WHAT ASSETS WILL BE PART OF MY ESTATE?
One common question that I encounter when advising estate-planning clients is what assets will be part of a deceased estate. These clients often want to know if their Will is sufficient for estate planning purposes or if some other form of estate planning document is required.
Your Will controls the property that is included in your deceased estate. Your deceased estate is made up of all of the property that you owned individually at the time of your death. When determining whether you own an asset individually at the time of your death we must look at the asset closely to make a determination. For example:
Real Estate
When a parcel of property is owned by more than one person, it can be owned as joint tenants or as tenants in common. If a property is owned as joint tenants, the co-owners have a right of survivorship. What this means is that on the death of one joint tenant, their interest in the property is transferred automatically to the other joint tenant. This transfer bypasses the estate of the deceased. In such a situation, property owned in a joint tenancy will not be considered an asset of the deceased controlled by the Will. If a property is owned by more than one owner as tenants in common, the result is quite different. There is no right of survivorship associated with a tenancy in common. Therefore if one party to the co-tenancy dies, the property does not pass to the other co-tenant. In such a situation, the deceased co-tenant's share would flow into their estate and would be controlled by the Will.
Bank Accounts
Often times in married or de facto relationships, the parties to the relationship own bank accounts jointly. Sometimes bank accounts are held with other loved ones such as children or parents. In the case of jointly owned bank accounts, the accounts pass to the survivor upon death. The Will does not control these assets. It must be noted that the power to co-sign on an account is not necessarily indicative of co-ownership of that account.
Life Insurance policies
If you have named a beneficiary on a life insurance policy with a death benefit, that beneficiary will receive the death benefit directly from the insurance company when you die. In such a situation, none of the funds paid out by the insurance policy will be controlled by the Will. This fact often is not known by our clients, who believe, mistakenly, that their deceased estate will have far more funds available for distribution because of the payment of insurance proceeds. In reality, the nominated beneficiary or beneficiaries receive the death benefit directly and independent of the Will. Only on the occasions where there is no beneficiary nominated will these assets be part of the deceased estate and controlled by the Will.
Superannuation
Funds held in superannuation for payment as a death benefit will, in most cases, be distributed by the superannuation fund directly to a spouse or children of the deceased. The superannuation trustee will be responsible for this determination. Only in some cases will these funds be paid into the deceased estate and be controlled by the Will. The owner of the superannuation can, in their lifetime, nominate the death benefit beneficiary in a way that binds the superannuation trustee to comply with that nomination.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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