Making a will is just one aspect of good estate planning. Of course you should also consider whether testamentary trust provisions would be appropriate and the benefits of an Enduring Power of Attorney and Enduring Power of Guardianship*. There are, however, a few other things your lawyer should be talking to you about …
Jointly owned assets
The principle of survivorship operates with respect to all jointly owned assets. Irrespective of what the deceased’s Will says, the survivor of a jointly owned asset will become the sole owner.
This means that good estate planning starts at the stage when assets are being purchased and continues to take account of whether assets are owned solely, jointly or as tenants-in-common with another, when the Will is drafted.
A well drafted Will needs to take into account the different potential outcomes that result from the various ways that clients own property.
The use of jointly owned assets can be an important estate planning tool in certain situations, especially where the Will maker is aware of the existence of a potential claimant.
Many people are not aware that:
- superannuation is an asset generally dealt with separately from the rest of your Estate; and
- what may be a tax free asset for you can become a taxable asset for your family.
In most cases you will not need to refer specifically to your superannuation in your Will unless you have gifted your super (including the proceeds of any super life insurance policy) to your estate in which case it could be very important to ensure that the proceeds are quarantined in your estate via a “superannuation proceeds trust” for the benefit of “dependents” – failure to do so could have adverse tax consequences for your beneficiaries.
It is vitally important to discuss your particular superannuation circumstances with your lawyer when making a Will, especially if you have a self-managed superannuation fund or if you have nominated your estate as the beneficiary of your superannuation. Your lawyer will be able to advise whether you need to deal with superannuation in your Will, and can discuss with you the benefits of making binding death nominations with your superannuation fund, as well as the tax implications of distributing your superannuation before or after your death.
Life insurance proceeds is also something that may fall outside the scope of your Will, because usually each policy has a named beneficiary and as such the proceeds go directly to the beneficiary and do not form part of your estate. Of course the named beneficiary could be your estate via your legal personal representative (the executor named in your Will) and this may be good estate planning in certain situations.
It is a very important part of the estate planning process to ensure that the proceeds of insurance policies are dealt with as you intend. What will happen if the policy beneficiary dies before you, and you have not had a chance to notify the insurance company of changes?
Many superannuation funds include a life insurance component, and in our experience many clients are unaware of the nominated beneficiary of either the super fund or the insurance proceeds. It is vital to make sure that nominated beneficiaries are correct after divorce or other relationship break downs.
Recently we heard of a young man, married for a number of years, with superannuation, life insurance in the superannuation fund, and substantial separate life insurance. In no case was his young wife the beneficiary – and this was certainly not his intention! He was simply unaware of the practicalities.
Your lawyer should discuss with you the insurances you have (or should have) in place and whether special provision should be made for any proceeds in your Will.
Previous relationships and managing the risk of inheritance claims
Under South Australian law, there are classes of people who are given the right to make a claim upon your estate after you pass away.
You may think that your involvement with a spouse or child is over due to a long separation, but the existence of all family members, spouses, and former spouses, should be discussed with your lawyer to ensure that you are fully aware of any risks to the distribution of your estate happening exactly as you intend in your Will.
If there is a real risk of a claim on your estate, there are a number of ways to manage that risk. Depending on your circumstances you may want to consider:
- Making a statement in your Will or via a statutory declaration as to why you do not want a particular person to benefit from your estate;
- The potential benefits of a testamentary trust;
- The transfer of assets to others, an appropriate trust or super fund during your lifetime, taking into account stamp duty and capital gains tax consequences; or
- Transferring an equal share of a relevant asset to your nominated beneficiary as a joint tenant during your lifetime so that survivorship operates and the asset does not become an estate asset.
(*Note: From 1 July 2014 Advance Care Directives replaced Enduring Powers of Guardianship – see our article on Advance Care Directives).