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Division of property

Relationship Property After Death

It is widely known that there are rules for the division of property when a couple separates. It is less widely known that there are different rules that apply when a relationship ends upon the death of one of the partners. The surviving partner must choose between two options - option A or option B.

Option A is to apply for division of relationship property under the Property (Relationships) Act 1976. Option B is to accept an inheritance under the deceased’s will or if there is no will, the share they would receive in accordance with the Administration Act. The survivor is not entitled to both unless the deceased expressed this intention in their will. The surviving partner is often favoured over the estate and has priority over beneficiaries of the deceased’s will and other claimants under inheritance law.

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 the 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 time limits that apply. The choice must be made within six months of the date of death, or, if administration of the estate is granted within six months of the grant. The time limit is important because the administrator of the estate may distribute the estate if no election is made within that six month period and the survivor is deemed to have chosen option B.

Option A

If option A is chosen, the survivor loses the right to inherit under the deceased’s will or in accordance with the Administration Act - even if the relationship property claim is unsuccessful. It is possible that there could be more than one surviving partner and if so, each would have the right to apply to the Courts for a division of relationship property.

Option A would benefit a survivor if the deceased partner owned most of the property in their sole name and inadequate provision had been made in the will for the survivor. An advantage of choosing option A is that the survivor has priority over any other claimants against the estate, for example children of an earlier relationship.

Option B

If option B is chosen, the survivor takes all of their own property, together with jointly owned property by survivorship and also takes whatever is given to them under the deceased’s will or under the intestacy provisions of the Administration Act. Option B is usually a better option for a survivor if property is mostly owned by them or jointly with the deceased. A disadvantage however is that entitlements are mixed up with claims by other people which, if successful, could end up diminishing the value of the estate. The choice of option B by the survivor can also be a disadvantage to children from earlier relationships.

Summary

If you wish to avoid these rules, during the relationship (when you are both still alive) you can enter into a contracting out agreement that states that these rules will not apply and setting out how your relationship property will be divided upon death.

The election of option A or B may result in vastly different outcomes and therefore it is crucial that you obtain proper legal advice about this election and the timeframes that apply.