Question: Can all of the assets that you own and/or control be included in your Will?
Answer: No
Tax Tip:
Many people assume that a Will covers all the assets you own and control, however, this is not the case. It is important to seek the advice of an estate planning lawyer to help you determine what assets are included and not included in your Estate.
For example, the following assets cannot be included in your Will:
Jointly held assets
Assets held in a discretionary trust or unit trust
Assets held by a company
Superannuation
Life insurance
Jointly held assets
Joint tenancy is most commonly used when spouses or life partners purchase property or open accounts together. Any property held with another person as ‘joint tenants’ is subject to the rule of survivorship. This means the property will automatically pass to the surviving joint owner and cannot be gifted under your Will. It is only when the surviving tenant passes away that the property can be gifted under the Will. The rules of survivorship also apply to any assets held jointly with another person and include shares and bank accounts.
However, if a property is held as ‘tenants in common’ with another person, then the percentage they hold in the property can be gifted in accordance with their Will.
We discussed this matter in more detail in Tax Tip #40 if you are interested in learning more about joint tenancy.
Assets held in a discretionary trust or unit trust
Trusts are very common due to the flexibility they offer you when you are managing your affairs and operating your business, as we discussed in Tax Tip #54.
However, assets held in a trust do not form part of your estate and cannot be gifted in your Will. This is because trusts operate for the benefit of all of their beneficiaries and not just a single person. As such, the assets held in the trust can only be distributed in accordance with the terms of the trust deed.
Even though you may have control of the trust if you are appointed as the trustee, appointor, or principal – you do not have the right to distribute trust assets via your Will. You can, however, pass on the role of appointor or principal of the trust through your Will, subject to the terms of the trust deed. The people who you would ultimately like to benefit from the trust should be appointed as appointors or principals of the trust. The appointors and principals have the power to hire and fire the trustee.
If you own units in your personal capacity in a unit trust, these units can be gifted under your Will.
Assets held by a company
If you are a director of a company, you cannot govern how the company operates after your passing or how the assets of the company are to be distributed upon your passing. Company assets are owned by the shareholders of the company.
If you own shares in your personal capacity in the company, the shares can be gifted under your Will.
Superannuation
In order to gift your superannuation balance to a beneficiary you must complete a nomination form with your superannuation fund provider. The nomination form will be either a binding death benefit nomination or a non-binding death benefit nomination.
A binding death benefit nomination should be reviewed every 3 years, as most binding death benefit nominations lapse every 3 years (unless they are non-lapsing binding death benefit nominations). This will depend on your superannuation fund provider and it may be different if you have a Self Managed Superannuation Fund.
If no nomination has been made with your superannuation provider, the Superannuation Trustee will determine who receives the balance of your superannuation benefits, which could result in unintended beneficiaries receiving a gift. As the rules for determinations made in this way differ greatly between superannuation funds, we strongly recommend having an up-to-date binding death benefit nomination in place.
There is also an option to elect that the benefits be paid into your Estate via your Executor, which ensures that the benefits are controlled by the terms of your Will. You should always seek the advice of an estate planning lawyer before selecting this option, as benefits paid into the estate could be at risk of family provisions claims under your State or Territory's succession laws.
Life Insurance
Life insurance can be held either inside or outside of your superannuation. If life insurance is held inside of super, it will form part of your benefit and be paid in accordance with the binding death benefit nomination or a non-binding death benefit nomination, as discussed above.
If life insurance is held outside of super, you will need to nominate who receives the benefits, and this can be an individual, select beneficiaries, or your estate. Again, you should seek the advice of an estate planning lawyer before electing the funds to be paid into the estate.
How can LGA Lawyers help?
We recommend that you contact us to arrange an appointment to help determine what assets can and can’t be included in your Will and to ensure that you have prepared the appropriate documents to deal with assets that do not form part of your estate.
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