It is not uncommon to see a Will where a Will maker gifts assets that actually cannot be dealt with through the Will. When making a Will it is important to understand that there are assets that you can give away in a Will, and those that you cannot.
Majority of people have:
- assets that will,
- assets that might; and
- assets that will not form part of their estate.
Different types of assets require different estate planning mechanisms. Some assets which cannot be dealt with through the Will might require some other arrangements to be dealt with in accordance with your wishes and to achieve effective estate planning.
Assets in sole name
Assets such as funds in bank accounts, shares, real property (house and land) held in your sole name, will form part of your estate and can be gifted in a Will.
Assets owned by two or more owners
Some assets, for example real property, bank accounts or shares, could be owned by two or more owners but legally registered as:
- ‘Joint Proprietors’ – Assets owned jointly by two or more owners will become ownership of the last surviving proprietor dying. Those assets will be distributed in accordance with the Will of that proprietor, or intestacy rules if that owner did not have a Will. The Wills of the other joint proprietors who died before the last surviving proprietor will be irrelevant with respect to those assets;
- ‘Tenants in Common’ – Each owner owns a certain percentage of the property and each owner can deal with their percentage as they want to. The percentage of each owner will be part of that owner’s estate which means a Will of each owner will be relevant with respect to that property.
Payment of superannuation death benefits will either be determined by:
- A binding death benefit nomination;
- The discretion of the fund’s trustee; or
- The rules of the superannuation fund.
Superannuation is a non-estate asset and does not automatically form part of your estate. It can usually be paid directly to the deceased’s dependents or to the estate. The ‘dependent’ is defined by legislation relevant to the superannuation and rules of a relevant superannuation fund and includes: spouses (including defacto partners), children (including step-children), anyone else financially dependent on the deceased or someone in interdependent relationship with the deceased.
Usually, superannuation funds allow their member to nominate beneficiaries of the superannuation death benefits. If allowed, you can nominate your dependents or your estate as beneficiaries. Where superannuation is paid to your estate (either through a binding death benefit nomination or as a result of the discretion of the trustee), it will at this time form part of your estate and will be distributed in accordance with your Will.
A difference between a binding and a non-binding nomination needs be noted, as the trustee of the superannuation fund is only obliged to follow a properly prepared binding nomination. Usually unless there is no a binding nomination or a reversionary pensioner, a trustee of the superannuation fund will have discretion to decide who will receive the benefits.
Assets in a family trust
Assets held in a family trust are also not part of the estate. However, it is important to be aware of the loans between the will maker as a beneficiary of the trust on one side and the trust on the other, as they will become assets and liabilities of the estate.
If you hold the position of appointor or trustee of a trust, you may be able to appoint your successor through your Will, depending on the terms of the trust deed. The appointor is the person who decides who controls the trust and the terms of the family trust deed will usually provide that the appointor may pass their powers either during their lifetime (by deed) or on death (by Will). This enables you to influence which persons have control of the trust and its assets on your death.
Life insurances may be paid to the estate depending on policy ownership and whether beneficiaries have been nominated.
Assets held in a company are also not part of the estate, but the shares held in it can be part of the estate and gifted in the Will. That will be important with respect to control of the company and appointment of it’s directors.
Understanding this distinction between estate and non-estate assets is fundamental to preparing and implementing an effective estate plan that will ensure that those you intend to benefit, actually do.
Call Vesna Pocuca or a member of the Wills & Estates team today on 5472 1588 or 5434 6666.