For Richer, Poorer – Contracting Out Of The Property (Relationships) Act 1976
March 5, 2013Attention All Business Owners
June 14, 2013Part 8 of the Property (Relationships) Act 1976 (‘the Act’) deals with the division of property where a marriage relationship or de facto relationship ends (after 1 February 2002) because one of the parties has died.
The basic scheme of the Act for relationships ending on death is that surviving spouses or de facto partners have a choice between two options – Option A and Option B, outlined as follows:
The Options
Option A is the ability to apply for a division of the relationship property under the Act.
Option B is not to apply for a division of the relationship property and instead rely upon the provisions of the deceased’s Will.
Choosing one of the options is a formal process that must be made by completing and signing a written notice. The notice must include or be accompanied by a certificate signed by a lawyer certifying that the lawyer has explained the effect and implications of the option chosen. It also needs to be lodged with the administrator of the estate.
There are also important time limits that apply to the election of an option:
- Where the estate is small enough not to require a grant of administration, the choice must be made within 6 months of the date of death or, if administration of such an estate is granted within that period, then within 6 months of the grant of probate or administration.
- In all other cases, the choice must be made within six months of the grant of administration.
The time limit is important because the administrator of the estate may distribute the estate if no election has been made within the 6 month period, and once distributed it cannot be undone.
If Option A is chosen, there is also a time-frame for the filing of the proceedings in court.
There is one important distinction between spouses and de facto partners in regard to the choice of options. Spouses have the right to choose Option A irrespective of the duration of the relationship, whereas de facto partners have that right only if their relationship lasted for three years or more; unless the court is satisfied that there was a child of the relationship or the surviving partner made a substantial contribution to the de facto relationship, and not having Option A would result in substantial injustice.
Option A
Generally speaking, choosing Option A means the equal sharing regime applies and that your lawful entitlement takes priority over the terms of the Will and you do not receive what has been provided for you under the terms of the Will.
Option B
Under Option B, the surviving spouse or partner elects not to apply for a division of the relationship property, but to inherit any provisions made in the deceased’s Will or available under intestacy provisions.
Option B is the default position if the survivor does not choose Option A within the time limit as detailed above, and in the manner prescribed.
Summary
The election of Option A or Option B may result in vastly different outcomes and therefore it is crucial that you obtain proper legal advice about this election and the time-frames that apply to this election.
