Estate Planning

Avoiding divorce from beyond the grave

B2B Editor 1 March 2013
The law is full of unusual cases. Here is a recent case that went all the way to the High Court. The Husband and Wife had been married since 1971. They both had children from previous marriages. Their wills left their respective estates to the children from their first marriages. However, the house they lived in was in the name of the husband. His will provided a life tenancy for his wife so she had somewhere to live if he died first. In 2008 the wife suffered a stroke from which she never recovered. She was admitted to full time residential care and could not return to live with the husband. She then developed dementia. Her Husband continued to provide for her and paid her medical expenses. He visited her regularly. They never formally ended their relationship Then a strange thing happened. In 2009, the wife’s daughter from her first marriage applied as a case guardian under the Family Law Act to sell the husband’s house. You may wonder why she would do this. The reason that was given in court was that the wife had supported her husband through their marriage and their situation now did not adequately recognize her support in the way the parties had organised their affairs. So the daughter was simply trying to remedy an injustice. However, if the daughter was successful, the wife’s estate would have increased from a life tenancy in the house (which is worth nothing on death) to half of the value of the house. The case was initially heard in the Magistrates Court of WA and the daughter was successful. The Husband appealed the decision to the Family Court of Western Australia. But it then became more complicated. During the Appeal the wife died. Under the Family Law Act, if court proceedings are already on foot and one the parties dies, those proceedings can still continue.
The Family Court of Western Australia decided that the Wife’s estate should still receive her share of the proceeds of the house but ordered that it be paid out of the husband’s estate when he died. So that Court thought it was better not to sell the house immediately so the Husband still had somewhere to live. The husband then appealed to the High Court. The husband argued to the High Court that an order to sell the house should not be made because there had not been any severance of the marital relationship. He said that they were still married at the time his wife died and they were only living apart because of her illness. The High Court said that the Family Court could order the sale of the house but only if the circumstances justified the sale. And the High Court was not satisfied that the circumstances justified the sale. The technical phrase under the Family Law Act was that it had not been shown it would be just and equitable to make the order. With the increase in dementia in our community, this case serves as a timely reminder for those considering their estate plans and planning for the future to consider what would happen if they lose capacity. While you may think you would never separate and seek a property settlement, can you be sure that your family would not intervene if they could? Even if you are happy with the arrangements would they be?
Stephen Bourke is a director in the boutique firm, Certus Law, specialising in superannuation, trusts and estate planning. He also consults to other practitioners through the consulting practice, SuperSplitting. Level 5, 28 University Avenue T: 6268 9090

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