19 October 2021

Relationship Property v Entitlement Under a Will

When a spouse dies, it can be a challenging time for the one left behind. After the grieving, organising the funeral and saying goodbye, a surviving spouse or partner will normally turn to the will. Few people know the surviving spouse has a choice between taking their entitlement under the will or applying to the court for a division of the relationship property.

Current Law

What is s 61 Property (Relationships) Act 1976 (“PRA”) for?

Section 61 of PRA gives a surviving spouse two options:

• Option A: is to apply for a division of the relationship property, the starting point being a 50-50 split.
• Option B: to not choose to make a division of relationship property. This means:
  • If the deceased spouse had a will: to receive the inheritance from the deceased spouse or partner as under the will;
  • If the spouse did not have a will: to take their entitlement under the Administration Act 1969.

Who can apply?

A “surviving spouse or partner,” may apply. This covers:

• Married persons;
• Civil union partners;
• De facto partners (two adults persons living together in a relationship and are not married or in a civil union).

There is one exception where the surviving spouse cannot apply. If relationship property court proceedings have been started to divide relationship property while both spouses or partners were alive, the court proceedings continue and the surviving spouse or partner cannot choose option A or B. However, the surviving spouse can choose to discontinue court proceedings and then choose option A or B.

Why make a choice?

The surviving spouse or partner:

• Is entitled to 50% of the relationship property plus any other entitlements under the PRA;
• Could be entitled to more under the PRA than they receive under the will;
• Can choose not to make a choice, meaning their entitlement defaults to their entitlement under the will.

How long do you have to make an election?

There are two different time limits:

Small estates: A small estate (usually, one without significant assets):

• Within six months after the date of death;

Or

• Where administration/letters of probate are granted, no later than six months after the grant of administration/probate.

Whichever is the later.

All other estates: no later than six months after administration/probate of the estate of the deceased spouse or partner is granted in New Zealand.

Like all court rules, there is an exception. The surviving spouse can ask for permission to apply out of time. In the s 61 case, at any time before the final distribution of the deceased’s estate.

Proposed Changes

The Te Aka Matua O Te Ture Law Commissions’ Review of Succession Law: Rights to a Person’s Property on Death 2021 Issue paper 46 is proposing a new Act to bring together the various succession laws. Although these are only proposals and are not the current law, for s 61, it made the following recommendations:

• A surviving partner should keep whatever gifts they receive under the will plus their PRA entitlement;
• De facto relationships of less than three years will need to satisfy additional criteria to qualify;
• Where the partners have separated prior to the death, the survivor can claim up to two years after separation;
• Where there are multiple eligible surviving partners, the court would apportion contested relationship property between surviving partners depending on the purchase, maintenance and improvement of that property;
• A surviving partner’s relationship property entitlements should be based on the classification and division rules recommended in the PRA review that would apply when partners separate, including that:
  • Property acquired before the relationship or as a gift or inheritance should be separate property, including the family home;
  • The burden of proof of establishing if property is separate property should be on the party that is on the title to the property; and
  • The court should have discretion to order unequal division of relationship property where there are extraordinary circumstances that make equal sharing repugnant to justice.

The most significant proposed change is removing the family home (if purchased before the relationship) from the relationship property pool. The house is usually the most significant estate asset, so moving this out of the reach of the surviving spouse disadvantages them to the benefit of the will beneficiaries. It will be interesting to see if this proposal is adopted.

If you have questions about making a division under the PRA or challenging a will, our Dispute Resolution Team are ready to assist you.

If you would like further information, please contact Daniel Shore on 07 958 7477.