Send us an email.

  • This field is for validation purposes and should be left unchanged.

What passes in accordance with a Will – estate v non-estate assets

When preparing a Will, it is important to consider what actually passes in accordance with your Will. It is not uncommon to see a Will where a testator has attempted to gift assets that they cannot legally gift in their Will.

What assets will pass in accordance with your Will is determined by the fundamental distinction between estate and non-estate assets. Importantly these different types of assets require different estate planning mechanisms to ensure that they pass in accordance with your wishes.

Estate assets are those assets that will pass in accordance with your Will. They are those assets held in your personal name or as tenants in common with another person. Examples of estate assets are property, shares or motor vehicles owned solely by you or as a tenant in common with another person.

Non-estate assets are those assets that you might exercise a degree of control over during your lifetime, but will not (or may not) pass in accordance with your Will. These include:

  • Assets held as joint tenants;
  • Superannuation; and
  • Assets in a family trust.

 

Jointly held assets

For assets that you hold with another person as joint tenants, where the other person survives you, the right of survivorship determines how that asset will pass when you die. If you predecease the joint owner, then your share will pass automatically to the surviving tenant. However, if the other joint tenant has predeceased you, no right of survivorship will take place and the asset will at this form part of your estate and therefore pass in accordance with your Will.

Superannuation

Superannuation is a non-estate asset and does not automatically pass in accordance with your Will.  Passing of superannuation will either be determined by:

  • A binding death benefit nomination;
  • The discretion of the fund’s trustee; or
  • The rules of the superannuation fund.

 

When executing a binding death benefit nomination you will need to consider whether you want your superannuation to pass directly to a beneficiary or to your legal personal representative (your estate). Where superannuation is paid to your legal personal representative (either through a binding death benefit nomination or as a result of the discretion of the trustee), it will at this time form part of your estate and will be distributed in accordance with your Will.

Assets in a family trust

Although you may control a trust, family trusts are non-estate assets and do not automatically pass in accordance with your Will. Control passes by virtue of passing the powers of the Appointor. The Appointor is the person who decides who controls the trust and the terms of the family trust deed will usually provide that the Appointor may pass their powers either during their lifetime (by deed) or on death (by Will).

Understanding this distinction between estate and non-estate assets is fundamental to preparing and implementing an effective estate plan that will ensure that those you intend to benefit, actually do.

If you would like to organise a complimentary estate planning meeting with Vik Sundar, Director of Private Wealth and our Certified Trust and Estates Practitioner (TEP)  please contact our reception on 02 6215 9100.

by