.
Benjamin Bryant: The first guest is our very own Gemma Rope. Gemma is a solicitor and one of the founding members of the Bryant McKinnon team. She does an incredible amount of family law work, including estate planning for many people who have recently separated. Welcome, Gemma. It’s great to have you back.
Gemma Rope: Thanks, Ben. It’s great to be back.
Benjamin Bryant: And we’re also honoured to be joined by Sydney based barrister Louise Goodchild. Louise regularly appears in the Supreme Court, District Court and the Federal and Family Court of Australia, representing clients in high profile, complex matters of family law. Amongst many other things, she has a deep expertise in Wills and estate law and has seen the impact of poor estate planning firsthand when dealing with contested Wills and estates in court. Thank you for joining us, Louise.
Louise Goodchild: You’re welcome. It’s great to have a chance to educate people on the importance of estate planning.
Benjamin Bryant: It’s fantastic to have both of you on the show today. But just before we get started, I must do my usual reminder to listeners to please share this show with family and friends who are separating or even just thinking about separating. There’s an incredible library of podcasts now with expert tips and advice on a wide range of subjects. The whole purpose of the show is to empower people in tough times. So please help us to help others by sharing. And now on with the show.
Benjamin Bryant: Let’s start by talking about Wills, because that’s probably the most commonly used estate planning document, and hopefully most of our listeners will have one already. First of all, Louise, what if my assumption is wrong and someone does not have a Will and dies after separation or divorce proceedings have begun? What happens to the assets? What are the complications for the survivors?
Louise Goodchild: Well, Ben, that’s one of those situations where you think, “I should have had a Will”. A divorce will not revoke a whole Will. It will revoke any gift to your former spouse or the appointment of your former spouse as an executor, a trustee or a guardian. And all other provisions in a Will not relating to the former spouse generally remain valid and effective. But if you don’t have a Will, you die intestate and you face the possibility that all of your assets will go to your previous spouse or your previous partner.
Benjamin Bryant: And I know Louise, I said divorce proceedings before, and of course if there’s family law property settlements on foot already in the court and a spouse passes away, of course, the people’s estate can continue on with the property settlement post-death, can’t they?
Gemma Rope: That’s exactly right. People often wait to do what is probably the most important thing until after the divorce is organised or settled or finished. You would say and I would say to them, do it straight away.
Benjamin Bryant: That’s right. There’s your first lesson.
Benjamin Bryant: Now, let’s say that you do have a Will, but you have not formally changed that Will after your separation or divorce. What happens in those circumstances?
Louise Goodchild: Well, as I said at the outset, the divorce doesn’t revoke the whole Will. A divorce will only revoke those bits that have anything to do with your former spouse, like if you’ve appointed them an executor or if you’ve left them a gift in your Will. The divorce only impacts upon those. So, it could still be that there’s aspects of your Will that you don’t want to continue after your divorce.
Benjamin Bryant: Or Louise, what about in the, perhaps unlikely, scenario, there are aspects of your world that you do want to continue. Perhaps you do still want to give a gift to your ex-wife? Your ex-husband? Is that a new Will?
Louise Goodchild: It’s a new Will. As I say, the portions of your Will that are anything to do with your ex-spouse, they will be revoked.
Benjamin Bryant: Alright. And what if you remarry?
Louise Goodchild: Well, again, if you remarry, the previous Will is, in effect, invalid.
Benjamin Bryant: And you’re doing a new Will.
Louise Goodchild: And you should be doing a new Will immediately.
Benjamin Bryant: So, I’m getting the message, Louise, that it’s important to change a Will when you separate or divorce or perhaps remarry.
Benjamin Bryant: And what are the most important things to consider when rewriting your Will?
Louise Goodchild: Well, there’s a whole lot of things, in my view, that you should be thinking about. The first thing is, remember that your Will’s got to be witnessed. There’s got to be two witnesses. The Wills got to be in writing as well. And it might be silly to say, but what have you got? Think about what your assets are and think about who you want to benefit from your Will. And then there’s an executor. Who do you think would be the best person to do the pretty important task of looking after your estate when you die? It’s probably one of the most important things you could ask somebody to do. When I die, I want you to make sure that my wishes are carried out. Will you be my executor? So obviously speak to somebody. It might be a brother. You might think it should be an accountant or it might be a lawyer, but let that person know and speak to them about it. The other thing is children. If you’ve got children, think about who you would like to be the guardian of those children if you pass away. And again, talk to that person about that.
