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New De facto/Matrimonial Property Law

New legislation dealing with the way in which property is divided when a relationship ends has now been passed.

Tuesday, November 13th 2001, 11:14AM

The changes take effect on 1 February 2002. However, the contracting out provisions of the Property (Relationships) Act came into effect on 1 August 2001 to enable those who do not want the new law to apply to them to contract out.

The most significant changes are:

  • the law now deals with the division of property between de facto partners as well as those who are married.
  • the legislation applies not only when a relationship comes to an end due to separation but also following the death of a spouse or partner.
  • all relationship property is to be shared equally unless there are extraordinary circumstances or the parties have contracted out of the provisions of the Act.
  • the court has the power to order one spouse or de facto partner to make payments to the other where there is an economic disparity due to the division of functions within the relationship.
  • it is now going to be more difficult for the court to set aside contracting out agreements. Before the court can set aside an agreement it must be satisfied that allowing the contract to stand would cause a serious injustice.

The major changes have been much publicised and debated. However, little has been said about the impact that the new law will have on the way in which Wills are prepared and estates administered.

What happens when your spouse or partner dies?

The survivor is given an option
Under the new law, the surviving spouse or partner has two options (referred to in the Property (Relationships) Act as options A and B). He or she may either:

  • elect to make an application under the new law for a division of relationship property (option A), or
  • take what he or she is due to receive as beneficiary under the Will or on intestacy (option B).

Therefore, if the deceased has not made any provision for the survivor in his or her Will, the survivor can bring a claim under the new Act for a share of the relationship property forming part of the deceased's estate. If the survivor elects to pursue a division of property under the Act he or she will not be entitled to receive under the deceased's Will (unless the deceased has expressed a contrary intention). The survivor can not take under the Will and bring an action under the new law. The survivor must choose either option A or option B.

In most cases, the survivor will be left all or most of the deceased's property under the deceased's Will. In these circumstances nothing would be achieved by choosing option A and bringing a claim under the Act.

Option must be exercised within a certain time limit
The survivor must choose an option within certain time limits. If the estate is small the choice must be made:
  • no later than 6 months after the date of death of the deceased spouse or de facto partner, or
  • if administration of the estate is granted in New Zealand, no later than 6 months after the grant of administration whichever is the latest.

In relation to all other estates the choice must be made no later than six months after the date of the grant of administration.

Survivor must complete a notice
The survivor must complete a notice indicating the choice that he or she has made.

The notice, signed by the survivor, must be in a prescribed form, and must include or be accompanied by a certificate signed by a lawyer stating that he or she has explained the effect and implications of the notice to the surviving spouse or de facto partner.

The notice must be lodged with the administrator of the estate or if administration of the estate has not been granted in New Zealand, in the Registry of the High Court in which an application for a grant of administration of that estate would have been required.

If the surviving spouse fails to make a choice within the prescribed period he or she is treated as having chosen the second option, ie to take under the Will or intestacy.

Distribution delayed
In most cases distribution of the estate will be delayed until the surviving spouse or partner has chosen an option.

Implications for Will makers
People completing Wills need to think about providing adequately for their spouse or partner in their Will. If they do not then their spouse or partner may bring a claim against the estate for the division of property under the Property (Relationships) Act. Any such claim will be costly for both the estate and the surviving spouse/partner.

Family Protection Act
The Family Protection Act enables certain close family members to bring a claim against an estate if the deceased has not made adequate provision for their proper maintenance and support. Over the years there has been a lot of litigation in this area, particularly from children who have not received as much as they think they deserve.

Currently, the only people entitled to bring a claim under this Act are the deceased's spouse, children and grandchildren and in some cases stepchildren and parents. At the moment a de facto partner cannot bring a claim under this Act. However, this will change from 1 February 2002. After this date a de facto partner will also be able to bring a claim against their deceased partner's estate if adequate provision has not been made in the deceased's Will for their proper maintenance and support.

It is therefore essential that the needs of your spouse or partner are considered when you complete your Will. If you do not make adequate provision for them they may bring a claim against your estate.

For those who are in second relationships the obligations imposed by the Family Protection Act can be difficult to manage. If you have children by an earlier relationship then you must not only ensure that you adequately provide for your current spouse or partner but also for the children of your previous relationship. You cannot just leave all of your assets to your children or all of your assets to your new spouse or partner. You must somehow strike a balance. Often Trusts and life interest Wills are used to manage these competing interests.

Intestacies
An intestacy is where someone dies without a Will. In this case the Administration Act 1969 determines where your assets go. At the moment it does not provide for distributions to de facto partners. Again, this will change with effect from 1 February 2002.

If you have any concerns about the impact that these changes will have on your Will and/or the administration of your estate please contact your local TOWER Trust branch or call toll free on 0800 TOWER Trust (0800 869 378) for further advice.

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