Archive for May, 2017

Ex-de factos & your Will – Isn’t a property settlement enough?

The incidence of de facto relationships has been increasing for some time, and that trend is likely to continue. Since 2009, the legal regime for property settlement has been the same whether the separating couple had been married or living in a de facto relationship. However, the law doesn’t always treat married and de facto couples the same. The law relating to what happens to your assets after you die is one area where there are some differences.

This article explores what might happen if a de facto couple made Wills during their relationship leaving their assets to each other, then, as often happens, were forgotten and unchanged after the relationship ended.

Isn’t your property settlement enough?

Many people think that once they have divided up their assets, neither partner could have a financial claim on the other in the future (except, of course, for child support if that is relevant). Some people also think that, because they weren’t married, their ex-de facto has no future financial claim. Those assumptions aren’t always correct.

The laws dealing with Wills and inheritances are completely distinct from those relating to division of assets after a relationship breakdown. A family law property settlement does not change someone’s Will, nor can it necessarily prevent someone receiving a gift left to them in their ex-partner’s Will.

So, can your ex-de facto inherit?

The answer to this question will depend on factors such as whether you had a Will, what were its terms, how long you lived together, whether you and your partner had joint children, and any financial support being provided by the deceased to the former partner. The answer may also depend on where you live.

According to a recent Western Australian case, Blyth v Wilken, another relevant factor could be the precise words you used to refer to your ex-de facto in your Will.

That case dealt with a Will in which the deceased left his assets to his now ex-de facto, with the parties having separated three years before the deceased’s death. The Will, made when the couple was living together, left the deceased’s estate to “my de facto wife Kathrine”.

The Court placed considerable importance on the words “my de facto wife Kathrine”, and decided that the deceased didn’t merely intend to benefit Kathrine; he intended to benefit Kathrine because she was his de facto wife. Accordingly, the Court concluded that the deceased would not have wanted Kathrine to benefit from his estate as she was no longer his de facto wife at the time of his death.

Would different words have made a difference?

As the decision in this case depended on the use of the words “my de facto wife Kathrine”, the outcome may have been different if the Will had merely referred to Kathrine by name, without also describing her as “my de facto wife”. That is, despite separating from the deceased years before he died and regardless of whether she had also received a property settlement, Kathrine could have received her former partner’s estate.

Some words of caution

The case of Blyth v Wilken is only one decision of a single Master (not a Judge). The decision is not binding and a Court could come to a different decision on similar facts. Hence, a reference in your Will to “my de facto partner such and such” will not necessarily guarantee that that person will not benefit from your estate in the event that your relationship ends before your death.

In NSW, Victoria, South Australia, Western Australia and the Northern Territory separating from your de facto partner will not change your Will and any gift in your Will to your ex-de facto could still be valid, despite the fact that you have separated and divided up your assets. In the ACT, Tasmania and Queensland, termination of a registered de facto relationship will revoke any gift in your Will to your ex-de facto partner. However, this only applies to registered relationships and registered terminations of them; and in the ACT it only applies to registered same sex relationships.

Depending on the State or Territory in which you live, you may also need to be wary of ex-partners making a claim for financial provision from your estate, even if you have changed your Will and had a property settlement. In general terms, in NSW, Tasmania, Western Australia and the Northern Territory your former de facto could make a claim on your estate if he or she was being maintained by you at the time of your death. Similar provisions apply in Queensland if your ex-partner is also the parent of your minor child. In Victoria, the entitlement to make such a claim is dependent on you and your ex-de facto not having finalised a property settlement by the time of your death.

The ACT and South Australia represent the two extremes. In the ACT, any ex-de facto from a relationship exceeding two years could be entitled to extra provision from your estate, regardless of whether or not he or she was dependant on you at the time of your death. However, the Court will take into account the terms of any post-separation property settlement. In South Australia, on the other hand, ex-de facto partners are not entitled to make such a claim at all.

Conclusion

Regardless of where in Australia you live, if you are going through a relationship breakdown, always speak with your family lawyer about what might happen if you or your former partner dies, even after you have completed your property settlement. It is important to review, and if necessary change, the terms of your Will as soon as possible after the ending of any relationship. In addition, in NSW your family lawyer could assist you to apply to the Supreme Court for approval of an agreement between you and your former partner that neither of you will make a claim on the other’s estate after the other’s death.

If you or someone you know wants more information or needs help or advice, please contact us on 02 6372 3388 or email richard@richardwisesolicitor.com.au.

Verification of Identity in property transactions

Verification of Identity (VOI) is a process used to confirm the identity of a person.

