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Enduring Power of Attorney: Is the role right for you?
Featuring: Wills & Estates Partner, Angela Harry

Understanding assets that you cannot leave to your beneficiaries in your Will: How to ensure your assets go to who you want them to!

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Attwood Marshall Lawyers Wills and Estates Partner Angela Harry discusses with Steve Stuttle on Radio 4CRB the different types of assets you cannot leave to your loved ones in your Will. If you don’t get the right estate planning advice when you draft your Will, your loved ones may miss out on their inheritance altogether!

Introduction

Estate planning (drafting your Will and making sure your assets go to who you want them to) is a very personal and tailored process. Everyone has different types of assets, as well as different family circumstances to take into consideration. A simple Will may not serve you as intended, because not all assets can be treated the same and gifted in your Will.

It can come as a surprise to many people that some of their most valuable assets they ‘’own’’ fall outside of their estate. In many instances, it is not until someone sits down with an experienced estate planning lawyer to discuss their assets and their intentions that they realise there is more to estate planning than just writing or drafting a Will. It is vital that people understand that just because you may have control over an asset, this does not necessarily mean you “own” the asset, in the context of making a Will and for that asset to be left to the person or charity you want.

There are so many assets held in different legal entities in modern times, such as companies, family trusts, self-managed superannuation funds (SMSF’s), institutional Superannuation, and the control or ownership of these assets can be a difficult issue to unravel. We find that many clients who have assets in these types of entities rarely are even asked about these assets when making a Will. Joint ownership of bank accounts and property (i.e. joint tenancy) is another often overlooked component of asset ownership that is misunderstood or not discussed when a Will is made. The consequences of not properly dealing with these assets in your Will or estate planning generally can be a huge surprise to your family and can cost hundreds of thousands of dollars in legal costs to rectify, not to mention the stress and uncertainty to your loved ones you leave behind.

Assets that fall outside of your Will

As part of an initial estate planning consultation, an estate planning lawyer will run through all the assets owned by an individual, and establish how they are held and whether or not each asset is something that can be gifted in your Will.

Assets that fall outside of your estate include:

  • Superannuation
  • Life insurance policies
  • Jointly owned real estate and bank accounts
  • Jointly owned shares
  • Assets held in family trusts

Superannuation

Superannuation is an asset that is growing in wealth for most people, and for some, it can be their most valuable asset. Most people do not realise that you cannot gift your superannuation balance in your Will. In order to pass on your superannuation balance to your intended beneficiary, you need to complete a non-binding nomination or binding nomination, through your superannuation fund. Ultimately, where your superannuation passes on your death is going to be determined by the trustee of your superannuation fund. When there is a binding nomination, or non-binding nomination, in place, the trustee will look at who you have nominated and what your instructions are.

There is a way to direct your superannuation to go via your Will, but you do have to do the beneficiary nomination appropriately to ensure your nomination is valid and that your wishes can be upheld.

If you do not nominate a beneficiary by way of a binding or non-binding nomination, your superannuation fund will follow relevant laws to determine who will receive your superannuation balance after your death.

Read more: A Binding Death Benefit Nomination can determine how your self-managed superannuation funds are dealt with upon death

Life Insurance (Death Benefits)

Life Insurance can be a bit of a trap for the unsuspecting. Where the proceeds are going to be paid will depend on:

  • Who or what is insured;
  • who or what owns the policy; and
  • whether or not a beneficiary has been nominated to receive the benefits directly.

Just like your superannuation balance, your life insurance (death benefits) do not form part of your estate. The person/s you want to benefit from these assets when you die should be arranged with your superannuation fund beforehand as part of the estate planning process.

Read more: What happens to a jointly held life insurance policy after separation?
Read more: When was the last time you reviewed your superannuation policies? Don’t assume you’re covered!

Jointly held assets (real estate, bank accounts, shares, etc.)

In the majority of cases where a couple owns real property together (i.e. a house, unit or land), the property is usually held as joint tenants . If you own a property as joint tenants, this is not an asset that can be gifted in your Will until the last tenant who shares the ownership passes away.

Under a joint tenancy, when the first joint tenant dies, the property automatically reverts to the surviving joint tenant, without reference to your Will. It is only when that property is solely in the surviving tenant’s name that they can then leave that asset to a beneficiary in their Will.

If you own a property as tenants in common , when you pass away your share of the property will pass pursuant to your Will. An example of how this works is if you have two siblings who have purchased property together, it is likely that they would own the property as tenants in common, which means each owner then has the opportunity to leave their respective share of the property to their own family members or loved ones.

