Assets that are not part of an estate

There are some assets that do not form part of a person’s estate and are not capable of being distributed by a person’s Will. The entitlement to share in these assets varies. A failure to appreciate the special circumstances relating to these types of assets can render a Will unable to achieve intended benefits or can render to little value a potential challenge to a Will.

We set out below some of the main types of assets that a person might accumulate or create over the years that are not part of the person’s estate.

Co-owned assets held on a joint basis

An asset might be co-owned by two people. There are two types of co-ownership, known as “joint ownership” and “tenants in common”. Many co-owned assets are held as between the owners on the basis of joint ownership. Where an asset is jointly owned and one co-owner dies the share of the deceased person passes automatically to the surviving co-owner. There is what is called a “right of survivorship”. The effect is as though the deceased person never held the share in the asset. Any attempt to give away that share in the person’s Will fails because it is not an asset of the estate.

Co-owned bank accounts and investments are usually joint assets. Household chattels owned by a husband and wife are often joint assets.

The main co-owned asset is usually a home or  real estate. The title to the property will describe whether the co-owners hold as joint owners or tenants in common. Often spouses or people in a relationship are registered on title as joint owners whereas co-owners who are  business partners or siblings tend to be registered as tenants in common.

Assets held by Private Companies

Sometimes a person has assets held by a company that he or she owns. The person may own all the shares in the company, and might be the only director of the company, and in so doing is able to use and enjoy the assets.  Whilst the person might own the company, it is the company that owns the assets. Thus for example the person can not in his or her Will give away the company car because he or she doesn’t own the item. It is a common mistake by business proprietors that they forget that assets they use personally are not theirs but instead belong to the company.

The only asset that the Will maker has is the ownership of the shares in the company, not any specific assets of the company.

Assets held in Family Trusts

Assets held in a Family Trust are governed by the determinations of the trustee of the trust and are not assets owned by the person who set up the trust and transferred assets to it. Such a person is unable in his or her Will to distribute the assets of what he or she might regard as “my trust”. Control of the trust post the death of the person might be capable of being governed by the Will, but the assets themselves are not the person’s to give away in the Will.

Family Trusts are often set up by professionals for tax and asset protection reasons. Careful consideration is not always given to the issue of control post death. Every person with a family trust should seek specialist  legal advice to “road test” who would control the trust as matters presently stand, and take appropriate steps to make changes if the “road test” currently produces an unacceptable outcome.

Sometimes t?here are beneficiary loan accounts created in the books of account of the trust. If a person has a beneficiary loan account, that account is an asset that can be given away in a Will or be taken into account in a Part IV claim.

Life Insurance Policies

The deceased might have had a  life insurance policy on his or her life, but the policy is owned by another person (such as a spouse) or the policy, even if owned by the deceased, might nominate a beneficiary to whom the proceeds are to be paid.

Superannuation

Superannuation is not an asset of a person’s estate. That comes as a surprise to most people. The monies might or might not be paid into the estate after death, depending on a number of reasons. Instead, the monies might be paid by the Fund Manager to dependants of the person who has died and by-pass the estate altogether.

Superannuation might be administered by a professional Fund Manager or it might be in a self managed fund run by the person whose superannuation it is. That person or entity is known as the trustee of the fund.

If you have any queries about how assets such as these might be dealt with feel free to telephone us to discuss the matter.

If you have a family trust or a self managed superannuation fund, why not road test your Will and the succession provisions of those documents to see if they produce the result you really want?

At McNabs we are well placed to assist you in any queries that you might have in this area. We can guide you through the process to help make it as trouble free as possible.

We can help

We will respond within the next business day. You can also call 03 9670 9691.