Understanding how financial agreements and wills interact is crucial in family law and estate planning. As an accredited specialist family lawyer in New South Wales, I’m often asked which document takes precedence. This article explains the process of entering into a financial agreement and its relationship with the Succession Act in NSW, focusing on which document prevails when a person passes away.

Financial Agreements

Financial agreements, also known as “binding financial agreements” (BFAs) or “prenuptial agreements,” are contracts between couples outlining asset division in case of a relationship breakdown. These are governed by the Family Law Act 1975 (Cth) and can be made before, during, or after a marriage or de facto relationship.

a) Key Points About Financial Agreements:

    1. Provide certainty about asset division.
    2. Cover property, financial resources, and spousal maintenance.
    3. Must meet strict legal requirements to be binding.
    4. Require independent legal advice for both parties before signing.

The Succession Act in NSW

The Succession Act 2006 (NSW) governs estate distribution after death. It sets rules for valid wills and estate administration.

a) Important Aspects of the Succession Act:

    1. Outlines requirements for a valid will.
    2. Dictates asset distribution without a valid will.
    3. Allows certain family members to contest a will under specific circumstances.

Financial Agreements vs. Wills

a) Scenario 1: Parties Are Still in a Relationship

If a person dies while in a relationship or before separation, the assets generally go to the estate, and the financial agreement is not activated. In this scenario:

    1. The will takes precedence.
    2. Assets are distributed according to the will.
    3. If there’s no valid will, intestacy rules under the Succession Act apply.
    4. The financial agreement remains dormant.

b) Scenario 2: Parties Have Separated

If the parties have separated before one partner’s death, the binding financial agreement usually takes precedence over the will. In this case:

    1. The financial agreement is activated.
    2. Assets are divided as per the agreement.
    3. Only assets not covered by the agreement form part of the estate.
    4. The will applies to the remaining estate assets.

Continuation of BFAs After Death

A Binding Financial Agreement continues to operate after death. According to section 90H of the Family Law Act 1975 (or section 90UK for de facto couples), the agreement binds the personal representatives of the deceased party. The executor named in the will must ensure the BFA is honoured.

Impact on Estate Planning

The existence of a BFA can impact estate planning:

  1. Estate Bound by BFA: Your estate must honour the BFA for division of finances and spousal maintenance.
  2. Continued Spousal Maintenance: Spousal maintenance payments may need to continue after death unless stated otherwise in the BFA.
  3. Allocation of Funds: Ensure your will sets aside funds for required spousal maintenance payments under the BFA.
  4. Family Provision Claims: If your will doesn’t make sufficient provision for your former spouse as per the BFA, there’s a risk of a family provision claim against your estate.

BFAs and Family Provision Claims

While a BFA binds your estate, it doesn’t prevent family provision claims. Certain eligible persons can still claim against your estate if they believe your will doesn’t provide sufficient provision. If your former spouse was receiving or entitled to receive maintenance, they may claim provision from your estate after your death, despite the BFA.

BFAs as Estate Planning Tools

BFAs can be valuable in estate planning:

  1. High Net Worth Families: Protect family wealth for future generations.
  2. Blended Families: Ensure assets are divided as if the parties were separated, allowing each partner to leave assets to their children.
  3. Separation Due to Illness: Manage assets for aged care in long-term separations due to illness or dementia.

Practical Considerations

  1. Coordinated Planning: Ensure your financial agreement and will are consistent and complementary.
  2. Regular Reviews: Review both documents regularly, especially after significant life events.
  3. Clear Intentions: Clearly express your intentions in both documents to avoid conflicts.
  4. Professional Advice: Seek advice from both a family lawyer and an estate planning lawyer.
  5. Consider All Scenarios: Plan for various scenarios, including separation and death.
  6. Declarations in Will: Consider including declarations in your will about your BFA intentions.

Conclusion

The interplay between financial agreements and wills in NSW is complex and depends on the circumstances at the time of death. Generally, a will takes precedence if the parties are still together, while a binding financial agreement prevails if separation has occurred.

Proper planning and regular reviews of both your financial agreement and will are key. Seek professional advice to ensure your assets are protected and your wishes are respected.

RAMSDEN FAMILY LAW – HOW WE CAN HELP

If you face such a situation, consult our experienced family law specialists at Ramsden Family Law. We are here to provide you with the necessary legal support and guidance to protect your family’s best interests during this challenging time. Empathy and understanding are crucial to helping clients through these difficult situations.

Our team of dedicated family law specialists brings extensive experience to the table. We understand the nuances of family law cases involving substance abuse and criminal elements. We offer comprehensive legal support tailored to your specific situation. Whether you’re dealing with parenting disputes, family violence issues, or custody battles, we have the expertise to guide you.

We recognise the emotional and personal challenges you may face in these situations. Our approach is rooted in empathy, ensuring you receive the support you need during difficult times. Our primary goal is to safeguard your family’s well-being and best interests. We work diligently to achieve outcomes that prioritise your family’s future.

Every family law case is unique. We provide customised solutions and legal strategies tailored to your specific circumstances. Ramsden Family Law has a strong track record of successfully handling family law cases, including those involving substance abuse issues.

If you’re facing family law challenges related to substance abuse or criminal law, don’t hesitate to contact Ramsden Family Law. Your family’s future is our top priority, and we’re here to provide the guidance and support you need.

The content of this article is intended to provide general guidance to the subject matter and must not be relied on as legal advice. Specific advice should be sought about your circumstances.

Written by Daniel Rod

Posted in: Property

July 18 2024