Understanding what assets are not covered by your will.
Your will can deal with assets you own in your sole personal name. Typically, these include investments and bank accounts in your name alone (including business bank accounts if you are a sole trader); motor vehicles registered in your name; personal items and real estate where you are the sole owner for all or a set proportion of the property.
You can specifically gift individual assets or you can deal with them collectively. For example you can leave your “estate” to your spouse or to your children in equal shares.
Even if your will is relatively straightforward you are likely to have assets such as superannuation and you may have jointly owned property or assets in a company or family trust. These assets will not necessarily form part of your estate and will need to be considered separately.
When people share ownership of property they will either be joint tenants or tenants in common. How the property is owned will impact on how it can be dealt with after your death.
For example, if you and your spouse own your family home as joint tenants, legally you both have an entitlement to the whole property. If one owner dies, the survivor becomes the sole owner. At that point, the property does not form part of the estate of the first person to die.
However, you may have acquired the property as tenants in common in particular proportions (e.g. 50/50). In that case your respective share does form part of your estate and you can gift your share via your will.
Appreciating the difference between joint ownership and tenants in common can become important, for example:
People are often surprised to learn that money held in a superannuation fund is not automatically part of their estate.
A superannuation fund, including a self-managed superannuation fund (SMSF) is a type of trust and the deed governing the fund determines how entitlements can be paid (and to whom) after your death.
Unless the deed allows you to make a binding nomination, the trustee of the fund will often have full discretion as to how to distribute the funds after your death.
It is important to get advice, as each fund has different rules and not every fund allows you to make a binding nomination (or the binding nominations may lapse every few years).
Superannuation death benefits can usually be paid directly from the fund to your dependants, which includes your spouse or defacto partner, children, or financial dependants or to your legal personal representative (your executor).
It is only if your superannuation death benefits are paid to your executor that they form part of your estate and can then be distributed according to your will.
Other considerations are that there will be different tax consequences depending on how the funds are distributed.
For anyone with an SMSF, another important part of estate planning is considering who you will appoint as your financial attorney and executor, as in most cases they assume control if you have lost capacity during your lifetime or after you have died.
John died leaving a wife of three years and four adult children from his first marriage. His will said that his estate was to be divided equally among his children. He had made no binding nomination and the superannuation trustee distributed his death benefit to his widow, which was not what he intended.
Jane had an SMSF and was the sole member. Unfortunately, Jane had a stroke and lost capacity and her eldest son who was her sole financial power of attorney became the sole controller of the fund. The SMSF owned a property that Jane was intending to transfer into her own name after she retired and gift to her younger son in her will. However, the attorney son sold the property whilst it was still in the SMSF and so the intended gift could not happen.
Assets held in companies are also important to consider. Although you may own 100% of the shares in the company, assets owned by the company are not included in your estate. If you wish for particular people to receive or benefit from company owned assets, you may need to consider gifting them the shares you own in the company. Even more consideration will need to be given if you are not the sole shareholder of the company.
Assets held in a typical discretionary or “family” trust do not form part of your estate when you die. This is the case even if you are the sole shareholder of the corporate trustee of the trust.
The trust deed will usually set out how control of the trust is managed. You may be in control during your lifetime but the deed may pass control to a specific person after your death. Alternatively, the deed may allow you to nominate in your will who will take control.
The trust deed should be reviewed to confirm who holds the controlling roles and how they will pass after death or loss of capacity.
Robert leaves the shares in the corporate trustee of the family trust equally to his three surviving children, with the intention that they will benefit equally. However, two of the children use their majority vote to exclude the third child from becoming a director of the company or receiving any benefits from the trust assets.
Estate planning is not just for when you have amassed a share portfolio and have family companies and trusts. If you have superannuation, have purchased property or have dependants, it is reassuring to know you have done everything possible to ensure that what you intend to happen after your death will eventuate. Whether you are clear about all your assets and intentions, or need guidance, we can help.
If you would like a "no obligation" discussion with one of our estate planning experts at a time that suits you, call 1800 867 113 or click here.
Jennifer Jackson leads the estate planning team at Avant Law. Jennifer has over
15 years’ experience providing estate planning and structuring advice to clients and their financial advisers and accountants. Jennifer takes the time to work through the issues with her clients, to identify what matters most to them in that often-difficult conversation about planning for their death or loss of capacity. She brings a wealth of life experience and a calm, practical and considered approach to handling legal matters, which her client’s value. In addition to working directly with clients, Jennifer presents to both professional and community groups on topics relating to her area of practice.
Disclaimer: The information in this article does not constitute legal advice or other professional advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of this content. The information in this article is current to 1 August 2023. Liability limited by a scheme approved under Professional Standards Legislation. Legal practitioners employed by Avant Law Pty Limited are members of the scheme.
© Avant Mutual Group Limited 2023
Liability limited by a scheme approved under Professional Standards Legislation. Legal practitioners employed by Avant Law Pty Limited are members of the scheme.