A man died without a Will.  As he was intestate his estate would usually pass to his spouse. That is, unless they had contracted out of that law by, for example, including a suitable provision in a valid relationship property agreement.

An issue arose in this case about whether the deceased and his spouse had contracted out of the intestacy laws. The couple had separated years before the deceased passed away, but a separation order had never been made. This meant that the couple remained spouses, despite dividing their property and being apart for many years.  

During their separation the couple had signed a relationship property settlement agreement. The deceased’s brother brought a court action claiming that the settlement agreement contracted out of the intestacy rules.

If that was held to be the case the brother would become the Administrator of the estate, and would be the next of kin in terms of inheritance, as the man died without children and his mother had formally excluded herself from benefitting from her son’s estate.

The laws of intestacy provide that a surviving spouse or partner will be prioritised over any other person, such as a sibling. The person with the priority interest will also become the Administrator of the estate.

However, these rules may not apply where there has been a prior relationship property settlement, as such settlements can remove a spouse’s interest in the estate.

The Court had to determine whether the couple had successfully contracted out of the laws of intestacy in the relationship property agreement.

In this case, the couple’s settlement agreement stated that it was in “full and final settlement of all property claims” that the parties may have against each other.

The Court concluded that “property claims” included any claim that the spouse could have had against the deceased’s estate.

However, whether the signed agreement meant that the spouse did not have an interest also depended on whether the settlement agreement was legally enforceable.

The Court concluded that the agreement had not been properly witnessed, and therefore was not legally binding unless a court ordered the agreement to be validated.

Essentially, the Court said the relevant terms of the agreement therefore would only amount to “contracting out” of the intestacy laws if it was enforceable.

The Court held that the spouse was entitled to make a claim to the courts for an order as to the invalidity of the contracting out agreement.

However, it would not be appropriate for the spouse to do so in the capacity of Administrator, as there would be a conflict of interest.

The deceased’s brother was therefore given the right to administer the deceased’s estate, and the spouse was granted the right to apply to the courts to determine the validity of the contracting out agreement.

If the agreement was held to be valid the spouse had no claim.

However, if the agreement was not valid, the spouse would have the first claim to the deceased’s estate under the laws of intestacy.

This is another clear example of where disputes following the death of a loved one may be avoided by correctly signing and witnessing a properly prepared Will, so it is legally valid.

The case also highlights the need for contracting out agreements to be properly completed. If either of those things had happened here then the need to invest significant funds in a court argument could have been avoided.

It is important to know your property rights and who may share in those property rights upon your death.

If you are confused about your rights or would like to know more about them, it pays to seek legal advice from a professional with experience in the area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Shaun Cousins and Hunter Flanagan-Connors