Lawyers and other parties involved in property transactions have an obligation to ensure that the person claiming authority to deal with land is legally permitted to do so.  This includes confirming a person’s capacity to act as agent for a company or as an attorney.

The VOI process is particularly important in land and property dealings as it assists in reducing identity theft and land title fraud.  Verification of Identity has always formed part of good practice however from 1 August 2016 it became mandatory for land transactions.

Lawyers and other parties must take ‘reasonable steps’ to verify the identity of their clients, their client’s agents and persons to whom title deeds are being provided.

This means that your Lawyer will need to formally verify your identity during a face to face interview or use other approved methods to confirm your identity and authority to enter into the contemplated transaction.  The VOI requirements extend to any person authorised to act on behalf of the client.

When do I need to prove my identity?

Land and Property Information (LPI) is the central registration authority for real property (land) dealings in New South Wales.  The LPI registers hundreds of transactions affecting land every week.

New provisions under the Real Property Act 1900 (NSW) allow the Registrar-General to make rules (Conveyancing Rules) regarding the verification and identity of particular classes of persons with respect to certain transactions (Conveyancing Transactions).

The Conveyancing Rules set out the framework required for VOI processes which also reflect the methods used by recently-introduced electronic conveyancing procedures.

Broadly, a Conveyancing Transaction is a transaction between one or more parties involving the creation, disposal or transfer of an interest in land.  A typical conveyance, mortgage, charge or lease over property falls within this category.

The registration, recording or removal of an interest or notation in the titles register are also Conveyancing Transactions and will be subject to VOI processes.  Examples include the registration of an easement, caveat or plan of subdivision.

The VOI process must also be used for documents that do not require registration at LPI (such as a contract for sale and purchase of land and agreement for lease).

How does the VOI process work?

Your Lawyer must be satisfied that he / she is dealing with the person claiming to be authorised to enter transactions regarding the property.  Likewise, Lawyers acting for the party on the other side to your property transaction must confirm the identity of their client.  The idea is to create an ‘even playing field’ in the conveyancing and property transaction setting.  By ensuring all sides to a transaction undertake diligent VOI measures the parties are better protected against property fraud.

If you are involved in a property transaction such as the sale or purchase of land or borrowing money secured by a mortgage, you will need to meet personally with your Lawyer or other agency to provide documents and formally prove your identity.

During the VOI process you will be asked to produce original documents so that your identity can be compared (ideally) with a document containing photo identification.

The documentation required for the VOI process is similar to the present ‘100 points’ system commonly used for banking and other identification processes.  There are various categories and combinations of documents which may be used to prove your identity.  These include an Australian or foreign passport, drivers licence or photo card, birth or citizenship certificate, Medicare, Centrelink or Department of Veterans’ Affairs card.  For those persons who are not Australian citizens or residents, other types of documents may be used.

The types of documents you need to produce are categorised with the higher category documents being the preferred VOI source, for example an Australian passport and driver’s licence.

If sufficient identification documents are not available, an Identifier Declaration may be used which enables another person to identify you.  Your Lawyer can advise you on this process.

Verification of Identity documentation relating to a property transaction must be kept securely by your Lawyer for seven years.  Once the VOI process is carried out, further verification need not take place for two years.  This means that you need not undertake a further VOI process for a subsequent property transaction that occurs within two years of the initial VOI.


 

What if I cannot visit my Lawyer?

If you are unable to attend a face to face interview with your Lawyer, an Identity Agent can be used to confirm your identity.  This is practical for clients who are travelling or do not reside close to their Lawyer’s office.

Australia Post and other reputable agents offer this service and your Lawyer can refer you accordingly.  The Identity Agent will complete the VOI process in a similar manner as required by your Lawyer and provide an Identity Agent Certification.

What about companies and attorneys?

If a party involved in a Conveyancing Transaction is a corporate entity, a company search will be obtained to confirm the existence of the company and to establish those persons authorised to sign on behalf of the company.  The authorised representatives will then need to undergo the VOI process.

Similarly, attorneys entering transactions on behalf of their principal must provide the document authorising such a transaction and complete the VOI process to verify their identity.

Conclusion

Identity theft leading to the registration of fraudulent documents and dealings over land is not a new phenomenon and can have devastating financial and other affects.  Verification of Identity is an important safeguard against fraud and is an essential risk management tool.

By imposing standard and reciprocal requirements for Lawyers and Conveyancers to identify their clients, mandatory VOI rules are likely to offer better protection and safeguard you against a possible fraud in connection with your property transaction.

For more information about VOI, talk to one of our experienced Property Lawyers or if someone you know wants more information or needs help or advice, please contact us on 02 6372 3388 or email richard@richardwisesolicitor.com.au.