Louise Goodchild: Now, it could also be that there’s some difficulties or some complexities in your Will. For example, there might be somebody that you want to exclude. That’s often a very difficult thing, but you might have good reason for it. If that’s the case, you make sure that you write down the reasons why you’re excluding somebody in your Will. It could be that there are children from a previous relationship. Think about, will I want to include them. If I do, how do I do that? It may be that you have a child that has special needs and you may have to give some real and serious thought to: how do I provide for my child who has a special need? You might have superannuation. You might have businesses. You might have companies. You have to give thought to that. And then there’s the cherished things: the things that are probably of no value to anybody else but are valuable to you and perhaps valuable to your family. Identify them. Be very clear about to whom or to where you want those items to go. Make sure you include the details of your accountant or your financial planner. In most circumstances, Wills are pretty straightforward and some people will choose to get a do-it-yourself kit. That’s not something that I would necessarily support. But some people do it. And it’s fairly convenient. But in my view, you should always approach a solicitor to make sure that all the i’s are dotted and all the t’s are crossed.
Benjamin Bryant: And lucky for us, we have a solicitor with us. Gemma, if parties are not going to the news agency and getting a do-it-yourself Will. What are the important things that you consider when advising them about rewriting their Will, or perhaps writing their Will for the first time? I know you’ve done a lot over the years, so what’s your what’s your role? What do you do?
Gemma Rope: I just thought when Louise talked about the news agency Will I think probably half of them that I’ve seen have been witnessed incorrectly or parts left off and things. And I believe that they have a place. I do think that they are an economical way to get something in place. But certainly, I do ask if I know a client has one of those Wills. I say, would you mind bringing it in just so that I can have a look at it? And about half of the time, I find something like no residue clause. What’s to happen if the spouse passes away or whatever? So anyway, it does have a place.
Gemma Rope: But what I was thinking about after what Louise was saying was for most of our listeners it’s separation. That’s what they’re thinking of and what they need to be doing and what jobs they need to get ticked off. And I do get a lot of people who ask about Wills early on, but I think the main thing that crops up from that is, well, what are your assets? Which is something that Louise was saying, what do you actually own? And what are we gifting here? And for many of our clients, they actually own most of their assets jointly. So, something that’s important for the listeners to realise is that jointly owned assets can’t be gifted in a Will. It’s the law of survivorship. So, for a house, a lot of married couples, they’ll own their house jointly, which will mean that upon death, it automatically passes to the other surviving property owner.
Benjamin Bryant: And before they even found the Will.
Gemma Rope: That’s exactly right. Things like joint bank accounts and things like that. It’s just simply a matter of taking a death certificate off to the bank and they transfer the name across. Nobody asks to see a copy of the Will. Who gets your joint bank account? Well, it’s not relevant. You need to understand what are you trying to achieve? And so sometimes until you’ve done your property settlement, a lot of the assets, your major assets will be held jointly. The superannuation is something I think we’re going to talk about later possibly, but it’s a little bit different. It’s not something most people have jointly. It’s usually an individual asset. It also isn’t something that will ordinarily form a part of your, something that’s dealt with in your Will. So, it’s important to talk to the lawyer or get that advice from the lawyer about what are we actually talking about here when we’re talking about s. The separation proceedings and divorce proceedings. I think you picked up on the difference there with the divorce proceedings and Louise covered all of that and then the family law proceedings, that’s where it does get a little bit more complicated. And hopefully anyone in that situation that’s doing property proceedings in court is actually talking to their lawyer, getting advice from their lawyer. Their lawyer knows their circumstances and can help them through that process about what they need to do.
Benjamin Bryant: And Gemma, while I have you. I was just thinking when you said tick a box. That’s what a Will is for a lot of people. It’s almost transactional. And I know we get a lot of phone calls saying, oh, how much do Wills cost? Because it’s just this thing that you do and you rock up, you write it out and sign up and away you go. But there are some differences. What would you consider to be a simpler Will? And what would you consider to be a more complex Will where people probably need to get some advice and spend some time with their lawyer?
Gemma Rope: Yeah, it’s getting rarer and rarer, sadly. But the situation where we have an intact family that just wants to get things organised and tick that box, I do have people ask me about that, but they do worry about the cost and often it doesn’t…. I’m hesitant to say it…. it’s not the end of the world if they don’t do a Will, you know, because a lot of the time their testamentary intentions will be followed. What they’re hoping to end up happening can end up happening if they don’t have a Will. But that’s only if everybody’s happy families and it’s an intact family. That’s not what we’re usually dealing with at this practice, because most of our clients are dealing with family separation. And so, they’re never going to be that simple. Most families, though, just want their children to inherit what they have worked hard for. So instead of wanting their spouse to receive everything and then that flow onto their children, they just want to bypass the ex-spouse and have their children benefit. And so that’s where talking about, okay, well, how do we make that happen? And talking about the age of the children if it’s a minor child, how does that money get held on trust for that child until they’re of an age that they’re able to use that money well. And when you have a separated couple, if the child is a minor, then naturally the surviving parent will be the person who manages those monies for that child. And that might not be something that a testator wants. They might not want their ex-spouse to be in control of the child’s money.
