In a de-facto relationship? Here’s a cautionary tale.
Unlike marriage, de facto relationships can be a little difficult to define. This becomes even trickier when one half of the couple dies and the other person makes a claim against their estate.
A recent case, Moon v Public Trust, shows how the Courts assess relationship property claims when the nature of a relationship is in dispute. The case also shows the role Trusts can play in protecting assets from these sorts of claims.
Steven and Mary were in a relationship for 27 years. However, they did not ever live together and each owned their own house. There was little sharing of finances, they had no children together and Mary described herself as single and Steven as her friend and companion. He made no provision for her in his Will and took active steps to prevent her from being able to benefit from his assets after his death. Mary died and left Steven only her ashes in her Will. At Mary’s death, Steven was earning $100,000 a year. Steven claimed against her estate on the grounds that he and Mary were in a de facto relationship and that he was entitled to maintenance and support from her estate. The Court agreed and awarded him $300,000. Why?
Steven claimed under the Family Protection Act 1955, which provides a Court with considerable flexibility in determining what a claimant is entitled to. While spouses or partners can contract out of the Property (Relationships) Act 1976 (often known as making a ‘pre-nup’), it is not possible to prevent someone from claiming under the Family Protection Act 1955.
However, it is possible to protect your assets from claims under both Acts, by placing your assets in a Trust. Steven used a Trust to protect his assets, which meant that a claim by Mary against him or his estate under the Family Protection Act 1955 would have faced significant barriers. Mary did not have a Trust. Mary’s house, which she had gifted to her brother in her Will, had to be sold to meet the cost of Steven’s award from the estate. On top of this, the Court held that both sides’ legal fees were to be paid from the estate.
Many people think that Trusts are just for the ‘wealthy’ and that the set-up costs outweigh any benefit they could gain from having one. However, Trusts are a practical tool used by everyday people to protect their assets from unwanted claims. Unfortunately for Mary’s relatives, the costs to her estate as a result of Steven’s claim vastly dwarf the price of setting up a Trust during her lifetime.
Are you a homeowner or business owner? A Trust could be a sensible structure for separating and protecting your assets. Ask me to refer you to the local Perpetual Guardian team to find out how a Trust could help you.
Special thanks to Perpetual Guardian for this article.