We were impressed recently by a presentation that we thought might be of value to not only to the reader of this newsletter, but also to their advisors and members. We asked David Davis of Mills Oakley Lawyers, a lawyer specializing in Estate planning at all levels, to provide us with an overview of some of the pitfalls he feels should be considered.
Estate Planning and Binding Financial Agreements
Currently, the divorce rate for first marriages is close to 40%, and 50% for second and subsequent marriages. Therefore, protecting your assets in case of divorce or separation if you are in a de facto relationship is a factor couples need to consider along with other forms of asset protection such as family trusts, testamentary trusts and their Wills.
The numbers of retirees entering into relationships are increasing and the need to protect their family assets from a claim by their married or de facto partner should be a priority.
In Family Law, Binding Financial Agreements apply to protect assets acquired before, during or after a relationship breaks down during the lifetime of the couple involved.
In Estate and Succession Planning, Wills apply to protect personal assets after death.
It is often important to have the two otherwise distinct areas of Family Law and Estate and Succession Planning link together somehow. This is especially so when couples wish to enter into Binding Financial Agreements as well as preparing their Wills, and they express the desire that they want the Binding Financial Agreements to apply to the administration of their deceased estates.
Although there is no absolute certainty in achieving this goal, the best step available for now is to insert a clause in the Will specifically referring to the Willmaker’s intention that the Binding Financial Agreement (which can either be summarised in the clause and a copy of the executed document included as a Schedule to the Will) is to bind the parties to the agreement in relation to the administration of the estate of the deceased partner.
It is important to have this set out clearly in the Will, as otherwise there is a presumption that the Binding Financial Agreement would only operate during the lifetime of the parties, leaving the estate of the first to die open to a challenge by the surviving partner.
It is important to note that a Binding Financial Agreement only operate if the parties separate. If one party dies before separation, it is that parties Will that comes into effect therefore it is essential that the parties Will and Binding Financial Agreement mirror each other in order to achieve the same result.