Separating couples usually give careful thought to finalising their property settlement so that each is clear as to the assets and liabilities as well as superannuation that they are to retain on the breakdown of the relationship. Often after parties have finalised their property settlement, they then also give careful consideration to their own estate planning and have new Wills prepared.
Whilst this is an important task to attend to, it is important to be aware that a spouse including a former spouse is defined as an “eligible person” under the Succession Act 2006 (NSW), meaning that they are a category of person who can, on the death of a spouse/de facto spouse or former spouse, bring a claim seeking a share of that deceased party’s estate.
For couples who both are receiving significant assets out of the property settlement, who are able to be financially independent of the other in the future and particularly those with children or who re-partner, they are often concerned about the potential for their former spouse to bring such a claim against their Estate. They may elect to enter into a mutual deed of release under the Succession Act. This is a written agreement between the parties in which each party promises to the other not to bring such a claim and in which both agree to join the other in an application to the Supreme Court for the mutual promises in the Deed of Release to be approved of and upheld by the Court.
It is only when the Supreme Court approves the mutual promises in the Deed of Release that the agreement is binding, meaning it bars any claim for provision from the other’s estate after their death. Some couples apply to the Supreme Court during their lifetimes in accordance with best practice guidelines. Other couples elect to wait in the event that such a claim is made. It is important to note that the mutual Deed of Release is not binding on the Supreme Court until it has been approved of by it.
Each case is of course different. For other couples, it may not be prudent to enter into a mutual Deed of Release. Examples can include couples with very modest net asset pool for division and the party in the weaker position may be relying on ongoing spousal support from the other.
Entering into a mutual Deed of Release is not to be done lightly. Careful consideration needs to be had to the advantages and disadvantages of doing so and giving consideration to your own individual and financial circumstances to determine whether or not it is prudent to do so.