The same applies to jointly owned bank accounts, shares, and chattels. Ownership of the asset passes automatically to the surviving joint owner under the law of joint ownership, not in accordance with your Will.

Assets held in trusts

When we talk about trusts we are usually referring to a discretionary trust, which many people know as a family trust. Beneficiaries of a family trust do not have a fixed entitlement or interest in the trust funds. It is the trustee of the fund who controls the trust. The trustee controls where the income is allocated and to which beneficiaries. Whether it is a company acting as the trustee, or an individual, it is that person or entity that controls the trust and those assets. Just to add some further complexity, most trust deeds name an ‘appointor’ or ‘principal’ that has the power to remove and appoint the trustee. This is usually the person or entity that ‘çontrols’ or ‘owns’ the assets of the trust. 

A common misconception that many people have is that the person in control of the trust can gift the trust assets via their Will. That is simply not the case. Trust assets are held outside of the estate.

Potential issues arising from trusts were highlighted in a recent NSW Supreme Court decision which involved an estate where the deceased had made a Will and they left a specific gift of a property to their chosen beneficiary. The problem was that the property wasn’t owned by the deceased, it was owned by the family trust!

The court was asked to consider the issue and ultimately ruled that the property was owned by the trust. This meant that the deceased could not gift the property, and the beneficiary missed out.

This is just one of the many reasons why it is so important to work through the estate planning process with a lawyer who understands succession planning and asset structuring and can look at how your assets are owned. Although you may not be able to gift assets that are held in a trust, you can pass control of the trust. Once you pass the control of the trust, you can end up with the assets of the trust under the control of the beneficiary that you intended.

A “free Will” may not be suitable to properly plan for the future and protect your assets

We frequently see the consequences that arise when people take up the offer of the Public Trustee’s “Free Will” service, or try to complete a do-it-yourself Will kit, only to think they have done the right thing and drafted a Will that will deliver their intended beneficiaries their inheritance. Sadly, beneficiaries can miss out when people try to do their own Will and gift assets that they technically do not own.

There are many instances where a simple Will does not serve its purpose. There have been many cases where people have taken up the offer of the Public Trustee’s ‘free Will’ service, only to have received a document that was not drafted properly and did not achieve its goal; that being to avoid potential disputes over the estate, or to properly plan and distribute assets that fall outside of the estate.

Inappropriate simple Wills unfortunately do not accommodate complex assets and proper succession planning.

For many people, had they have received appropriate legal advice from an experienced estate planning lawyer from the outset, they could have avoided making critical and costly mistakes. Unfortunately, it is your beneficiaries who are left behind that will be the ones to deal with the aftermath when your wishes cannot be upheld. Your beneficiaries will then likely be involved in disputes or litigation in order to rectify the situation. In some cases, beneficiaries simply miss out on what you intended them to receive.

Attwood Marshall Lawyers – helping you plan for the future to preserve your wishes

As part of completing your estate plan, our Wills and Estates lawyers will help you determine if an asset is a “non-estate asset” and if this is the case how to pass that onto your intended beneficiaries so that your wishes can be fulfilled.

It is our intent to help you plan for the future and protect your assets. There are so many factors that sit behind the estate planning piece, and it is imperative to obtain all the background information so that your assets, whether or not they are owned by you or just under your control, end up with your intended beneficiaries.

With one of the largest and most experienced Wills and Estates departments in Australia, our friendly team are ready to help you. The process is not as overwhelming as you may think. We regularly get feedback from our clients who are pleasantly surprised as to how straightforward and easy the process was to complete their estate plan.

We will make it easy for you so that you can have peace of mind in knowing that your legal affairs are in order.

Book an appointment today with one of our estate planning lawyers by contacting Wills and Estates Department Manager, Donna Tolley, on direct line 07 5506 8241, email dtolley@attwoodmarshall.com.au or free call 1800 621 071.

You can also make an appointment with any of our specialty legal departments by visiting our website and using our online booking app. You can visit our lawyers at any of our conveniently located offices at CoolangattaKingscliffRobina Town CentreBrisbaneSydney, or Melbourne.

Read more:

Your Estate Planning Checklist to help you get organised in 2021

Enduring Power of Attorney – one of the most crucial and powerful documents you can create in your lifetime

Do It Yourself Will Disasters: The difference between a DIY Will and a professionally drafted Will

There’s No Such Thing as a Free Will – Beware of the Public Trust Office!

 

 

 

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Angela Harry

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