Benjamin Bryant: It might be an issue of trust.
Gemma Rope: There’s a trust issue absolutely usually. And of course, some people get along really well and they know, look, if at the end of the day, if I haven’t got around to making my Will and we haven’t done family law property proceedings and the money ends up back in the hands of my ex-partner, it will flow on down to their children eventually, and that’s okay with them. But then it’s nobody knows when it’s going to happen to them. That’s the hard part. It’s sort of that interim period between separation and when everything’s sort of resolved and all that. And that’s where it’s important to realise that you can’t actually apply for a divorce until 12 months after separation. And a lot of people, as you know, don’t do their divorces. They don’t bother doing the actual legal process of divorcing, ending the marriage, because a lot of people just have no intention of remarrying or it’s just not something they want to spend money on. They don’t really care if they stay officially married to that person. Yeah. So that’s why you can’t sort of almost rely on the divorce happening to revoke those aspects of your previous Will. And obviously when people die without a Will, there are things that occur that might be unintended.
Benjamin Bryant: And might be trite to say, but you only die once, so you’ve got to get it right.
Gemma Rope: Do it well.
Benjamin Bryant: And Louise, what other estate planning documents, apart from a Will, do you need to consider and address after a separation or divorce? You know, the common ones are Power of Attorney or an Advanced Care Directives or trusts.
Gemma Rope: That’s right, Ben. Look again at your powers of attorney if you’ve done them or if you haven’t done them, do them. Look again at your Advanced Care Directives. Again, if you haven’t, do them. Who’s your beneficiary of your insurance policies? You have to look at that. Who’s going to be the beneficiaries of your superannuation fund. Often with your standard industry funds there’ll be a binding death nomination. Have a look at that. It could be that your previous spouse is the person you nominated. That’s the usual course. You’ll have to reconsider that. With a self-managed super fund, the fund generally pays a death benefit to a dependent or other beneficiary. Now, again, that needs to be looked at if you’ve got your own self-managed super fund. So they’re the sorts of documents that you should be looking at, at the same time as you’re looking at your Will.
Benjamin Bryant: And Louise, for the purpose of our listeners. I think everyone is fair to say that people know that people can challenges. You know, that gets a lot of media attention. Let’s say an ex-spouse has lost capacity, but the other party is still the Power of Attorney or the enduring guardian or something like that. Is it possible for somebody else, maybe a child or a new partner or something, to try and revoke that or challenge that Power of Attorney or guardianship or something if the spouse or the person has lost their capacity.
Gemma Rope: There are possibilities always with respect to either challenges to s or challenges to documents that people have drafted. So, the answer is yes, there is a possibility.
Benjamin Bryant: Thank you.
Gemma Rope: Ben, I think that whilst ever you have capacity, you can change your, you can create new powers of attorney, appointments of enduring guardian, you can revoke these documents. But once you lose that capacity because of illness you can’t do that anymore. And yes, there are possibilities where people can stand up for you and try and create a situation for you that’s more what they know the intentions are and what’s best for that person. But it’s more complicated. And that’s why whenever somebody comes in to see us and they’re sick, they’re going on holidays, going to be doing travelling, they’ve got some surgery coming up, anything like that. It’s always a bit more of a priority for us to get their affairs in order. Because, yes, while they have capacity, they can do those things.
Benjamin Bryant: Prevention is better than the cure. Gemma, superannuation binding death nomination that Louise just mentioned. You also referred to that earlier about perhaps superannuation not forming part of the estate, which some people mistakenly believe. What are the common traps for this? Let’s say we didn’t nominate a binding death nomination on the super fund. Who’s it going to? What’s happening there?
