Want to Know What Happens To Your Assets After Death?
One of the most important decisions to make when considering making a Will is who gets your assets.
Many clients are surprised to find that their Will only deals with assets in their own name at the date of death which could only be a bank account of $10,000, although they enjoy the use of many other assets which they believe they own.
So the first thing to do is to establish what assets you have and how they are owned.
There are several reasons for this misunderstanding as there is more than one way assets can be owned.
Jointly Owned Assets
Real estate, shares, bonds and bank accounts can all be owned jointly. Upon the death of the first co-owner, usually the survivor gets the lot.
In the case of real estate, you can own property where there are 2 owners either held as joint proprietors or tenants in common. If the property is owned as joint proprietors, the survivor gets the lot. If held as tenants in common, the first deceased decides who gets their share of the property. It could be left to the survivor or it could be someone else altogether. This needs to be addressed in your Will.
Life insurance is an agreement by which the life insurance company contracts with the insured to pay money to someone, called “the beneficiary” upon the death of the insured person.
The proceeds of the life policy do not, as a matter of course, form part of your estate but rather pass directly to your nominated beneficiary. Sometimes life policies can be useful if you want to provide for somebody but want to keep that arrangement private and away from your general estate.
Discretionary Family Assets
Once you put assets into a trust, they are governed by the rules of the trust. Sometimes, you can put in place arrangements that control how these assets pass, but you cannot do so by simply stating in your Will that those assets are to pass to specified individuals.
If the money was given to the trust, then you do not own it anymore – it belongs to the trust.
If the money initially put into the trust account was recorded as a loan to the trust, then you can direct what happens to that loan amount. It is important you get advice as to how to deal with that loan amount. Loan accounts are often established for taxation purposes with little thought about the implication on death.
Different people can be in charge of a discretionary trust. Often, if you set up the trust, you will also be the appointor and guardian of the trust whilst you are alive and legally capable.
Generally, the trust will give you the power to appoint successive appointors and guardians. If so, it is important to follow any rules in the trust deed when appointing people to take over these roles. It may be necessary to make new appointments to those roles which come into effect upon your death, and to do this now.
It is important that these matters be reviewed at the time of making a Will.
For many people, superannuation will be the most valuable asset they own upon death. However, most people are surprised to learn that you often do not have the last word on what happens with your super balance upon death.
You may wish to direct who is to receive your superannuation. However, all superannuation funds have a trust deed as its foundation document and that deed sets out who decides what happens with your superannuation.
If your superannuation deed allows for binding nominations, you can legally direct the trustee of the super fund that the way the proceeds are to be divided up. There are special rules about binding nominations eg binding nominations generally only last for three (3) years, then have to be done again.
Some industry superannuation funds do not allow for binding nominations whereas retail superannuation funds often do allow.
Self-managed superannuation funds have their own trust deed setting out their own requirements. In addition there are complicated tax rules that apply upon your death which need to be considered.
If you wish to leave your super funds to a charity and not to family members, this cannot be done by using death benefit nominations. However, you can address this issue when you make your Will.
There are ways in your Will in which you can overcome the limitations in dealing with your superannuation and to make your superannuation work more effectively for your intended beneficiaries. You need to obtain legal advice when preparing your Will about how to handle these matters.
There are many matters to consider when making a Will. Knowing what assets you have, how you own them and who you want to leave them to requires thoughtful preparation. Feel free to give me a call to discuss your estate planning needs.
Grant has been a partner at Phillips & Wilkins since 1990 having joined the firm in 1983. He is a member of the Law Institute of Victoria Elder Law Committee.