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Option A & B? That is the question

Published: 26th February 2018

Author: Greg Kelly, Greg Kelly Law Ltd

Published in: Trust e.Speaking | Issue 26

Entitlements under your spouse or partner’s will

When your spouse or partner dies you will need to make a very important decision between your entitlements under their will and potential claims against their estate. We discuss the implications of that decision, some of the issues that it raises and the consequences of the choice that you make.

In 2002 the law in New Zealand was changed so that when one of the spouses to a marriage or one of the partners in a de facto relationship of more than three years dies, the death for most purposes is treated the same as separation. Under the Matrimonial Property Act 1976, when a married couple separated the general rule was that their matrimonial property was split 50/50.

The changes to the law in 2002 extended this division to the situation where one of the spouses or de facto couples dies leaving a surviving spouse or partner. For practical purposes, death is treated the same as a separation under the Property (Relationships) Act 1976, known as the PRA.

Making a choice

There are specific provisions in part 8 of the PRA dealing with the division of relationship property on death. In essence, the surviving spouse has to make the following choice within six months of probate being granted:

  • Option A - which is to make an application to the court under the PRA for a division of relationship property, or
  • Option B - which is to elect not to make an application under the PRA for division of relationship property but to accept the provision made for them under their partner or spouse’s will and in any other way by the deceased.

Significantly, if Option A is chosen then the surviving spouse loses all gifts made to him or her in the deceased’s will. It needs to be remembered, however, that when applying to court for the division of the relationship property, as part of the court application, the surviving spouse can ask the court for an order that the gifts under the will be reinstated.

If the surviving spouse or partner does not make an election within six months of the date of probate being granted then he or she is deemed to have chosen Option B – that is accept what they receive under the will. This is, in effect, the default option.

The options

  1. If Colin and Diane are married (or in a de facto relationship of more than three years) and Colin dies leaving most or all of his estate to Diane, then Diane does not have to do anything in terms of electing Option A or B. In this situation Diane is better off taking what she receives under Colin’s will (Option B). If she does not choose one of the options, then six months after probate being granted she will be deemed to have chosen Option B anyway.
  2. On the other hand, if Colin’s will gives 50% or more of his estate to his children of his first marriage then Diane may very well be better off to get advice about choosing Option A. When she applies to the court under the PRA, she will ask the court to reinstate the provisions in Colin’s will for her.

A further important point to bear in mind is that quite separate from the division of relationship property, when a person dies he or she has duties to make provision for the maintenance and support of a surviving spouse or de facto partner. This is totally separate from a PRA claim and this obligation specifically applies to the deceased’s separate property.

Therefore in example (2) on page 2 Diane can claim one half of her and Colin’s relationship property by choosing Option A and, at the same time, she can also pursue a claim under the Family Protection Act 1955 for further provision for her maintenance and support from Colin’s estate. In determining the claim for maintenance and support the court will take into account what Diane has received under Colin’s will and/or what she will receive from a division of relationship property. The court will also take into account factors such as the length of their relationship, the competing claims and whether Colin has made provision for Diane through, for example, a family trust.

Deciding on A or B?

To make an informed decision about which option to choose, it’s very important that surviving spouses or partners obtain full details of the deceased’s assets, copies of all relevant documents and get prompt legal advice.

To make a valid and enforceable choice of Option A or B, it’s necessary for a document in a prescribed form to be signed and this document must be accompanied by a certificate signed by a lawyer who certifies that the effect and implications of the notice have been explained to the surviving spouse or partner. The document must then be lodged with the administrator of the estate.

Timeframe

Claims against estates are usually subject to specific time limits; not complying with these restrictions will often mean that legal rights disappear. For example, if Option A is not chosen in time and the estate has been fully and finally distributed, it may not be possible to belatedly pursue a PRA claim. Prompt advice is, therefore, essential.

 

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