Was it a loan or a gift? – Big difference!

Housing affordability is a big issue for young Australians. When discussing that issue recently, the Prime Minister infamously remarked that the solution is for parents to “shell out” to help their children buy a home. For those lucky enough to have parents able to assist them financially in adulthood, whether by helping them into the property market or otherwise, could that “solution” be creating more problems than it solves?

How might that money be treated if the recipient separates from his or her spouse or de facto? Almost certainly, the parents who had “shelled out” to help their adult child won’t want the child’s now ex-partner to benefit from or keep some of that money.

Family law property settlement – the basics

The Family Law Act sets out the steps that must be followed to divide up a separating couple’s property. If it is considered necessary to alter the legal ownership of the parties’ property in order to reach a just and equitable property division, then all of the parties’ assets and liabilities, whether owned jointly or separately, must be identified and valued.

One then assesses each party’s financial and non-financial contributions to the acquisition of those net assets and to the welfare of the couple or family unit, before, during and after the relationship. Having determined respective contributions, the parties’ future needs are compared and taken into account, in order to reach a just and equitable property settlement.

Was it a loan?

If money had been received by one or both parties from parents, for example, the first question that must be answered is whether that financial assistance was a loan or a gift. When the recipient’s relationship breaks down, he/ she will almost always want to argue that the money he/ she received from his/ her parents was a loan. The ex-partner will, in turn, want to argue it was a gift. How do you tell which it was?

The say so of the recipient child and his/ her parents will not necessarily be enough to convince the Court that the money was a loan. The Court will have regard to all of the evidence surrounding the “giving” and receipt of the money, such as:

  • Conversations between the child, the ex-partner and the parents
  • Any relevant documents. For example, did the parents record the transaction in their bank account as something like “Loan to John/ Jane”? Perhaps one of the parties kept a spreadsheet of monies received entitled “Loan from mum & dad”
  • Were any repayments made?
  • A formal loan agreement would be the best evidence in trying to resolve this question.

Unfortunately, when money and families become intertwined, things have a remarkable propensity for becoming messy. Notwithstanding that, it is equally unfortunate that few people take the trouble to properly document loans between family members. The lack of clear documentation can turn a messy situation into an ugly one.

If it was a gift, to whom was it given?

Having successfully argued that money received from the ex-partner’s parents was a gift not a loan, that person may now want to argue that the money was gifted to both parties, not just the parents’ child. He or she might bring evidence of conversations where the parents said things such as “We want you both to have this money because we’re all family now”. Or she or he might claim that the money was given in recognition of, for example, the care provided by a child-in-law to her/ his parents-in-law.

While the Court will take into account all of the relevant evidence and each case will turn on its own facts, it is usually the case that the Court would find that money gifted by parents was a gift to their child, not to the parties jointly.

How is this relevant to a property settlement?

The characterisation of whether money received from a parent or someone else was a loan or a gift could be very important to a property settlement, especially if large sums are involved.

Firstly, the money would be taken into account when ascertaining the parties’ assets and liabilities. If the money was a loan, that will be a liability of the parties, reducing the net assets to be divided between them. Legally, there would be an expectation that the loan would be repaid; however, in practice, the lending parents often allow, even want, their child to keep the loan money after the property settlement is finalised, providing a windfall to that person.

If the money was a gift, then it, or whatever had been purchased with it, would form part of the parties’ net assets available for distribution between them.

However, it doesn’t end there. The money would be taken into account in determining each party’s contributions. If the money was a loan, it may have little or no impact on the Court’s determination of who contributed what. Although, the recipient of the loan could be given credit for having contributed the benefit of, for example, a low- or no-interest loan.

If the money was a gift, then, except in the unusual circumstances of the Court finding that it was a gift to both parties, it will be treated as a financial contribution by the party whose parents gifted the money. Factors such as how long ago the money was received and the size of the gift compared to the parties’ overall net asset pool will decide the extent of the gift’s impact on the final determination of the parties’ respective contributions. The larger and more recent the gift, the greater impact it will have on the recipient’s percentage contributions.

Conclusion

Whether money received by a couple from parents or others is properly characterised as a loan or a gift could have a considerable effect on the separating couple’s final property settlement. People’s memories can fade, even change, over time, and it can later be difficult to determine if the money was intended as a gift to one or both parties or a loan requiring repayment.

If parents want to take the Prime Minister’s advice and “shell out” to help their children into the property market, those parents should think carefully about whether they intend to gift or lend the money, and should seek advice about the pros and cons of those options and the proper documenting of any loan.

If you or someone you know wants more information or needs help or advice, please contact us on 02 6372 3388 or email richard@richardwisesolicitor.com.au.