Who are entitled to the assets?

The answer to this question is not always simple and can differ depending on whether or not a Will was left and also the types of assets involved.

At McNab, McNab & Starke, we assist people to identify who are entitled to the assets of the person who has died.

Jointly owned assets

A lot of people not only own assets in their sole name, but also own some assets jointly with another person. A simple example is a joint bank account. Often the matrimonial home is held this way. The surviving co-owner takes the entire asset by way of survivorship and the half share that was the deceased’s, in effect, lapses.

Solely owned assets

For those assets that are in fact held solely in the deceased person’s name, it is the last valid Will of the person that governs who are entitled to the assets. If there is no Will, there is a formula prescribed in the Administration & Probate Act that applies to set out who are entitled to the assets. That formula is known as the Intestate scheme of distribution.

Sometimes there can be a dispute over which Will was the last “valid” Will.

A qualification on this is that in some circumstances the scheme of entitlement set out in the Will, or prescribed in the Intestate scheme of distribution where there was no Will, can be challenged by a person for whom the deceased had an obligation to make provision for his or her maintenance and support and failed to do so. These types of claims are known as Part IV claims. If successful, a Part IV claim results in an order from the Court to vary the terms of the Will, or the Intestate scheme of distribution, to make provision for the person concerned.

Assets not directly part of a person’s estate

There are also some assets that a person might accumulate or create over the years that are not directly part of the person’s estate. These assets are not capable of being distributed by a person’s Will or by the Intestate scheme of distribution. We set out in the following paragraphs who might be entitled to some of these assets.

Superannuation

Most people have superannuation today. The entitlement to a person’s Superannuation is determined by a number of matters. The superannuation is held by trustees who see to the investment and management of the Fund pending the person retiring or otherwise becoming entitled to the monies. It is the rules of the superannuation Fund, and not the person’s Will, that determine who is entitled to the deceased member’s benefits.

Those rules generally provide that the trustees of the fund have a discretion to pay the benefit amongst any of the following;

• The estate of the deceased member (in which case the monies paid to the estate are then governed by the terms of the Will);
• The spouse of the deceased;
• The children of the deceased;
• Actual financial dependants; and
• People with whom the deceased lived in an interdependency relationship.

Sometimes the rules of the Superannuation Fund do not allow payment to the estate unless there are no “dependants” of the deceased member.

The rules of most Superannuation Funds usually allow for the member to give the trustee a direction as to how to allocate the benefit amongst the class of eligible recipients set out above. This is done through the member completing a “nomination form”. Some such forms are expressed to be “binding” on the trustees. All others are simply “advisory” and as such are simply one factor the trustees will take into account in making the decision.

In order to be valid, binding nominations must comply with certain strict formalities and must be renewed at least every three years, and possibly earlier if the rules of the Fund so prescribe. A failure to meet these requirements means that the nomination will loose its binding nature and simply become advisory as far as the trustees are concerned.

Where the member did not make a binding nomination, the trustees make the decision on who is to be entitled to the superannuation. Even though the trustees might have made a decision to pay the superannuation in a certain way, that may not be the end of the matter because there is often a right of appeal to the Superannuation Complaints Tribunal for anyone aggrieved by that decision. For this reason the entitlement to a person’s superannuation is often not known until after the relevant appeal period has expired.

A self managed superannuation Fund might not have a right of appeal available to the Superannuation Complaints Tribunal and that can mean that the trustee’s decision is all but final. It is for this reason that people who have self managed superannuation Funds need to give special consideration about whether to put in place binding nominations and also who will be the controller of the Fund should the person die. Unfortunately this is often overlooked, sometimes with very unfortunate results for the people who the superannuant might have wanted to benefit.

Finally, where a person has been divorced, in some cases the terms of the property settlement might have given rise to Family Court splitting orders or flagging orders. These might go to limit the amount of superannuation actually available to be distributed by the trustees whether pursuant to a binding nomination or in the exercise by the trustee of the discretion referred to above.

Assets in Family Trusts

The deceased might also have had a family trust. If the books of account of the trust show that the deceased had a loan account with the trust, the estate of the deceased will be able to call up those monies from the trust. Over and above that however, the control of the assets in the trust rests with the trustees of the trust or, indirectly, with the person who can dictate who the trustees of the trust are to be from time to time. Who these people are can only be determined by reading the trust deed itself. The issue of control of a family trust after the death of the originator of the trust is one that is often inadequately considered by the person during his or her lifetime and, where there is such a failure, there is the potential to cause completely unintended results.

Proceeds of Life Insurance policies

A person might have a life insurance policy taken out on his or her life. Sometimes the policy is owned by the person, in which case the proceeds of the policy will form part of the estate and can be governed by the Will. Sometimes however the policy is owned by another person, for example a wife may own a policy on the life of her husband, and in such a case the proceeds are not an asset of the estate and will be paid directly to the spouse.

Part IV claims

Even though a person may not be immediately entitled to assets of an estate, entitlements may be obtained by bringing a Part IV claim against the estate.

Need help?

If you would like to know more about any estate that you are involved in feel free to contact us.

We can help

We will respond within the next business day. You can also call 03 9131 6382.