In my practice, it is not uncommon to come across clients who do not know how their most important assets are dealt with upon their death.
The most common example of this is the family home.
Joint Tenants vs Tenants in Common
A husband and wife generally own the family home in both of their names as joint tenants.
Many clients are not aware that such jointly owned assets will not be controlled by their Will. Instead, such jointly held assets are dealt with using a principle called the “right of survivorship” and automatically pass to the survivor independently of the Will.
Only upon the death of the survivor of the jointly held property would the property fall into the estate and be dealt with under a Will.
This principle is the same for joint bank accounts, vehicles registered in joint names, shares registered in joint names, home contents and personal effects and any other assets owned as joint tenants.
The other common form of real property ownership is as tenants in common.
It is this mode of holding which allows a husband and wife (for example) separate ownership interests in a property which forms part of their estate and can be dealt with under a Will, as each owner has the right to leave their share of the property to any beneficiary they wish.
This method of owning property is useful for second marriages or relationships where a “right of residence” can be set up in the Will for the surviving spouse to reside in the property (or a subsequently purchased property or aged care facility) until their death and then the (usually ½ ) interest in the property passes to children of the first relationship.
Both modes of holding have advantages and disadvantages and the effect that each mode of holding has on the party’s ability to dispose of the property needs to be thoughtfully considered.
A change in the mode of holding can be effected at minimal cost.
These considerations are becoming more common as society is experiencing an increase in second and subsequent marriages and relationships, which create blended families and step-children to also factor into the estate planning process.
Keep in mind though that assets in your sole name, including real property, bank accounts, investments, vehicles and units in a unit trust, will all form part of your estate and have the ability to be controlled by your Will.
Superannuation is another asset which clients often assume they are able to control in their Will.
However, this is not automatically the case as superannuation is “owned” by the trustees of the super fund and great care must be taken to ensure that you know how to control this asset in the manner you desire.
You can read Alison Evenden’s article on the topic titled “Superannuation and Estate Planning” click here
Life insurance is treated similarly to superannuation. Some life insurance proceeds are paid direct to a beneficiary and do not form part of the assets dealt with under your Will either, unless you specifically nominate your estate as the beneficiary of your policy.
It is most common that, during your life time (generally at the time you take out the policy) you nominate the beneficiary of your policy. This beneficiary is commonly your spouse and/or children.
Unit Trusts and Companies
Assets which are owned by unit trusts or by companies (which you control) will not form part of your estate either, however, the shares, or units, in such trusts and companies will be an asset which can be controlled through your Will.
Assets which are owned by a discretionary trust (which you control) will also not form part of your estate as the assets of the trust are “owned” by the trustee of the trust.
In many cases control of the discretionary trust can be dealt with in your will by passing the role of appointor of the trust to the person whom you wish to control the trust after you die.
A good estate planning lawyer can assist you helping you establish your specific circumstances and plan how you can manage your estate effectively upon your death.
It is also wise to review your estate planning on a regular basis to take into account any change in your relationship, assets or circumstances.