Gemma Rope: If you don’t tell the trustee in a way that is binding who you want your superannuation to go to. And it’s very important to remember that these nominations often lapse. So, if you haven’t created a non-lapsing, binding death nomination, then the trustee will make the decision about where that money should go. Now, in an intact family, it’s not going to be a problem. The trustee is going to go, oh, okay, well, you’ve got your spouse there. That’s obvious. We’ll pay it to them. But for our listeners in separated families, that’s where it gets complicated or maybe even children from a prior relationship. That’s where the trustee, you just never know which way they’re going to go, how they’ll divide that superannuation. And for a lot of people the superannuation is actually one of their largest assets. It’s forced savings and it can be very significant. Sadly, you hear about or you read cases where children have missed out in favour of a new de facto partner, and that’s a decision for the trustee to weigh up where that money should go and the pros and cons and where they choose to pay that. Whether it does go to the new girlfriend or boyfriend or whether it goes to children, that could really benefit from it in the future. If you want that control, if you want to have a say in where that goes, you need to do something actively about it. If you’re in that position.
Benjamin Bryant: And like what you said before, Gemma. It’s very wise for the listeners to know their superannuation fund policy, their rules, what their fund or trustee requires in terms of binding death nomination. For example, I know my partner’s, once you’ve done the binding death nomination, it’s for life, which works great in my favour. But for my fund it lapses every three years. So, we have to go through the same process every three years. So, it’s very important that parties know what is required of their fund for it to be a binding, key word, binding death nomination.
Gemma Rope: And to understand their family situation. So, for myself, I probably signed a binding death nomination back when I opened up my super fund. And then it’s probably lapsed. It’s a bit like the mechanic who doesn’t look after their car with me. But at the same time, I don’t need to worry about it too much because I have an intact family. I don’t have any children from a prior relationship. So, it’s like I said before, some people, their family situations mean that it’s not the end of the world if they don’t create a new Will, if they don’t complete a binding death nomination. It’ll end up being the way that you intended it anyway. It just might be slightly more complicated, slightly more expensive, and just slightly more confusion for the people that you leave behind. Which is why if you just get off your butt, go in to see a lawyer, get your Will done, get all the bits and pieces in place that you need to, then you can ask those questions. And also, the lawyer will pick up on things that you didn’t realise were important. I just the other day I had a client saying I just wanted a simple Will. I don’t know why you’re digging into this background. Why are you asking about family dynamics? Why are you talking about this child that I’m not leaving things to? People don’t understand why it’s important because Louise knows she works at the back end where it’s all gone wrong and.
Benjamin Bryant: The wheels have fallen off.
Gemma Rope: And if maybe that person just had put a bit more time and thought and sort out the correct legal advice, maybe there’s a few bits and pieces that could have been put in place to prevent some problems.
Benjamin Bryant: And it’s like the insurance adage, isn’t it? You’d rather have it and not need it than need it and not have it.
Benjamin Bryant: And Louise, what are the key things that one needs to consider when revising their Will to accommodate a blended family like situation?
Louise Goodchild: Well. That’s the thing Ben, that’s the difficulty. If you’ve got children from a previous relationship and you’ve got considerable wealth that you gained during your first marriage, you may want that wealth to go to those children. So, you have to think, how am I going to do that? And there’s various ways that a solicitor can advise you how to ensure that some of your wealth goes to your children from a previous relationship, sort of a trust structure, for example. And then you consider how you would be needing to provide for your current spouse, for example. Again, by way of a mutual Will or again by way of a trust structure. They are the circumstances when I would certainly say to people, go to a lawyer. Go to a lawyer to set up clearly and effectively, to make sure that you provide in the way that you intended for your either blended family or for your previous family and your current family. I mean, Gemma, is that right? They’re the ones that you’re seeing: how do I provide for my past family? I’ve got my kids, they’re adults now and I’ve got this second family. How do I do that?
Gemma Rope: Absolutely. I want to create a Will that gives my entire estate to my new spouse and on their passing, it goes to my children from a prior relationship. Now, that all sounds great. And that’s where I’m delving into how do you treat these children? Is it like they were children of the relationship. Because obviously step-parents everyone might be treating each other as if they’re just one big family. How much time are you spending with these kids at this point? Is everybody all speaking together? Do you foresee any fallings out in the future? Now, obviously, people don’t have a crystal ball, but that’s what I’m looking at and I’m asking these questions about: if that’s the Will you want to create, then you need to understand it is possible for your new spouse, when you pass away and they receive your entire estate, to then shack up with somebody else. You don’t know at what age you’re going to pass away. And that’s perfectly reasonable that somebody might get a new partner. Then they’re in a complicated situation because they’ve now probably going to be merging finances with a whole new person. Where does that leave the children? And this is where all of the family provisions cases generally come from. With these remarriages, children from prior relationships. Some of the ideas that we throw around on top of what Louise has mentioned is making children beneficiaries of a life insurance policy, something like that. The trust structures. Things like a lesser used, but life interests in properties, so that yes, my spouse can continue to live at my property that I own until they die or until they remarry, until they live in a defacto relationship with somebody or if they move out then the house gets sold and given to the children. Now there’s lots of factors that go into that about length of relationship and things like that, because somebody might say, that’s a good idea. I like that one. My spouse can continue to live there. Great. And then it goes to my kids. But the spouse might not be happy with that. It might not be fair. They’ve been in a relationship for 30 years, done all sorts of contributions to the wealth of the family, but then be told you can’t live your life. You’re living in someone else’s property. So that’s where also family provisions are fairly. And I’m glad that there are these provisions. A lot of people say to me, well, this is not very fair, is it? How come these people can claim on my estate to change my Will. If I want to do it a certain way, that should be law. That should be it. But I am glad that in New South Wales we have these provisions to allow people to seek a different outcome from the court because sometimes it’s not quite fair.
