How to update wills and estate plans during separation?
CM Law's Ultimate 50 List - Separated Couples FAQ #36:
How to update wills and estate plans during separation?
Introduction
Separation can be a tumultuous time for individuals and families, bringing about significant changes in personal circumstances. One critical aspect that often requires attention during this period is the updating of wills and estate plans. In New South Wales (NSW), the law provides specific guidelines and considerations for individuals looking to update their wills and estate plans during separation. This article outlines the importance of revising estate plans in the context of separation, the legal process involved, and the consequences of failing to update these documents.
Importance of Updating Wills and Estate Plans During Separation
During separation, it is essential to reassess and update estate plans to reflect the new circumstances. Failure to do so can result in unintended beneficiaries or disputes over the distribution of assets. Here are key reasons why updating your will and estate plan during separation is crucial:
- Change in Beneficiary Designations: Separation often changes the intended beneficiaries of an estate. Individuals may no longer wish for their estranged spouse to inherit their assets and may want to include other family members, friends, or charitable organizations instead.
- Guardianship of Minor Children: Separation may alter the dynamics of family relationships, making it necessary to reconsider the appointment of guardians for minor children. Updating the will ensures that the children’s best interests are protected according to the parent's current wishes.
- Power of Attorney and Executor Appointments: If the separated spouse was previously designated as the executor of the will or as the attorney under a power of attorney, these roles might need to be reassigned to avoid potential conflicts of interest or complications.
- Asset Division and Property Settlement: Separation agreements and property settlements often require changes in the ownership of assets. These changes should be reflected in the estate plan to ensure that the distribution of assets aligns with the new financial arrangements.
Legal Process for Updating Wills and Estate Plans
Updating a will and estate plan during separation in NSW involves several steps to ensure that the documents accurately reflect the individual’s current intentions and comply with legal requirements.
- Review Existing Documents: The first step is to review the existing will and estate plan to understand the current provisions. This review helps identify the necessary changes and ensures that all aspects of the individual’s wishes are considered.
- Consult with an Estate Planning Lawyer: Engaging an experienced estate planning lawyer is crucial to navigate the complexities of the legal process. The lawyer can provide guidance on the implications of separation on the estate plan and assist in drafting the necessary amendments.
- Draft a New Will or Codicil: Depending on the extent of the changes required, the individual may choose to draft a new will or create a codicil, which is a legal document that amends an existing will. A new will is often recommended to avoid confusion and ensure clarity.
- Update Beneficiary Designations: Beneficiary designations on life insurance policies, superannuation accounts, and other financial assets should also be reviewed and updated as part of the estate planning process. These designations often override the provisions of a will, making it essential to ensure consistency across all documents.
- Sign and Witness the Documents: In NSW, a will must be signed by the testator in the presence of two witnesses who are not beneficiaries of the will. This formality is crucial to ensure the validity of the document and prevent potential disputes.
- Register the Will: While not legally required, registering the updated will with the NSW Supreme Court can provide additional security and ensure that the document is easily accessible when needed.
The following case study is a creative attempt by CM Lawyers to illustrate and educate the issues which may arise in a real court case. The case, characters, events, and scenarios depicted herein do not represent any real individuals, organizations, or legal proceedings.
Case Study: Updating a Will During Separation in New South Wales
Introduction
In a recent case in New South Wales, a separation led to a contentious legal battle over the updating of a will. The case highlights the emotional and financial toll such disputes can impose on all parties involved, emphasizing the importance of timely and careful estate planning during separation.
Case Overview
The case of Re Estate of Anderson [2020] NSWSC 982 involved a separated couple, John and Mary Anderson, who had not yet finalized their divorce. John, the primary breadwinner, had not updated his will following their separation, which still named Mary as the sole beneficiary. After his sudden death, a dispute arose between Mary and John's children from a previous marriage, who were not included in the will.
Behaviour of the Participants
John’s sudden death left Mary in a state of shock and despair. Despite their separation, she was emotionally devastated, feeling both a sense of loss and betrayal as John's children from his first marriage immediately contested the will. They accused Mary of manipulating John to keep her as the sole beneficiary. The children’s accusations and the hostile environment exacerbated Mary’s grief, leading her to engage in a bitter legal battle to defend her late husband's decisions, despite knowing that he had intended to change the will before his untimely death.
