Family law, and specifically the Family Court, often gets a bad press for justice. But a recent Clancy Triado case demonstrates how legal knowledge and applied common sense resolved an issue before it became a complication.
The case involved a married couple living together for 36 years. The husband was in his mid eighties and was beginning to slide into dementia. His second wife was 15 years his junior.
He owned a successful business asset valued at $10 million but chose to step back, appointing a new person as CEO. He operated the business under the husband’s supervision on the understanding that the wife would receive a significant portion of the value of the business on her husband’s death.
Exclusion through non-estate trusts
She revealed to us the CEO was organising the business’s affairs to exclude her via a series of non-estate trusts. Their relationship was originally healthy, but as she was increasingly denied access to the state of the business, it’s fair to say the connection deteriorated.
If her husband predeceased her, the only assets she would have access to would be those in his own name, assets worth less than the value of the business.
She told us the marriage was stable and that a separation was unlikely. However, her husband, uncertain about the business’s finances, couldn’t discuss them with her, and in any case had been told not to.
They remained in the family home, she as his full time carer. But she felt she had no security, and no assurance that she would receive anything from his estate apart from some jointly held properties.
Family Court proceeding advised
We advised an application for a Family Court proceeding using the Stanford decision as precedent. The procedure allows her to continue her claim in the event of his death, and obliges both parties to submit specific information to the Court. Importantly, a mediation was ordered. Court proceedings were adjourned.
Here we had a wife wanting to care for her husband through his decline and death. Yet she found herself in circumstances, which failed to protect her own financial position. Worse, she was likely to be disenfranchised from her rightful assets by the CEO.
However, despite the Stanford ruling, we knew the court would still be reluctant to make final orders in circumstances where the marriage was still intact.
Two possible mediation outcomes
The mediation centred on two possible issues. We could either win her an immediate settlement, and renounce a later claim against his estate. Or, should we not obtain an early settlement, how could we protect her assets and stop the husband or anyone else making a later claim against her? At the same time, how could we ensure her a reasonable settlement without inducing a cash flow crisis for the business via her deserved payout? We might also have to fight a difficult case seeking to set aside transactions.
We recommended a deed of settlement that gave her agreed benefits now, and in the future. The deed saw both wife and husband agreeing not to contest the other’s will in the event that either predecease the other.
We will now convert this settlement into a deed of family arrangement, which can be made legally binding in both the Family Court and Supreme Court. Everyone identifies their assets, knows exactly where they stand, and can will their assets to their children from prior relationships. Life can go on as it should — she can continue caring for her husband, presumably until he dies.
Binding financial agreement
From it will follow a binding financial agreement under the powers in the Family Law Act. It will exhibit the deed of settlement, showing the court that even though they haven’t separated they’ve contracted out of the family law environment. It demonstrates they’ve reached a fair, just, and reasonable settlement.
It was an intriguing case. You don’t often negotiate or have a proceeding issued where the couple is still living under the same roof and in an intact marriage. Normally separation occurs beforehand.
This way, we were able to regain her sense of assurance that she would receive her proper entitlement while helping to preserve a caring relationship.
If you have queries on family law, divorce and separation, or mediation, speak to Georgina Gregory on 03 9813 1111, or visit www.clancytriado.com.au.