Benjamin Bryant: So that’s the thing. It’s tricky and it’s not always fair. I know we have clients all the time that say, well, you know, I want to provide say for my adult children from my former relationship, but I also want to provide for my new children. And I just want to be fair. And then they look to you, the lawyer, saying, well, can you tell me what’s fair? It’s not easy. And like what you said before, Gemma, Sometimes the intention is really simple. Well, if the intention is simple, then the document must be simple. But no, it doesn’t work like that way. Sometimes the intention can be very simple, but to effect or realise that intention is quite tricky. Louise, I’ve got one final question for you.
Louise Goodchild: I was going to say, Benjamin, and also to encourage people to talk about this amongst their family. Often, I don’t know if you find this Gemma, but often I hear that people’s intentions in s is just something that’s completely out of the blue, takes people by surprise. And I just wonder if there were some conversations that were had early on about what the intentions were that might lessen the impact somewhat?
Gemma Rope: That’s right. I do think people get a bit funny about talking about death, whereas we do it all day, every day. It’s not funny for us. It’s just normal. So just putting on your big girl/ big boy pants: I’m going to face something that I find awkward now so that I can have more confidence in the future later.
Benjamin Bryant: Who would have thought that open communication improves relationships?
Gemma Rope: I just know that some of our listeners, this is all talking about property stuff, but I know that a lot of our listeners, that’s sort of a bit lower on the priority list and it’s parenting issues that are forefront of their mind right now. And although Louise did mention I just thought I’d say about guardianship in s for kids, because often now matters that we’re dealing with, we’ve got risk issues, we’ve got all sorts of trust issues and things where people are saying to us, if I die, I’ve got concerns if my ex-partner is then having full control, custody and can I control that in some way? And so, yes, you can say something about it in your s. Where you would like your children to live. But it’s not a binding thing. It’s a way I say you can speak from the grave; you can say your view about what you would like to do. And there’s things that we can talk to you about if that is a concern for you. But at the end of the day, the court is there to make that decision. If you’ve passed away and there is a dispute about what’s best for your child and where they live.
Benjamin Bryant: Thanks, Gem. That’s really important. And Louise, another thing that people have high on their mind is the question, is it possible to write a Will that cannot be contested?
Louise Goodchild: Well, wouldn’t that be fantastic? I’d be out of a job.
Benjamin Bryant: And there’s your answer.
Louise Goodchild: I think the short answer is no. And really, I think Gemma touched on it as well. We want to make sure that we’ve got a body that’s able to consider these sorts of disputes because people haven’t contemplated things that happen in their lives. And so, we do need a body that we’re able to go to, to consider how fair and equitable people’s estates should be distributed. So, the short answer is no.
Benjamin Bryant: Well, Gemma and Louise, I think that was a great overview and really enforces how important it is to take care of estate planning wherever there are real major changes in your life. Louise, thank you so much for taking time out of what I know is a very busy schedule to talk to our listeners about this important subject.
Louise Goodchild: You’re welcome. It was a pleasure.
Benjamin Bryant: And Gemma, as always, a pleasure to share the microphone with you. Thank you for your insights.
Gemma Rope: Thank you, Ben. Thank you, Louise.
Benjamin Bryant: And that’s a wrap for this episode. Next month, Heather will be back and we are going to talk about the difficult subject of substance abuse. We’ll explore how drug and alcohol abuse plays out in the family law courts and the impact on parenting matters. If you have any specific questions relating to substance abuse and family law, please send them to familymatters@bryantmckinnon.com.au or message us on Facebook and we’ll try to get the answers for you on the show. We’ll put links to any resources mentioned in today’s show and a full transcript in the show notes on our website. And don’t forget, please share this show with family and friends who may benefit. Goodbye for now and hope to have your ears again next month.