On the other side, John's children, feeling alienated and angry, believed they were entitled to a share of their father’s estate. They felt that Mary, who had not been on good terms with their father at the time of his death, had no right to inherit everything. Their desperation was palpable as they faced the prospect of losing their family home and financial stability, pushing them to pursue every possible legal avenue to contest the will.
Legal Process and Court Involvement
The case was brought before the NSW Supreme Court, where the children argued that John had intended to update his will to include them as beneficiaries but had not yet done so due to the ongoing separation proceedings. They presented evidence of John's intentions through emails and correspondence with his lawyer. The court examined this evidence, along with the validity of the existing will and the circumstances surrounding its creation.
Financial Consequences
The legal costs associated with contesting the will were substantial. Over 18 months of court proceedings, both parties incurred significant expenses, including legal fees, court costs, and expert witness fees. The major assets involved included the family home valued at $1.2 million and a superannuation fund worth $800,000. Due to the protracted legal battle, the total cost exceeded $350,000, significantly reducing the estate's value and the inheritance available to both Mary and John's children.
Lessons Learned
- Prompt Action is Crucial: The case illustrates the importance of acting quickly to update a will during separation. Delays can lead to disputes and financial losses.
- Clear Communication: Communicating one’s intentions clearly and documenting changes can prevent misunderstandings and conflicts among beneficiaries.
- Legal Costs Can Be Substantial: The costs associated with contesting a will can be high, often reducing the estate’s value significantly.
- Professional Guidance is Essential: Engaging an experienced estate planning lawyer can help navigate the complexities of updating a will during separation and ensure compliance with legal requirements.
Statistics
- Executor Mismanagement: Approximately 12% of estate disputes in NSW involve allegations of executor misconduct or mismanagement.
- Separation Cases: In NSW, around 8-10% of probate cases involve separated or divorced individuals who have not updated their wills.
- Legal Costs: The average legal costs for contesting a will in NSW range from $50,000 to over $300,000, depending on the complexity of the case.
- Asset Reduction: Estates subject to disputes over will contests often see a 20-30% reduction in value due to legal fees and delays in asset distribution.
- Time Delays: Contesting a will can extend the administration of an estate by 18-36 months, with more complex cases taking even longer.
- Guardianship Disputes: About 5% of estate disputes involve disagreements over the guardianship of minor children.
- Superannuation Disputes: Nearly 7% of contested wills involve disputes over superannuation beneficiary designations.
- Beneficiary Changes: Over 40% of individuals who separate or divorce in NSW update their wills within a year.
- Will Registration: Less than 15% of individuals in NSW register their updated wills with the Supreme Court.
- Financial Impact: The financial impact of failing to update a will during separation can result in significant losses, often exceeding $100,000 in lost assets and legal fees.
Essential Resources
Government Resources
- NSW Government – Wills, Probate, and Inheritance
URL: https://www.nsw.gov.au/law-and-justice/wills-probate-and-inheritance - NSW Supreme Court – Probate
URL: https://www.supremecourt.justice.nsw.gov.au/Pages/sco2_probate/probate.aspx - Complex Probate Proceedings – Supreme Court NSW
URL: https://www.supremecourt.justice.nsw.gov.au/Pages/sco2_probate/sco2_probate_complex.aspx - NSW Trustee & Guardian – Updating Your Will
URL: https://www.tag.nsw.gov.au/updating-your-will - Legal Aid NSW – Wills and Estates
URL: https://www.legalaid.nsw.gov.au/get-legal-help/factsheets-and-resources/wills-and-estates
Non-Profit Organisations
- The Law Society of New South Wales – Removing an Executor
URL: https://www.lawsociety.com.au/legal-help/probate-estate-administration/removing-executor - Justice Connect – Legal Help for Beneficiaries
URL: https://justiceconnect.org.au/resources/removing-an-executor/ - NSW Bar Association – Wills and Estates
URL: https://www.nswbar.asn.au/for-the-public/factsheets/wills-and-estates - Community Legal Centres NSW – Wills and Estate Planning
URL: https://www.clcnsw.org.au/wills-and-estate-planning - Australian Centre for Grief and Bereavement – Estate Planning
URL: https://www.grief.org.au/resources/estate-planning
