- Sounds simple right?
- What makes up a person's estate?
- What is an estate asset?
- What is a non-estate asset (and why should you care)?
- A quick list of non-estate assets many people have (and can't give away in their Will)
- Summary table: When you can and when you can't
Sounds simple right?
Here are some financial assets you may be using that you don't actually own in your own right. And if you want to give them to another person, that's going to require some additional effort on your part.
- A simple example would be our Superfund. Yes, the money is in our own name but not yet technically owned by us. For most of us under 65, it's actually held in trust for us by a Superfund and managed in accordance with the rules of that trust.
- This subtle but important distinction has really important implications for people who are needing to make a Will and are considering who to leave what to but may not fully understand the legal limitations of co-ownership.
The key is understanding the difference between an 'estate asset', and a 'non-estate asset'.
What makes up a person's estate?
Simply said, a person's estate refers to everything they currently own personally or control. If the person has died, it's often referred to as the Deceased Estate.
What is an estate asset?
Assets owned by you personally are estate assets and you can specify in your Will who those assets should be gifted through your estate.
What is a non-estate asset (and why should you care)?
Non-estate assets are assets that cannot be gifted in your Will.
- This may be because you are not the sole legal owner of the assets (even though you have control over them during your lifetime) or because you own them jointly with another co-owner.
- Non-estate assets usually require separate special nominations about how they should be dealt with upon your passing away.
- If your estate consists mostly of non-estate assets, making sure you've provided for family members in your Will might require an additional strategy to help equalize your estate.
Here's a list of things you may have, but you don't own. This means these items or assets cannot be left my you in your Will to another person.
A quick list of non-estate assets many people have (and can't give away in their Will)
Many people own assets jointly with another person. The most common would be a joint-owned house.
If you wish to give your interest in any of these non-estate assets to another person, you cannot simply leave them in your Will and hope for the best; you're going to need to follow a different set of rules for these different types of assets.
- Superannuation funds. A superannuation death benefit payout will be a non-estate asset when paid directly to the beneficiaries by the fund trustee. Your superannuation death benefit will only be dealt with as an estate asset via your Will if the trustee of the superannuation fund pays the benefit to your legal personal representative (LPR) ie: (your estate).
- Life insurance policies. Usually, a life insurance benefit is paid to the policy owner or their nominated beneficiary. It's only when the life insurance benefit is paid to the individual's personal estate that it's dealt with by a person's Will.
- Family Trust assets. Assets held in family trust are non-estate assets, as they're not owned by you personally, and cannot be specifically dealt with in your Will.
- A Company. Assets held in a private company or unit trust are non-estate assets, as they're not owned by you.
- Assets Owned as Joint Tenants. Assets owned by you and another person in joint names (ie: as joint tenants) are non-estate assets. Full ownership of assets held as joint tenants will automatically pass to the survivor(s) owner upon the death of a joint owner.
- Pro Tip: It's the Will of the last-surviving owner that determines who the asset is finally transferred to. This most often applies to the family home owned by two or more people.
- Assets owned as Tenants-in-common. Assets owned by you and another person as tenants-in-common are estate assets and are not affected by the law of survivorship. Your share or interest may be gifted or otherwise dealt with in your Will in the same manner as assets owned in your sole name.
Summary table: When you can and when you can't
|How is the Asset Owned?||Can I give it away in my Will?||Are there exceptions to this rule?|
|Assets owned solely by you in your name||Yes||You own it in your own name, you can give it all away under your Will.|
|Assets owned jointly as tenants in common||Yes||Be clear you can only pass your share of the asset under your Will.|
|Assets owned jointly as joint tenants||No||Not personally owned by you so not yours to give away|
|Jointly owned assets (including real estate) are designed to automatically pass to the surviving joint owner.
This means you cannot give away a jointly owned asset in your Will
|If the other joint owners of an asset pre-decease you, you automatically inherit your co-owners portion and the asset will become solely held by you. You are then able to dispose of it under your Will.|
|Assets owned by a Company||No||Not personally owned by you so not yours to give away|
|Assets owned by a Trust||No||Not personally owned by you so not yours to give away|
|The legal ownership for trust assets is with the Trustee and not a particular individual.
This means you cannot give away an asset owned by a Trust.
|If you hold the position of Appointor or Trustee of a trust, you may be able to appoint your successor through your Will if the terms in the trust deed specifically allow for this.
If you're the sole owner of a specific interest in a trust, such as Units in a Unit Trust, then you can give that interest away in your Will.