There is a common misconception that anything a person owns or has access to must form part of that person’s estate. However, this is simply not true. In fact, some very valuable assets do not form part of a person’s estate, which can cause confusion, stress, and arguments once the person has passed away.
Here are some types of property that do not automatically form part of a person’s estate, who might be entitled to them, and how you can make provision for them in your Will.
Superannuation is one of the most common assets people believe forms part of their Will. Realistically, superannuation - whether held in a retail fund or a self-managed superannuation fund – is part of a trust and a trust relationship exists between the trustee and the fund’s members (which can be as few as one member in the case of self-managed super funds). As the fund is therefore governed by a trust deed any death benefits can only be dealt with in accordance with the deed.
The laws relating to the distribution of a deceased person’s superannuation are complex. Unlike most other assets and personal belongings, which can be left to whomever the deceased wishes, superannuation can only be passed to spouses, children, a legal representative, or those who can establish that they were financially dependent on the deceased.
If you are considering bequeathing your superannuation to one of the eligible beneficiaries you will need to discuss executing a death benefit nomination stipulating who should receive the funds. This is particularly important in cases where the deceased has separated from their former partner but had not legally divorced at the time of their death.
Property held jointly
Property that is held jointly with another person (i.e., when you purchase a property as joint tenants) does not form part of a deceased person’s estate when they die. The deceased person’s share will instead be transferred to any surviving joint-holder(s).
Most commonly this scenario arises with spouses who have purchased property together and no issues arise, however, if you are in a relationship, seeking to write a Will and want to bequeath part of your estate to children from a previous relationship you should speak to a lawyer about how best to provide for them in your Will in a way that minimises the risk of it being contested.
Property held jointly does not only relate to housing, it can also be relevant for vehicles, household items, or other assets that have been purchased jointly. In the case of one joint-holder dying, the other joint-holder(s) would receive the deceased’s share.
Property held by a trust
Assets held by a trust are not considered to be the assets of an individual, even if that individual is named in the trust deed as trustee, beneficiary, or appointor. As was explored with superannuation, assets held by a trust must be dealt with in accordance with the terms of the trust deed and for the benefit of beneficiaries of the trust.
The terms of the trust deed should be reviewed when estate planning commences ascertaining the directive when a trustee, beneficiary, or appointor passes away. The Will should then be drafted to include a provision passing control of the trust if so allowed in the trust deed.
Passing control of a trust is the way to ensure that the deceased person’s beneficiaries receive property held by the trust and this process may involve a variation to the trust deed, which will require the assistance of an experienced Wills & Estates lawyer.
Property held by a company
Company-owned property (including intellectual property of a business) does not automatically form part of an estate and cannot be bequeathed in an individual’s Will. A company is bound by its constitution and therefore has its own legal entity, which is separate from that of the individual shareholder/director. A shareholder’s shares may be distributed to beneficiaries named in a Will only if the terms of the company’s constitution, shareholders agreement, or buy-sell deed allow for it.
If you want to ensure your Will has been prepared to include all of your property is distributed the way you wish them to be, our Wills & Estates lawyers can work with you to draft a legally sound document or update your existing Will.