Getting your estate planning up-to-date. Part 1: Ownership of Assets

We can’t help but think of our mortality at times like this, so we might as well be constructive about it!  Estate planning is an essential task, but it can feel overwhelming.  To make it a bit easier, we have prepared a three-part series of articles on things you need to consider.

Part 1 considers the ownership of your assets, Part 2 looks at the different gifting options in your Will, and Part 3 sets out the documents you need in place if you lose capacity.

Do you know how you own your assets?

How you own your assets affects how you can deal with them – both while you are alive and when you die.  If you own an asset in your own personal name, you can deal with that asset through your Will. But some assets cannot be dealt with in your Will.  These include:

  1. Jointly held assets;
  2. Assets held in a family trust;
  3. Your super; and
  4. Your life insurance.

Let’s find out a bit more about each of these assets.

Do you hold any assets ‘jointly’ with other people?

Many couples own their family home and other assets (bank accounts, shares, cars, etc.) in ‘joint names’ or as ‘joint tenants’.  The important thing to know about assets owned jointly is that when you die, your interest in the asset will automatically pass to the other owners. This is known as the ‘right of survivorship’.  The practical effect of this is that you don’t get to chose who ends up with your share of these assets when you die. That decision has already been made as a result of how you own the asset. No matter what you put in your Will about a jointly held asset, it won’t have any effect.

If you want to deal with ‘your interest’ in a jointly held asset through your Will, then you need to change the way you own the asset. You need to change if from ‘jointly held’, to ‘tenants in common’.

We can help you check how you hold your various assets, and then we can help you change the ownership of the assets to suit what you want to happen.

Are you involved in a family trust?

Many families hold assets in a ‘family trust’. This is usually set up by your accountant to protect your assets and save tax. Technically these structures are referred to as ‘discretionary trusts’.

A ‘trust’ is separate from you. Any assets you hold in a trust will stay in the trust, even if you die. Generally, you cannot state in your Will who is to get the trust assets. You need to take additional steps to make sure the assets end up where you intend.

There are three important roles in a family trust – the Trustee, the Appointor and the Beneficiaries.  Of these, the Appointor is the most important thing to get right in terms of your estate planning. This is because whoever is the Appointor (or controls the Appointor) gets to choose who gets the trust’s income and assets.

We can help you confirm who the Appointor of your trust is, and put in place a strategy to pass on this role so that the trust’s income and assets end up where you intend.

For more information on how family trusts work, see this article.

If you hold significant wealth within your family trust, then you must read our more comprehensive guide to Controlling a family trust when you die.

Who will get your super when you die?

Many people do not realise that they do not ‘own’ their super. Your super is held in a ‘superannuation trust’. Just like a family trust, this trust has a Trustee and Beneficiaries. When you die, the Trustee of your super fund must pay out your account balance following the super laws. The people who the Trustee can pay your super to are limited to:

  • Your spouse (or de facto);
  • Your children;
  • Your ‘legal personal representative’ – meaning your estate to go through your Will; and
  • A person in an ‘interdependency’ relationship with you – being someone who is dependent on your, or whom you are dependent on at the time of your death.

The general rule is that the Trustee of your fund gets to choose which of these beneficiaries get your super, and in what proportions. For example, they may pay it all to your spouse, and none to your kids, or all to your kids, and none to your spouse.

The only way you can be sure who gets your super is to put in place a legally valid Binding Death Benefit Nomination.

If you want to give your super to someone other than a close relative, then you need to direct the super to your Legal Personal Representative (i.e. your estate), in which case it will pass through your Will and you can specify in your Will who gets what. For example, you could state in your Will that you want some of your super to go to your grandchildren.

Litigation over super is increasing because many Binding Death Benefit Nominations are found to be legally invalid. Things get more complicated if you have a Self Managed Super Fund.

We can help you get a clear picture about where your super is and where it will currently go. We can then put in place a legally binding nomination to ensure that it ends up where you intend. We can also help you understand the tax consequences of all of this.

Do you hold any life insurance?

A policy of life insurance pays out an agreed sum of money when you die. Often people take out life insurance to pay off debts or to meet family expenses, like school fees.

A life insurance policy is a ‘contract’ between the owner and an insurance company. This policy can be owned by you personally, by another person (such as your spouse), or by your super fund. The proceeds from the life policy will only go through your Will if you own the policy in your own name. Many people have life insurance, but aren’t sure who owns it. If it is owned in super then the Trustee of your fund may determine where the cash goes.

We can help you understand how your life insurance fits into your overall estate planning. We can review how your policies are currently owned, and ensure that any payout will end up being applied for it’s intended purpose, whether that be the repayment of a mortgage or the education of your children.

What to do now?

The first step in an effective estate plan is to fully understand how you hold and control your assets. We can then help you put in place an appropriate strategy to make sure those assets end up in the hands of the people you intend.

Looking for peace of mind? Call us today on 1300 654 590 for a no-obligation chat.

You may be tempted to give Will drafting a bit of a go or to pop out and purchase a Will Kit but we recommend that your seek the services of a lawyer to answer your questions and make sure that the right assets go to the right people at the right time.

What to read next

If you have not already read the other parts of this series, then check them out here:

Getting your estate planning up-to-date. Part 2: Who gets what?

Getting your estate planning up-to-date. Part 3: What happens if you’re incapacitated for a period of time?

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Estate planning for sole directors of private companies

Estate planning for sole directors of private companies

If you are the sole shareholder and director of a private company, have you thought about what will happen to your business if you lose capacity or die? Failure to plan for this eventuality can affect the financial viability of your assets and leave your family vulnerable – so it is something you need to turn your mind to. Fortunately, there are several solutions that are easy to implement and lots of advice about these issues is available.

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