Property Division – What Happens When one of the Spouses Dies?

26/06/2021

When married or de facto couples separate they will want to divide matrimonial property and have their own separate assets.  Problems will arise in circumstances where after separation (but before property division) one of them dies.  What happens then? 

Death of a Spouse – No Application under the Family Law Act

No application can be made to the Family Court for property division if one party dies prior to the commencement of proceedings.  If the proceedings have not been filed in the relevant Court usually, the Family Court of Australia or Federal Circuit Court of Australia.  The Family Law Act 1975 will not determine the division of property between the surviving spouse and the deceased spouse. Iin those circumstances, the Laws of Succession and Intestacy will apply. 

Watson & Watson Lawyers Acted for Surviving De Facto Spouse

In a recent case Watson & Watson Lawyers acted for the de facto wife in circumstances where before any proceedings for property division could be commenced, the de facto husband died.  Significant problems arose in the matter but we were able to resolve the matter favourably for our client.  The case turned on the fact that the de facto husband died and that the parties held the property as tenants in common and not as joint tenants. 

Had proceedings in the Family Court of Australia or Federal Circuit Court of Australia already commenced at the time of the de facto husband’s death, the proceedings could have been continued by his legal personal representative.  The de facto wife could have sought Orders in those proceedings seeking recognition of the superior contributions she made during the relationship and importantly the contributions she made after separation. 

As there were no proceedings on foot at the time of death no matrimonial cause was available and proceedings could not be commenced under the Family Law Act.

The de facto husband’s Executor maintained that the property should be sold and the proceeds be divided equally between the former de facto and the de facto husband’s deceased estate.

Tenants in Common or Joint Tenants

Under Australian Law land (real estate) where for example there are two registered owners of land, the owners will either hold the tenancy as tenants in common or as joint tenants.  If the registered owners (for example the husband and wife) hold as tenants in common and if one were to die for example the husband, the husband’s share of ownership in the property would pass in accordance with the deceased’s Last Will and Testament or in accordance with the laws of intestacy. 

If the owners hold as joint tenants then the doctrine of survivorship applies and the survivor will take the interest of the deceased in the land regardless of the terms of any Will which the deceased may have made.

The above is subject to the rights of beneficiaries of a trust, if the land is held by the registered proprietors as trustee of a trust.

Background Facts

• The parties were in a de facto relationship for more than 10 years. 
• The de facto husband and wife were the owners of a residential property in Sydney and (initially owned the property) as joint tenants if they owned the property as joint tenants and on the death of one tenant, the surviving tenants would have taken the whole of the deceased’s interest in the property.  This occurs automatically by operation of law. 
• However during the relationship the joint tenancy was severed and at the date of separation, the parties owned the property as tenants in common in equal shares.  This excluded the operation of the doctrine of survivorship which would have resulted in transfer to the survivor. 
• After separation the de facto husband disposed of and wasted assets of the relationship that could have been available for division if those assets were not wasted. 
• After separation the de facto wife remained in the property and over the years continued to pay the mortgage and finally paid off the whole of the mortgage. 
• The de facto wife used her own funds without contribution from the de facto husband to make substantial improvements to the property which enhanced its value.

The parties had been separated for some years when the de facto husband died.  The husband left a Will which benefited members of his own family and left nothing for his former de facto wife. 

The deceased de facto husband was still one of the co-owners of the residential property as at the date of his death.  He was still a co-owner. 

Supreme Court of NSW – Application in Equity – Adjustment Between Co-Owners 

Watson & Watson Lawyers after providing advice to the wife, were instructed to obtain an adjustment on sale of the property so as to ensure that the de facto wife’s contributions and moneys that she spent in improving the property were effectively returned to her.  The position taken by the de facto wife on advice of Watson & Watson Lawyers was that as the de facto husband and wife were co-owners, that there could be a claim for an allowance for improvements made to the property by the occupying co-owner and that this Application could be made in the Supreme Court of New South Wales Equity Division. 

The matter was resolved on the basis that the de facto wife received compensation for her contributions and improvements to the property.  A greater than 50% outcome achieved was obtained by the de facto wife. 

Navigating financial/property settlement post marriage and de facto relationships can be complicated.  At Watson & Watson Lawyers our experienced Senior Family Solicitors can assist in relation to complex or less complex financial/property settlements and any other related family law matters.  Please contact Richard Watson Senior Family Law Solicitor or his Personal Assistant Shereen Da Gloria to discuss your matter and seek appropriate timely advice.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.