When planning your estate, it’s important to understand what assets will or will not form part of your estate upon your passing. Estate assets will be distributed in accordance with the terms of your will. Other assets (non-estate assets) – which may surprise you – will not form part of your estate and cannot be distributed under your will.
What are estate assets?
Generally, estate assets include sole legal ownership of assets such as:
- real property (e.g real estate and land);
- personal property (e.g. motor vehicles, jewellery, artwork);
- intangible personal property, e.g. stocks and digital assets); and
- cash of any kind (e.g. savings and term deposits).
What are non-estate assets?
Non-estate assets are assets which you may have had some control during your lifetime, however, did not have legal ownership or will pass directly to another party. Examples of such assets are discussed below.
Any property jointly held with another person (such as your spouse) does not form part of your estate when you die. Rather, the property automatically devolves or passes to the surviving joint owner. This is called survivorship. Properties commonly owned as joint tenants include the family home and bank accounts.
Depending on your circumstances, you may wish to consider severing the joint tenancy for the purpose of estate planning, this is particularly the case for blended families (families with children from previous relationships) in which the parent wishes for their children to inherit their share of the interest in the property. Owning property as tenants in common will allow the property to be divided and gifted under the terms of your will.
A company is a separate legal entity distinct from an individual shareholder/director. Even if you are the sole shareholder or director of that company, it is not possible to gift the company’s assets under a will.
Subject to the terms of the company’s constitution, any shareholders agreement or buy-sell deed, only the shares you own in the company can be distributed under the terms of your will. However, a good shareholders’ agreement will typically dictate what will happen to the shares of a deceased shareholder. Accordingly, when preparing an estate plan, it is important to review what documents, if any, determine what happens to your shares in the event of your death.
Similarly, to a company, the assets held by a trust are not considered assets of a person regardless if you are named a beneficiary of the trust. This is because the trustee of the trust holds the assets on trust for the benefit of the beneficiaries pursuant to the terms of the trust deed. When preparing an estate plan, it is therefore important to review the terms of the trust deed to determine what happens in the event of the death of a trustee, appointor and/or beneficiary.
A person’s superannuation can often be their biggest asset. However, superannuation does not automatically form part of the assets under your will. This is because your super – including the proceeds of life insurance policies – is held for you in trust by the trustee of your superannuation fund and governed by superannuation law.
You may have some control in terms of how your super is dealt with on your death if you have executed a binding death benefit nomination. Otherwise, the trustee will decide how your super benefit is paid after you die.
This is a complicated area of law with significant implications relating to tax, potential conflicts of interest and estate challenges, and therefore legal and financial advice should be sought when dealing with superannuation as part of an estate plan.
It is important to obtain advice before preparing a will, particularly due to the complexities of modern families and business structures and the value of estates.
You worked hard for your wealth and spending some time discussing your wishes and planning your estate with our solicitors will help ensure that your assets will be distributed to benefit your intended beneficiaries. Contact us today.