Not all of a person’s assets are automatically captured and dealt with by the terms of a Will.
The below are examples of assets that need to be carefully considered by a person making a Will (“Testator”) as well as the Testator’s advisors, as improper planning can result in these assets falling outside of the Will and being unavailable for the Testator’s intended beneficiaries.
- Jointly owned real property
In Queensland, if a jointly owned house or investment property is held between the owners “as joint tenants” then their interest in it will not be an estate asset that is dealt with through the provisions of a Testator’s Will. Instead, their interest in the property will pass to the surviving property owner, under the rules of survivorship.
Only if the property is held between the persons “as tenants in common” will their interest in the property form part of the Testator’s estate and be dealt with in accordance with the provisions of their Will.
- Cash in jointly owned bank accounts
Joint bank accounts are a common and efficient way for spouses, defactos and others to manage joint finances.
On the death of one account holder, the rules of survivorship apply to vest ownership of the joint account and its balance to the surviving account holder. It is common for the financial institution to transfer ownership of such an account and its balance to the survivor on receipt of the Testator’s death certificate, before probate or letters of administration are granted.
In a spousal or defacto relationship, it is common for the Testator to intend the balance of the account to pass to the surviving account holder anyway. If that is the case, then there is often no issue that arises.
However, the Testator may not always intend for the account holder to receive the entire account balance. For example, in a blended family, the child or children of a Testator could miss out on the proceeds of an account that is held jointly with the Testator’s spouse or defacto, where that surviving account holder is not also the parent of that child or those children.
Another example is where an elderly and immobile Testator has opened an account with a child that lives closest to home and has contributed significant sums to assist with payment of the Testator’s bills, groceries, medical care or everyday living. Such funds could potentially be retained solely by the child whose name appears on the account and lost to the Testator’s other children or intended beneficiaries under the Will.
- Company and Trust interests
An asset that is not owned by the Will maker personally, but instead through a separate legal entity such as a company or a trust will not form part of the Will maker’s estate and will instead continue to be owned by that company or trust, after the Testator’s death.
Having said this, shares in a company or units in a unit trust that are owned by the Testator personally do form part of the estate and will be dealt with in accordance with the Will. For this reason, the structure of these corporate or trust entities (and their governing documents) needs to be carefully examined as part of the Testator’s personal estate plan.
- Superannuation and Life Insurance
Superannuation is dealt with under separate legislation and is not an estate asset that is dealt with by a Will.
Under the relevant legislation, a superannuation account holder can nominate specific beneficiaries to receive the account proceeds by making binding or non-binding superannuation death benefit nominations. These are usually the account holder’s dependents (spouse, children or financial dependents).
Life insurance is similarly dealt with in that a policy holder may nominate a specific beneficiary to receive the proceeds of the policy.
Forgetting to review, renew or update such nominations (which can lapse) as a Testator’s circumstances change is a common occurrence, often having unintended consequences for the estate. For example a young person may initially nominate parents or family members to receive such superannuation or life insurance policies and forget to update those nominations upon marriage or entry into a defacto relationship.
In the case of both superannuation and life insurance, it is permissible for a nomination to be made in favour of a legal personal representative or an estate (rather than an individual). This is often a favoured approach as it allows any payments of superannuation or life insurance proceeds to form part of the residuary estate under the Will, from which the legal personal representative can pay estate debts before distributing the residuary estate to the intended beneficiaries.
Where an individual is nominated, they are paid the proceeds absolutely. This occurs outside of the purview of the Will, and the individual concerned may use such proceeds as they see fit, without being under any obligation (save for perhaps a moral one) to use same for the benefit of the Testator’s estate.
Conclusion
The loss of a jointly owned property, the proceeds of a jointly owned bank account or superannuation or life insurance proceeds due to incorrect nominations can have dire consequences for an estate.
Not only does a legal personal representative need to consider whether any debts or gifts can be made from other estate assets (and if not, then it is common for the estate to be forced to declare bankruptcy), but the legal personal representative is also left in an unenviable position of having to try and determine what the testamentary intentions of the Testator were at the time of their death and whether sufficient evidence can be obtained so that the estate can commence proceedings to try and recover any assets that have been lost through the improper application of the rules of survivorship or poor estate planning.
Obtaining such evidence and running such proceedings is a difficult, lengthy and highly costly exercise, given that the breadth of such evidence can span years or decades and the quality of such evidence deteriorates over time.
Unless a Court grants injunctive relief to stop the asset being dealt with until the proceeding is decided, the legal personal representative is often faced with an additional hurdle that by the time the evidence is gathered, the property may be sold or the bank account, superannuation or life insurance proceeds spent, making the prospects of recovery limited, at best.
The importance of retaining an experienced solicitor to assist a Testator to make a proper estate plan cannot be overstated. Our estate planning solicitors have years of experience in expertly advising clients regarding their specific personal circumstances and preparing carefully tailored estate plans that accords with their testamentary wishes and intentions.
For a no obligation quotation, please do not hesitate to contact one of our experienced estate solicitors today.
