Disclaimer: this blog relates to the law in Queensland and may not be appropriate for other states or territories.
A Will that is properly drafted effectively distributes or disposes of the assets which form your estate. However, there are certain assets or ownership structures that do not usually form part of your estate and are not dealt with by your Will.
In this blog we explore the common assets or structures that are not dealt with by your Will, and what can be done to ensure those assets are passed down in accordance with your wishes.
Today, virtually anyone who has worked in Australia has funds in a superannuation account to assist their retirement. Many people hold significant funds in their superannuation account well into their retirement and even upon their death. When a person dies with funds remaining in a superannuation account, those funds form a ‘death benefit’ that is payable to a ‘dependent’ of the deceased (the surviving spouse, a child, or someone who is financially dependent on the deceased), or to the executor of the estate to be dealt with according to your Will.
The trustee of the superannuation fund decides who is to receive the death benefit and that decision is binding, unless the deceased has a ‘binding death benefit nomination’ (BDBN) in place at the time of their death.
In the absence of a BDBN, the trustee of the superannuation fund has the discretion to decide who is to receive the death benefit, regardless of what is stated in your Will or the reasons why you have or haven’t provided for a spouse, child or dependent. For these reasons, it is important to ensure your funds in superannuation are dealt with according to your wishes by completing a BDBN.
A BDBN is either ‘lapsing’ or ‘non-lapsing’ and a superannuation fund may only allow a lapsing BDBN or will also offer a non-lapsing BDBN. A lapsing BDBN typically requires renewal every three years to remain binding on the trustee of the superannuation fund. A non-lapsing BDBN will remain in place and binding on the trustee of the superannuation fund unless you change or remove it, even if it was prepared many years ago and your circumstances have changed. In both cases, it is crucial to review your BDBN every few years to ensure your funds in superannuation are distributed in accordance with your wishes.
Jointly owned assets
Assets owned by two or more persons are owned as “joint tenants” or “tenants-in-common”. The key difference between ownership of an asset as a joint tenant or tenant in common is the ‘rule of survivorship’, which applies to assets owned in a joint tenancy.
The rule of survivorship means that if one of the ‘joint tenant’ owners of the asset dies, their interest in the asset will pass to the surviving joint tenant owners regardless of what is stated in the deceased person’s Will because the asset does not form part of the deceased person’s estate.
On the other hand, a person who owns an interest in an asset as a tenant in common is able to gift or dispose of that interest as they see fit or in their Will. Typically, a primary residence or joint bank account owned by a couple will be owned as a joint tenancy. In Queensland, the main advantage to holding assets in a joint tenancy is that the asset does not form part of the estate of the deceased joint owner, so it is not at risk of being lost to claims against the estate.
There are several ways a joint tenancy can be converted to a tenancy in common and vice versa, if there is a desire to give an interest in a jointly owned asset to other beneficiaries who are not joint owners of that asset, or if someone wishes to ensure that their jointly owned asset will pass to the surviving joint owners.
A discretionary trust is a trust created for a range of beneficiaries (usually defined classes of people, such as spouses, children, siblings etc.) where the trustee has the discretion to decide which beneficiaries will receive income or capital (assets) of the trust. The assets of a discretionary trust do not form part of your estate because they are held for the benefit of, usually, a broad range of beneficiaries, even if the trustee has not exercised their discretion to give any income or assets to those beneficiaries.
Therefore, if you control a discretionary trust you must ensure that your control of that trust is passed down according to your wishes.
Depending on the terms of the discretionary trust, this can usually be achieved by nominating a successor trustee or appointor (a person who can appoint or remove the trustee of the trust and who is therefore in control of the trust).
How we can help
At Turner Freeman we take a comprehensive approach to your estate plan and look at all the assets you own or control, so that we can ensure that every asset is accounted for and aligns with your intentions. If you need advice about your Will, assets, or your estate plan generally, contact our team today on 07 3025 9000 for a confidential, obligation free discussion.